Gino DiCaro

SCIF reform moves forward in legislature

By Gino DiCaro, VP, Communications

Capitol Update, April 4, 2008 Share this on FacebookTweet thisEmail this to a friend

On April 2nd two bills restructuring the State Compensation Insurance Fund (SCIF) moved out of their policy committees. Both Senator Mike Machado (D-Linden) and Assemblymember Joe Coto (D-San Jose) introduced legislation this year in response to the controversy that arose in 2006 when two SCIF directors voluntarily resigned over conflict of interest issues. These incidents resulted in numerous investigations and audits.  SCIF is still undergoing a joint criminal investigation by state insurance investigators, the California Highway Patrol and the San Francisco District Attorney's Office.  

One particular audit of the fund commissioned by the Department of Insurance and conducted by an independent firm resulted in 110 recommendations.  Many are already being implemented, but several others require legislation.  SB 1145 (Machado) and AB 1874 (Coto) would strengthen SCIF’s management procedures and provide more transparency. According to the authors, their main objective is to run SCIF, a $20 billion insurance company, more like a large private insurer than a quasi-public agency of government.

To accomplish this, the authors felt it was important to professionalize the Board of Directors with members that have experience with large companies, have the skills to overcome current challenges and avoid conflicts of interest in the future.  Both bills expand the Board from five to nine members and establish qualification criteria.  

SB 1145 passed out of its policy committee with Republican support.  But in the Assembly Insurance Committee, AB 1874 ran into resistance when republicans reserved their right to vote.  Even Assemblyman Charles Calderon (D-Whittier) expressed several concerns with the way the bill was written. Ultimately, though, he provided a courtesy Aye vote to move the bill along.

Both bills are supported by the Governor’s Administration. They and several stakeholders are involved in further developing details of both bills.

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