Commentary: Comp Reform a Boon to California

Saturday, April 22, 2006 | 1

By Business, Transportation & Housing Agency Secretary Sunne Wright McPeak and Labor & Workforce Development Agency Victoria Bradshaw

Gone are the days of runaway workers' compensation costs, runaway jobs and runaway budget deficits. And back are the days of punctual treatment for injured workers, job growth and fiscal sense for the state's budget.

Remember it was just a few years ago back when business leaders cited workers' compensation costs as a primary concern. They were complaining - and rightfully so - that their workers' compensation costs increased by more than 300 percent from 1997 to 2003, taking their premiums to a record-high percentage of payroll.

So Gov. Schwarzenegger urgently responded to those concerns upon his arrival in Sacramento. In fact it was two years ago this month when he led a bi-partisan effort to pass Senate Bill 899, which reduced workers' compensation fraud and provided prompt treatment to help injured workers recover and return to work.

Now two years later, workers' compensation premiums have dropped by nearly 50 percent since they peaked in 2003. According to the California Workers' Compensation Insurance Rating Bureau, these costs are continuing to decrease.

Immediately after taking the oath of office, the governor also was faced with finding ways to return lost jobs back to California. Before Governor Schwarzenegger took office, from January 2001 to July 2003, California's employment slipped by more than 360,000 people losing paychecks - when unemployment grew by almost 50 percent.

Since that time, the governor has vetoed numerous "job-killing" legislative bills that unnecessarily would have exposed California businesses to excessive litigation, unwarranted audits and increased compliance costs. He also has administered many directives to streamline government processes for licensing businesses.

Those actions contributed to California's current unemployment rate being at 5 percent - falling 26 percent from November 2003 through January 2006. Compared to other large states, California's unemployment rate dropped 11 percent more than New York and 25 percent more than Texas during that same period of time.

The bottom line is that California has added nearly 580,000 jobs since Gov. Schwarzenegger was elected to office - bringing statewide employment to an all-time high of almost 15 million.

He believes that what is good for business also is good for government. As a result, his approach has helped our state agencies share in the benefits of restoring economic vitality in ways that also have helped to reduce the state's budget deficit.

When the governor took office in November 2003, an independent audit of the state's finances estimated that its operating deficit would reach $16.6 billion in 2006-07. The latest estimate, however, is that his budget proposal would incur an adjusted operating deficit of $4.7 billion in 2006-07 - about 28 percent of what was predicted in November 2003.

If California was a business when Gov. Schwarzenegger took office, it would have been tipping on the brink of bankruptcy. But today the state's improved budget picture has enhanced its bond ratings with notable financial institutions - reducing long-term financing costs for the future construction of schools, levees and roads.

What a difference a few years can make.

A California Chamber of Commerce survey in 2003 reported that nearly 20 percent of California's businesses were planning to expand or relocate out of the state due to high costs and regulatory pressures. That survey also found that just 14 percent of business leaders believed the state was heading in the right direction.

But forecasts by the Southern California Association of Governments and the Los Angeles Economic Development Corporation suggest regional job growth will strengthen significantly in 2006. Recent surveys by the Bay Area Council and Silicon Valley Group show improving consumer confidence and business plans to increase hiring. And a Milken Institute report found California to be home to 11 of the top 50 major metropolitan economic hotbeds in the country - with particularly strong growth in the Central Valley and Inland Empire.

Though forecasts, surveys and reports suggest that California is back on the right track for economic recovery, there is more important work to be done during the next few years to further reform the economic climate in this state. Gov. Schwarzenegger is committed to building a brighter future for all Californians.

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