The Sacramento Bee, January 8, 2004

Sacramento– Democratic leaders said Wednesday that they are unlikely to pass a new workers' compensation reform plan before the March 1 deadline when Gov. Arnold Schwarzenegger says he would put the issue to voters on the November ballot.

"I'm not going to stop work on workers' compensation because it's March 2. The only firm deadline we have for the legislative session is the end of August," said Sen. Richard Alarcon, D-Sun Valley, one of the chief architects of last year's workers' compensation legislation. "If he takes it to the ballot, it diminishes our ability to get good work on workers' compensation (reform)."

Senate President Pro Tem John Burton, D-San Francisco, called the deadline "totally unrealistic."

But Democrats are split on the issue. Insiders said the Assembly was more likely than the Senate to reach agreement before the deadline. Insurance Commissioner John Garamendi also said Wednesday that a compromise could be reached by March.

"These issues have been discussed for years," he said. "It can get done."

Political experts also said Schwarzenegger's leverage with the Democrat-controlled Legislature could be strengthened by three proposed workers' compensation initiatives that are already seeking qualification for the November ballot. One measure submitted last week is similar enough to a proposal by Schwarzenegger that Republican insiders said the governor could endorse the plan if he decides to bypass the Legislature.

"The biggest problem is getting the political will to get things done," said Lawrence McQuillan, director of business and economic studies at the Pacific Research Institute in San Francisco. "That threat (of an initiative) hanging over them is going to be a major motivator for change."

As a cornerstone to his economic recovery plan, Schwarzenegger is counting on an overhaul of the state system that treats workers injured on job to save employers billions in workers' compensation insurance costs. That would free money for businesses to hire new workers and expand operations as well as help the governor recruit companies to California.

The day after taking office, Schwarzenegger introduced a sweeping proposal aimed at cutting more than $11 billion in costs out of a bloated workers' compensation system in which employers have paid spiraling premiums in recent years.

His plan includes uniform guidelines for determining disability awards and independent medical review of claims.

Labor leaders and attorneys representing injured workers oppose the Schwarzenegger proposal, arguing that it threatens to erode benefits and medical treatment necessary for workers to return to the job.

"We're not going to support a bill that reduces injured workers' benefits," said Nathan Ballard, a California Labor Federation spokesman. "Real reform includes re-regulation (of insurers)."

Art Azevedo, head of the California Applicants' Attorneys Association, said lawmakers should let new workers' compensation laws passed last summer play out before making further changes.

"I'm dismayed by his (Schwarzenegger's) attitude. We'll be advising to Legislature to leave his proposal on the table and let's go to the ballot," Azevedo said.

Allan Zaremberg, president of the California Chamber of Commerce, said passing legislation by March is imperative to allow insurers to cut rates this summer. If Schwarzenegger launches a ballot measure, it also provides time to gather signatures by mid-April to qualify an initiative for the November ballot.

"There now will be a consequence for the Legislature turning a deaf ear to businesses crying for relief," Zaremberg said. "He's not going to wait for the Legislature to act. The governor is not afraid to go directly to the voters."

Garamendi said he will continue to work with labor and business leaders to build a coalition to get legislation passed. But he admitted "the Senate is reluctant to act by March 1."

Sen. Charles Poochigian, R-Fresno, called the deadline fair warning to the Legislature.

"We're ready and willing to talk about any concerns," said Poochigian, who is carrying the governor's bill. "If the motivation of the critics is to undermine bold, comprehensive reforms, then that's where that March 1 deadline becomes very relevant."

Alarcon, though, said there are dozens of other proposals that merit review.

"Whatever might emerge by March 1, it is not going to complete the workers' compensation reform," Alarcon said. He said a ballot measure could well lose. "If voters vote it down, then we end up with nothing."

But Barbara O'Connor, director of the Institute for the Study of Politics and the Media at California State University, Sacramento, said Schwarzenegger could persuade voters to support something as complex as workers' compensation reform.

"We are dealing with a public that is very different. We have entered a new era where the governor is a good communicator," O'Connor said.

Gilbert Chan can be reached at (916) 321-1045 or gchan@sacbee.com.