Calif. insurance regulator to sue over state fund

posted: 73 DAYS 11 HOURS AGO

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SACRAMENTO, Calif. -California's insurance regulator said Thursday he plans to sue Gov. Arnold Schwarzenegger's administration to stop the sale of a portion of the state's workers' compensation insurance business.

Insurance Commissioner Steve Poizner said he'll fight the sale of a portion of the State Compensation Insurance Fund for $1 billion. Schwarzenegger and lawmakers authorized the sale last month as part a revised budget plan to fill a deficit once estimated to be as high as $26 billion.

The State Compensation Insurance Fund is the insurer of last resort for employers to provide compensation to workers who get injured on the job.

Selling a portion of the business or taking money from its assets violates the state's constitution, Poizner said. He warned the sale would drive up insurance premiums for construction firms, farms and other small businesses.

"You simply can't be pulling money out of state fund for uses outside of the workers' compensation system," Poizner said Thursday. "And even if this scheme were legal, it is terrible public policy."

Rachel Cameron, a spokeswoman for the governor, said the administration believes the state can sell a part of the insurance business without having an impact on costs.

Poizner's lawsuit was expected to be filed in Sacramento County Superior Court in the coming days.

Schwarzenegger signed the state's revised $85 billion budget July 28. It included billions of dollars in cuts to schools and colleges, prisons, and the state's health care program for the poor.

The Schwarzenegger administration announced Thursday it had reached a tentative two-year deal with highway patrol officers to forgo pay raises and become the first state workers union to contribute to their own retirement health benefits.

If the union's 8,500 active officers approve the deal, the California Association of Highway Patrolmen would forgo 0.5 percent pay raises for the next two years. The money would be used to pre-fund the officers' retiree health benefits, and officers would contribute an additional 0.5 percent of their salary to that fund.

2009-08-27 18:46:08