SAN FRANCISCO - California Insurance Commissioner Steve Poizner said last week that he plans to go to court to block the state's plans to sell $1 billion of the State Compensation Insurance Fund's assets.
The proposed sale of part of the state-owned workers' compensation insurer's book of business was included in the package of budget revisions state lawmakers negotiated with Gov. Arnold Schwarzenegger in July.
A failure to execute the SCIF sale would throw the thinly balanced budget out of whack.
Poizner, a Republican who is running for governor in 2010, said the sale would be unconstitutional.
"In these tough economic times, the state should be doing everything possible to create jobs, not use budget gimmickry to hurt the economy," he said in a statement. "The Schwarzenegger administration simply got it wrong with their proposal and the Legislature failed to adequately scrutinize the consequences."
Poizner isn't the only one raising red flags about the plan to sell part of SCIF's business.
The nonpartisan Legislative Analyst's Office, in a May report on what were then budget proposals, classified the SCIF proposal as a "high risk" to the budget.
"It is very unlikely, for example, that parts of the State Compensation Insurance Fund (SCIF) - the publicly run workers' compensation insurer - can be sold during 2009-10 for $1 billion," the LAO wrote.
The state established SCIF in 1914 as a self-supporting, nonprofit enterprise to ensure the availability of workers' compensation insurance.
Poizner argues that the proposal to sell a portion of SCIF's business book violates the state's constitution, which requires the Legislature to establish a "complete system of workers' compensation."
Poizner said staff at his Department of Insurance believe the sale of some SCIF assets will result in its lacking funds to pay its remaining liabilities, thereby forcing it to raise premiums on its customers, most of which use SCIF because they lack access to private workers compensation insurance.
The state fund's board has adopted a resolution opposing the proposed sale.
The SCIF lawsuit isn't the only sign that pieces of the barely one-month-old budget package are unraveling.
The July budget deal included hundreds of millions of dollars in unallocated spending cuts to the state's prison budget.
Senate Democrats passed a bill to enact such cuts by reducing the prison population through means that include revised parole guidelines and a commission to review sentences.
But many Assembly Democrats, evidently worried about looking soft on crime, balked at the Senate bill. A watered-down Assembly prison bill - without some of the more controversial provisions, and $220 million less in savings - is expected this week.
