THIS WEEK IN SACRAMENTO

Prepared by Norwood & Associates

November 14, 2003

Schwarzenegger Prepares for Special Session on Workers' Compensation Insurance

Arnold Schwarzenegger will be sworn in as Governor on Monday, November 17, 2003. He will immediately call for a Special Session of the Legislature to begin the next day, November 18. The topics to be considered are the state budget, drivers' license for undocumented immigrants, and workers' compensation insurance reform.

The Governor-Elect's policy team is still making decisions on key elements of the reform package. They have not finalized language or obtained authors. They haven't decided if they will have one large bill or break up the package into several different bills. While they have reportedly submitted some language to Legislative Counsel for drafting, the language has not been finalized and could still change.

The rush to put together a workers' compensation insurance reform bill is driven by the Governor-Elect's campaign promise for fast action. However, it is taking his policy team longer than expected to put together the reform plan, and the long-term strategy for achieving success appears to still be in development.

There is little doubt the Governor-Elect's reform plan will be aggressive. His policy team includes senior staff of the Senate Republican caucus, including Senator Chuck Poochigian, who were openly critical of last year's reform bills. They believe many in the business community were too quick to compromise with Democrats. The new reform bill will reportedly include most of the reform package proposed by the Republican caucus that was killed by legislative Democrats last year, and possibly a new idea to eliminate chiropractors from being designated as treating physicians.

The biggest problem facing the Schwarzenegger team, however, is not word-smithing or deciding which reforms to include, but how to fashion a long term strategy for success. Many observers believe the strategy of a Special Session with inadequate preparation may doom the process, or at least make it much harder to get a bill passed through a Legislature controlled by Democrats.

The Schwarzenegger team hasn't decided whether to place its reform plans in one bill or break it up into several bills. The advantage of one bill is that it establishes a simple goal for determining success. There are several problems with this approach, however. Some of the reforms being contemplated require amending the California Constitution, which can only be accomplished by a vote of the people. The Legislature can place a Constitutional amendment on the ballot with a 2/3rds vote. This could be difficult to achieve because the deadline to place the measure on the March 2004 primary ballot is December 5, 2003.

Many believe it would be very difficult to obtain consensus among Democrats with only a couple of weeks to go, especially since no one has seen any language yet. Separating out the constitutional issues into a separate bill may make it easier to move other reforms through the legislative process.

Then there is the question of authorship. While the Governor-Elect will be the sponsor, he does require legislative authors. It will be easier to achieve bipartisan consensus by having several discrete bills with authors from both parties. However, this approach makes it difficult to move quickly and decentralizes control.

Several supporters of workers' compensation insurance reform are getting nervous things aren't coming together better this close to the Special Session being called. Many question the wisdom of calling a Special Session in the first place. They note this strategy will only be successful if the majority Democrats in both Houses cooperate with the Governor-Elect. This is not a foregone conclusion.

Generally speaking, there are two camps within the Democratic caucus. There are those who want to give Governor-Elect Schwarzenegger whatever he wants, then blame him later if things don't work out as hoped. There is another camp that views the whole concept of a Special Session as a joke, and half-seriously suggest they should simply walk out and only convene when the regularly scheduled Legislative Session begins in January 2004. It appears the more liberal Senate is prepared to be more confrontational than the Assembly, which has a significant contingent of moderate Democrats who are still trying to interpret what the recall election means for them.

There is also a school of thought that the Governor-Elect's policy team is developing a high risk "us v. them" strategy that leaves no room for negotiation and building alliances. They believe the reforms now being drafted are so hard-core that powerful special interests such as the applicant's attorneys and unions will not let Democrats support the bill, dooming the reform effort. They note that some unions now recognize they over-played their hand in the last few years, and now want to negotiate to keep from being wiped out.

Everyone in the business community will be ecstatic if the Governor-Elect's aggressive Special Session strategy is successful. However, there is also the fear the Schwarzenegger team, in its zeal for fast results on workers' compensation insurance reform, hasn't thought out what will happen if the Democrats balk.

One possibility is the Governor-Elect could simply throw up his hands, say "I tried," blame the Democrats, and kick everything over to the voters at the next ballot. Many in the business community are concerned that if this happens the issue will get lost in the increasingly lengthy ballot that may contain the repeal of mandated health insurance, repeal of drivers' licenses for undocumented immigrants, reapportionment and the "blank check" initiative that makes it easier to raise taxes. Another very real concern is there won't be enough money to adequately wage initiative campaigns on all these issues.

Another possibility, of course, is the Democrats refuse to hand the Governor-Elect an early win during the Special Session, but then work constructively with him in negotiating real and substantive reforms when the Legislature convenes for the regular Legislative Session in January 2004.

The applicant's attorneys, who were relatively unscathed in last year's workers' compensation insurance reform effort, know a bull's eye is painted on them this year. They are developing a media campaign to improve their image. They are also working on a legislative strategy to drive a wedge between employers and insurers.

Insurance Commissioner John Garamendi's statistically unsupported advisory pure premium rate cut of 14.9 percent could play into this strategy. By creating the expectation, no matter how unrealistic, that premiums should drop by almost 15 percent next year, applicants' attorneys and distressed employers will have a common villain - insurance companies, when rates don't fall.

Leadership Changes

The contentious succession issue for Speaker of the Assembly may be resolved next week. Democrats are gathering to plan how to respond to the Governor-Elect's Special Session. One of the issues on the agenda will be whether or not to allow termed-out Speaker of the Assembly Herb Wesson to continue during his last year, or to elect someone else as is traditionally the case.

The liberal and moderate factions in the Democratic caucus have been vying for the upper hand for some time now. The choice of Speaker will send an important signal regarding Democrat's strategy for working with Governor Schwarzenegger.

Assembly Republicans have also chosen Assemblyman Kevin McCarthy to replace termed out Assemblyman Dave Cox, who is running for the Senate. As the minority party, Republicans are usually appointed to the vice-chair position on committees. Assemblyman McCarthy announced the following vice-chairmanships:

Appropriations: Sharon Runner (R-Lancaster)

Arts & Entertainment: Tony Strickland (R-Thousand Oaks)

Budget: Rick Keene (R-Chico)

Education: Alan Nakanishi (R-Lodi)

Governmental Organization: George Plescia (R-San Diego)

Health: Todd Spitzer (R-Orange)

Higher Education: Robert Pacheco (R-Walnut)

Insurance: John J. Benoit (R-Riverside)

Water, Parks & Wildlife: Tim Leslie (R-Tahoe City)

* * *

© Copyright 2003 by Norwood & Associates

[email protected]