California businesses, already reeling from higher energy costs and a slowing economy, could get hit with up to $6 billion in added annual costs if bills passed by the state Legislature last month get signed into law by Gov. Gray Davis.
Among the bills passed in the session’s final hours were multibillion-dollar increases in workers’ compensation and unemployment insurance benefits. Also on Davis’ desk are measures that would expand prevailing wage law and make it easier for employees to take sick leave to care for relatives.
“These bills would place very onerous costs on businesses,” said Willie Washington, a lobbyist with the California Manufacturers & Technology Association. “There’s a real question here of just how much more the state’s businesses can absorb.”
But Tom Rankin, president of the California Labor Federation, said he has absolutely no sympathy for “California’s greedy employers’ associations.”
“If California had indexed unemployment and workers’ comp benefits to the state’s average weekly wage, as many other states do, employers wouldn’t be facing these modest increases,” he said. “But after waiting 19 years to raise some workers’ comp benefits and since 1991 to increase unemployment benefits, employers should be expecting this.”
By far, the legislation with the largest impact on business is a pair of bills that would increase workers’ compensation benefit levels and make other changes to the state’s workers’ comp system. The main bill in the package, SB 71, by Sen. John Burton, D-San Francisco, increases weekly disability benefits 33%, to 85%, for a cumulative total of nearly $3 billion.
The bill already had received lots of attention, largely because it pitted Burton, the leader of the state Senate, against Davis, who had vetoed previous workers’ comp bills in the past.
Earlier this month, Davis indicated that the bill was too costly to accept without offsetting cost reductions. So the Democratic leadership in the Legislature threw together another bill, AB 1176, by Thomas Calderon, D-Montebello, to speed up the introduction of managed care into the workers’ compensation system and to reduce the employer tab for retroactive lifetime pension benefit claims for permanently disabled workers.
But employer groups say these promised savings may not materialize.
“This trailer bill is nothing but a futile attempt to reduce a proposed benefit increase,” said Lori Kammerer, executive director of the California Coalition on Workers’ Compensation. “This whole package could end up costing employers more than $4 billion a year, and that comes after many employers have seen their worker’s comp bills double over the last couple years.”
Davis said at a news conference two weeks ago that he has taken no position on the workers’ comp package, saying he needs to review some of the last-minute additions.
Also on Davis’ desk is SB 40, by Sen. Richard Alarcon, D-Van Nuys, which would increase unemployment insurance benefits up to 25% a year, a cumulative cost to employers of $1.1 billion annually.
The labor federation’s Rankin countered that the increase in unemployment benefits would be modest, and is long overdue. He said the $7 billion currently sitting in the state’s Unemployment Insurance Trust Fund would be sufficient to cover the increased unemployment benefits for the next two years, so the impact on employers would be deferred.
And, Rankin argued, the additional benefits would be an immediate stimulant for the economy.
“No unemployed worker is going to put an extra $100 a week into the bank. They’re going to spend it,” he said.
Last week, the consensus among Sacramento lobbyists was that Davis would likely sign increase unemployment insurance benefits bill.
“Gov. Davis has shown over the last two years that he will sign one or two key bills for labor and put off consideration of others until the next year,” said Fred Main, senior vice president of the California Chamber of Commerce. n
Fine is a staff writer with the Los Angeles Business Journal.
