CA State Fund Board Opposes Proposed Sale Of Assets

Sacramento, CA (CompNewsNetwork) - Due to the severe nature of California's budget crisis, policy leaders are understandably considering everything as they try to produce a balanced budget. The sale of all or a part of State Fund's assets is one of the many suggestions that have been made. This suggestion was included in the May budget revise, which is done each May after tax receipts have been tallied, and proposes suggests that State Fund retain its role as a guaranteed provider of workers' compensation, but that a portion of State Fund's assets would be sold to a private insurer with the proceeds (estimated at $1 billion) going to California's general fund.

Historical Precedents
The idea of either selling or privatizing State Fund has been suggested at various points in history. In the past these proposals have always been dropped after considering the legal challenges as well as the risks to the market and economy. While there's no guarantee the outcome this time will be similar, the risks have not changed and in fact may be greater given the recession.

Another important historical precedent is State Fund's role as a viable and affordable option when market conditions worsen and private insurance companies scale back their product offerings. The board experienced this in 2000-2002 when 28 private carriers claimed insolvency and left the California market. At that time State Fund stepped up to fulfill its leadership role as a critical safety net for the market by providing coverage for most of those policyholders and prevented a workers' comp market collapse and the drain on the state's economy that would have resulted.

It's important to understand that the current proposal is structured as a study of the idea of selling all or part of State Fund's assets. This proposal requires substantial and thoughtful analysis not only because of the complexity of issues but also because the stakes are so high. Clearly if this were to occur it would be a lengthy proposition and not one that would happen quickly.

As State Fund move through this process, it remains committed to serving all California businesses. Millions of Californians rely on the security and certainty State Fund offer the state's employers, particularly the small businesses and new ventures that are keys to California's economic recovery. State Fund is obligated and well-positioned to provide stability, affordability, and availability to California's historically volatile workers' compensation market.  Without it, many employers—particularly small businesses and start ups—would simply not be able to obtain or afford workers' compensation insurance.

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