With legislative leaders unable to reach a compromise on a budget, Governor Arnold Schwarzenegger is moving forward with his furlough plan. Per executive order, starting in February all state agencies will be required to furlough employees two days a month. This is about a 10% reduction in hours. For those agencies and boards that deal with California workers’ comp and health and safety issues, that means possible backlogs for legal proceedings, enforcement actions and claims administration.

“We’ve informally opined that it’s kind of dumb…applying it to SCIF doesn’t make sense. It seems kind of goofy to risk penalties by furloughing people from an agency that’s not going to save the state any money.”
—Mark Rakich, Assembly Insurance Committee

Under the governor’s original budget proposal, the furlough applied to State Compensation Insurance Fund (see WCE story 12/9/2008). SCIF adjusts claims for a significant number of employers, including all state agencies. A two-day-a-month furlough could slow down the claims process and benefits for its private companies’ injured workers and those in state agencies.

If SCIF is not exempt, SCIF president Janet Frank may have no choice but to comply. If she has flexibility, the question remains whether SCIF will take advantage of the furlough to achieve badly needed cost savings.

 “It’s my understanding that it supposedly applies to SCIF,” says Mark Rakich, chief consultant for the Assembly Insurance Committee. “We’ve informally opined that it’s kind of dumb…applying it to SCIF doesn’t make sense. It seems kind of goofy to risk penalties by furloughing people from an agency that’s not going to save the state any money,” Rakich says, adding that there seems to be a kind of “fairness premise” behind it.

Though SCIF staffers are state employees, SCIF’s payroll is off budget—funded by premium from policyholders, not the state’s General Fund. So furloughing SCIF workers would have no direct impact on the state’s revenue shortfall, hence the perceived shortsightedness of the move.

Even though the California Chamber of Commerce represents private employers, it supports the governor’s furlough policy as a matter of fairness. The economy already is forcing the private sector to cut back, and employers are being asked to absorb proposed revenue generators in the governor’s proposed budget.

“We don’t think you should prioritize public jobs over private sector jobs,” says Marc Burgat, vice president of government relations for the Chamber. “We think public employees should be sharing in this as well. We’ve talked to [the governor] and members of both parties…the private sector has taken a lot of hits and that should be shared enough to get the economy going. Having equal cuts…is appropriate.”

Jeanne Cain, vice president of policy for the Chamber, is also the chair of SCIF’s board of directors.

SCIF has not officially confirmed that it is or is not complying with the furlough. Some employees are getting a little antsy.

“[SCIF] told us privately that they do not want to do it and are still in negotiations with the [Department of Personnel Administration], but they essentially told us that we will get paid if the state issues warrants, but we are not exempt from the furlough,” says one employee. “With the two state holidays in February, and the two furlough days, SCIF will only be open 16 days in February. The employees are all waiting to see what [SCIF president] Jan Frank is going to do…her silence in this area is deafening.”

Frank hasn’t been completely silent. She emailed employees saying that management still is assessing the situation in light of the governor’s executive order. Here is that email:

“I know this is distressing and we have heard your concerns. The situation is very complex and evolving daily. We are working diligently on several fronts to determine State Fund’s status. As soon as we have confirmed information, we will share it with all employees. Thank you for your patience as we work through this process.”

DPA tells Workers’ Comp Executive that it’s too swamped to provide department-specific information.

SEIU local 1000, the union that represents SCIF employees, has filed an unfair-practice charge with the Public Employment Relations Board against DPA and the governor, challenging the furlough. “The governor still maintains that all departments are subject to the furloughs,” says Jim Zamora, spokesman for SEIU.

 Impacts on Other Agencies

 Department of Insurance

 The furlough is discretionary for constitutional officers—all of whom say they won’t comply. Insurance Commissioner Steve Poizner, the only other Republican holding a statewide constitutional office, initially said publicly that if other state agencies are forced to comply, the Department would furlough. He later reconsidered his position, saying his Department will not comply.

Instead, the Department issued a news release saying it’s implementing a 10% across-the-board budget cut. “We welcome ideas on how we can save money, so we’re doing the 10% cut,” says Darrel Ng, spokesman for the Department. “It’ll save more than what the furlough would save.” He says the Department has approximately 1,300 employees and that the Department doesn’t expect any impact on workers’ comp programs.

DIR, Cal/OSHA, DWC, Labor Standards and Commissioner

The furlough applies to the Department of Industrial Relations, says spokesman Dean Fryer. DIR has approximately 2,600 employees, encompassing the Labor Commissioner, California Occupational Safety and Health, Cal/OSHA, the Division of Workers Compensation and the division of labor standards.

“It will impact our entire department. It will go across every agency regardless of funding source,” Fryer tells Workers’ Comp Executive. This also includes all the boards and commissions, he adds. It’s unknown what the impact will be on the workload of the various divisions.

Local administrative law judges under the Workers’ Compensation Appeals Board will lose at least two hearing days, no doubt bogging down an already backed-up system. DWC is also struggling to get the kinks out of the Electronic Adjudication Management System, in particular scanning of forms.

“The good news is that EAMS will still be available on furlough days,” EAMS spokesman Peter Melton tells Workers’ Comp Executive in an email. “External users would still be able to access the electronic Web-based application and electronic filers would still be able to file forms on those Fridays that DWC district offices are closed. However, it is not certain at this point whether there would be technical support in case of a problem.”

He says DWC is looking at the impact on scheduling at the 24 district offices and satellite hearing courts. “The offices have been instructed to reschedule any hearing set for the first two potential furlough days in February (2/6 and 2/20),” he says.

As for the savings from the furloughs, Fryer says the expectation is that any savings accrued in DIR’s General Fund (GF) will be returned to the state’s general fund. The cost savings from the furlough will increase the fund balance (reserve) of most special funds, including the Workers’ Compensation Administration Revolving Fund (WCARF).

“While the impact of an increased fund balance for the 2009/10 fiscal year is unknown, there are many variables that affect the annual calculation of the assessment amount, which will not be known until the department completes its annual assessment in the second quarter of next fiscal year,” Fryer says.