April 2003

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Guest Commentary 

Workers’ Compensation Crisis Afflicts Schools

State Senator Chuck Poochigian of Fresno is chair of the Senate Republican Caucus.

In recent months, there has been an outcry throughout private industry against California’s broken workers’ compensation system. Employers face insurance premiums twice the amounts they paid just four years ago, forcing them to cut health benefits, lay off workers and, in some cases, leave the state for better business climates.

But privately owned businesses aren’t the only ones suffering in this crisis. Public employers also bear the burden of skyrocketing workers’ compensation insurance costs – costs that have negative ramifications for California citizens served by the state’s public services. Most public entities, including schools, are "self insured," meaning they are not reliant on insurance industry workers’ compensation pools to meet the majority of their workers’ compensation mandates.

K-12 Education

Over the past few years, K-12 education has experienced significant increases in workers’ compensation costs.

What Could Schools Buy With That Additional $84 Million?

• Hire Over 1,300 New Teachers
• Purchase 1.7 Million New Textbooks
• Hire 3000 Teachers’ Aides
• Purchase 42,000 New Computers

Workers’ compensation increases are affecting schools both small and large from all parts of the state. In 1998-99, Compton Unified School District, south of Los Angeles, spent 3.3 percent of its annual budget on workers’ compensation, or $208 per student. Two years later, their bill was $235 per student for a total cost of more than $6.8 million. A tiny San Luis Obispo County district, Cuyama Joint Unified, spent $254 per pupil for workers’ compensation in 1998-99. By 2000-01, costs nearly doubled to $436.

Costs for the 2001-02 school year are not yet available, but school officials expect they will continue the upward trend. Consistent with statewide trends, schools could face increases this year of well over $100 million.

Higher Education

California’s institutions for higher education have experienced similar workers’ compensation increases, causing alarm among school officials who also face millions of dollars in budget cuts.

The California State University (CSU) currently employs nearly 43,000 people. Workers’ compensation costs for the CSU rose considerably over the past four years, despite a decline in the number of claims filed.

The University of California employs 191,000 people at 10 campuses, five teaching hospitals and two national laboratories. The total UC payroll is $7.5 billion dollars. Workers’ compensation claim costs nearly doubled over the past four years.

Meaningful Changes Must Be Implemented for Relief to Schools

Schools cite several primary cost-drivers to which they attribute the increases: Medical cost inflation; increased utilization; high litigation costs, and legislation, including AB 749 (Calderon), which passed in 2002 and substantially increased benefits.

In the midst of the workers’ compensation crisis, it is important to recognize the hardships faced by employers are not restricted to the private sector and that public services, including our education system, are impacted as well. Total annual increases in the range of $150 million are affecting and will continue to affect the ability of our school systems to educate our children. Given the magnitude of increases to these self-insured entities, real, systemic reform must be implemented in order for relief to be achieved.