State Compensation Insurance Fund president Janet Frank is opposing the governor’s right to furlough SCIF employees.  Frank lays out her arguments in a succinct and compelling brief to the San Francisco Superior Court. Her brief is in response to legal action filed in February by in-house SCIF attorneys challenging Governor Arnold Schwarzenegger’s furlough.

Even though Frank was named as a respondent, along with the governor in the action, she is choosing to side with SCIF employees. In doing so, she is publicly but gently splitting with the governor.  In December 2008, the governor mandated that state employees be furloughed two days a month to address the state’s budget crises. Frank, working through the Department of Personnel Administration and the governor’s office, attempted to get an exemption from the furlough and was turned down.

Frank’s position is first that SCIF is legally entitled to control its own staffing levels, and manage it own business. It is off budget, so furloughing staff does not save the state money.

This was something the Legislature intended. Insurance Code §11873(c ) says that,  “Notwithstanding any provision of the Government Code or any other provision of law, the positions funded by the State Compensation Insurance Fund are exempt from any hiring freezes and staff cutbacks otherwise required by law.”

Frank tells the court in a memorandum of point and authorities, that all powers to administer SCIF activities reside with its board of directors. The insurance code specifically says “the board is vested with full power, authority and jurisdiction over the State Compensation Insurance Fund.”  Insurance Code §11781 states in pertinent part that the board… “may perform all acts necessary or convenient in the exercise of any power, authority or jurisdiction over the fund, either in the administration thereof or in connection with the insurance business to be carried on by it under the provisions of this chapter, as fully and completely as the governing  body of a private insurance carrier.”

In other words, her point is that since the state constitution provides plenary authority to the legislature, not the executive branch, and since the legislature has seen fit to exempt SCIF from such executive orders, the Governor has no authority to furlough its employees.

Finally, Frank makes the point that SCIF is funded separately from the budget.  A furlough would in no way result in savings to the state. The brief says in pertinent part: “…[Insurance Code §  11174] shows that salaries of State Fund employees are paid out the assets of State Fund, which are in turn derived from premiums and investments made using those premiums, not out of State revenues. When the exemption for the State Fund from hiring freezes and staff cutbacks contained in 11873 (c)was enacted, the Legislative History noted that the exemption ‘would not result in a direct fiscal impact to the state, since SCIF is an off-budget department.’ ”

In concluding, Frank urges the court to consider the merits of her arguments and to do so expeditiously.  You can read a copy of Jan Frank’s brief in the Resources section at   www.wcexec.com .

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