Study Shows Public Employers Saved Billions from Workers’ Comp Reform
Joel Fox, President, Small Business Action Committee
As California’s workers compensation crisis came to a head in the winter of 2003-2004, thousands of stories and complaints echoed throughout the state about the crushing impact workers comp costs had on California businesses. Workers compensation costs tripled for some businesses in just a few years. For others, workers comp premiums totaled more than salaries. In traveling the state promoting the Small Business Action Committee’s workers comp reform initiative, I held up a copy of a state of Idaho advertisement from a California business journal promoting reasonable workers comp rates there and offering to help California businesses move. Some did.
However, little attention was focused on the difficulties workers comp costs brought to local and state governments. But government was also hit hard. The City of Los Angeles had seen its workers comp costs increase nearly $50 million to $160 million over three years. That increase could pay for 750 new police officers according to city councilwoman Wendy Greuel. Then Insurance Commissioner and now Lt. Governor John Garamendi said that the cost of workers’ comp for the Los Angeles Unified School District was equivalent to 10,000 new teachers.
But, governments couldn’t revolt against these costs as some businesses did. You can’t move a California school district to Idaho. Or a local police department, either.
The government workers comp costs were not a hit against a bureaucracy. Taxpayers covered the costs of workers compensation for government. By spending millions in tax dollars for those costs there was less to spend on government provided services.
Fortunately, the reform pushed by Governor Schwarzenegger and passed by the legislature, SB 899, brought real cost savings benefiting both the private and public sectors.
The Small Business Action Committee sponsored a study to look at the effects of the SB 899 reforms on local government. Completed by The Center for Government Analysis, the report shows that in just a few years local and state government have already realized a savings of $1.87 billion. That is $1.87 billion that can go toward government budgets without raising taxes. Or looked at another way, that is $1.87 billion the taxpayers don’t have to come up with just to satisfy insurance premiums.
Dr. Steven Frates of the Center of Government Analysis, using the starting salary of an LAPD officer, calculated that the estimated savings engendered by the workers comp legislation was equivalent to hiring 25,097 new police officers — this in a state where the total number of sworn police officers is approximately 67,000.
Workers compensation reform has helped California businesses, taxpayers and the public sector.
(To see the full study go to www.sbaction.org and follow the links under the red banner: SBAC Workers Compensation Study)