NU Online News Service, Aug. 28, 10:50 a.m. EDT
California's insurance commissioner said he plans to sue the state over its move to sell $1 billion in assets of the State Compensation Insurance Fund, which is intended to balance the state's budget.
In a statement, Commissioner Steve Poizner said he would file a lawsuit seeking to declare the sale unconstitutional. Such a move, he said, could lead to skyrocketing workers' compensation insurance costs for California's construction firms, agricultural industry and other small businesses.
"The pilfering of funds used to pay the claims of injured workers to instead help fill the state budget gap is both unconscionable and unconstitutional," said Mr. Poizner in a statement. "This $1 billion sale of SCIF assets could not only endanger the solvency of SCIF, but is a direct affront to the state's jobs and business climate.
"In these tough economic times, the state should be doing everything possible to create jobs, not use budget gimmickry to hurt the economy," he continued. "The Schwarzenegger Administration simply got it wrong with their proposal and the Legislature failed to adequately scrutinize the consequences."
The department said the provision, ABX4 12, which was part of the state's July budget revision, authorizes the Department of Finance to sell or otherwise dispose of assets and liabilities belonging to SCIF, with the intent of raising $1 billion in general fund revenue.
As the insurer of last resort, that is self-sustaining, the department argues that such a move would leave many organizations without access to workers' comp coverage, or extremely high premium rates.
Prior to the legislation, the department said SCIF rates have been rising faster than the rest of the workers' comp insurance market.
The department said similar efforts like this have been attempted in other states and have failed. In both Colorado and Utah, legal authorities have determined that funds could not be transferred from their respective insurers to the states' general funds.
The department said it expects to file the suit in Sacramento County Superior Court in the coming days.
In July, the SCIF board of directors passed a resolution opposing the state's efforts to sell the fund's assets.
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