State Compensation Insurance Fund (SCIF) is trying to kill a good-government bill that affirmatively permits the State Auditor to audit State Fund! State Fund has been so recalcitrant over the past several years that the Auditor's office has had to go to the legislature and ask for an affirmative bill to permit its audits. And SCIF is fighting it all the way home.

It's the same old excuse from the embattled management of SCIF: that it is entitled to confidentiality. The State Auditor does not do insurance regulation-type audits but rather audits of how money is spent on more mundane items such as executive expense vouchers and contracts for services. The confidentiality issue is nothing less than a smokescreen. The legislation will bring the possibility of some much-needed transparency to State Fund's general and otherwise nonconfidential operations, according to the bill's sponsor.

SB 1452, authored by Sen. Jackie Speier (D-San Mateo), would give teeth to the California State Auditor and specifically subject SCIF to the same audit requirements as other state agencies. SCIF has refused such audits in the past, citing its regulation by the Department of Insurance and confidentiality, despite its being part of the Division of Industrial Relations, which is subject to audit.

But it seems these audit requirements are just too much for SCIF's interim president Jim Tudor, who has decided he should be allowed to pick and dictate the terms of SCIF audits. This is a right not bestowed by the legislature upon other state agencies.

Tudor has ordered State Fund Government Relations Officer Patricia Quintana to get the bill killed or set aside for this year. There have been several strategy discussions on the topic,  according to sources on the 16th floor. Tudor likely is counting on union help to influence Democrats on Assembly Appropriations, the next place the bill will be heard.

State Fund's hired and paid lobbyists Lang Hansen O'Malley & Miller also are known to be working behind the scenes to tank the bill. SCIF has paid these guys nearly $150,000 of policyholders' funds so far this session, and for what? To keep potential audit results secret from the legislature, from its own board, and from its policyholders. In fact, SCIF wants to prevent the audits from happening at all, it would seem.

SCIF's lobbyists testified before the Assembly Business & Professions Committee that a publicly released audit of SCIF would be potentially "disruptive to the marketplace."

But the facts are quite different: The State Auditor already has statutory responsibility to keep proprietary information confidential. That would include certain aspects of risk-based capital (RBC) reports, and other so-called market-disruptive facts.

Unbelievably, and in what appeared to be near desperation, SCIF then suggested that the Joint Legislative Audit Committee review the audit first to determine if its contents would be disruptive and then release it to the public. Senate staffers refer to this argument with a combination of laughter and just plain astonishment. They call it "astounding."

Experienced legislative hands know these tricks – don't publicly challenge the bill on its face, just complicate it until it dies a natural death. Then it never appears as though you acted in a self-serving fashion.

SCIF went on.  It also expressed concern that some of the audit requests might be generated by the Little Hoover Commission, thus posing a competitive dilemma. In this way, SCIF has accused Little Hoover Commission Vice Chairman Stanley Zax, CEO of Zenith National Insurance Company, of using his position to gain competitive knowledge. There has never been an indication of this; those who know Zax say he's far too ethical for this sort of game. Zax has been critical of SCIF's business practices in the past and SCIF seems to be grasping at straws.

All of this folderol comes from a SCIF management that has been unable to decrease market share significantly when measured either by number of policyholders or percentage of total market share. Down to 38 percent, its share is nearly double the 20 percent it should be near.

The Association of California Insurance Companies withdrew its opposition to the bill once language that called the Workers' Compensation Insurance Rating Bureau a public entity was removed. ACIC is now neutral on SB 1452.

The Assembly Insurance Committee wisely passed the bill and rejected SCIF's amendments. SB 1452 now moves to Assembly Appropriations for a hearing on August 9. SCIF is the only official opposition. Compline, on behalf of its members, has taken a position in favor. Compline is a sister company of Workers' Comp Executive.

Senate staffers say SCIF's arguments are not convincing, and its lobbyists have not proposed any reasonable amendments since the policy committee hearing.

According to the lead Senate consultant on the bill, Richard Steffen, SCIF had proposed that the State Auditor be allowed to perform audits only in connection with whistleblower complaints by its employees. But this proposal is designed by SCIF management to seriously water down the legislature's audit and oversight authority, something the legislature is clearly unwilling to give up. And how many whistleblower complaints have there been, anyway?

SCIF has said it's not subject to the full authority of the Insurance Commissioner on a number of occasions. Now, it would appear, State Fund management is trying to find ways not to be subject to the legislature.

The Assembly Appropriations Committee meets this week. If we act today, together, to counteract this continued recalcitrance by State Fund management, we have a chance! There is still time left to make our voices heard.

We ask—we urge—you to forward this e-mail showing your support of SB 1452 to Judy Chu, Chairperson; Sharon Runner, Vice Chair; and Ronald Calderon, member. Cut and paste their email addresses as follows:  Assembly.chu@asm.ca.gov  Assemblymember.Runner@assembly.ca.gov Assemblymember.ron.calderon@assembly.ca.gov

You can also register your support by emailing both Chuck Nicol, the lead consultant in the Appropriations Committee and Richard Steffen, the lead consultant on SB 1452 for Senator Speier. Their emails are as follows Chuck.Nicol@asm.ca.gov and Richard.Steffen@SEN.CA.GOV

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Commentary filed in the public interest by Publisher J Dale Debber from Connemara, County Galway, Ireland.