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Current Budget Stalemate May Jeopardize Work Comp Benefits

In workers' compensation defense news, the current budget stalemate between the state legislature and the governor's office may result in nearly 2,700 Californians going without work comp benefits.

The constitution mandates that the state has a budget in place by July 1, the start of the new fiscal year. However, a strong difference of opinions among politicians regarding management of the state's $19 billion deficit has postponed a budget for well over 90 days (a new record). As a result of this budget gridlock, money is not being widely distributed to state agencies.
Chief of legislation and policy for the California Division of Workers' Compensation (DWC), Susan Gard, recently stated that the DWC has roughly one to two weeks of funds remaining to cover work comp benefits from the following funds:

• Uninsured Employer Benefit Trust Fund (UEBTF) - Pays work comp benefits to employees whose employers fail to carry state-mandated insurance

• Subsequent Injuries Benefits Trust Fund (SIBTF) - Pays work comp benefits to employees who were disabled prior to their job-related injury

UEBTF and SIBTF funds are gathered via assessments charged to employers throughout the state. However, the funds gathered through these assessments are nearly exhausted due to a large number of unforeseen claims.

While state officials use both past budgets and potential expenditures as a reference in determining assessments, the process is not entirely failsafe. 

"We do these assessments very close to the vest because we're assessing employers," said Gard. "We want to make sure we are prudent and have a bit of a buffer, but we don't want too much of a buffer because this is money employers have to pay. We don't want to over-assess, but we don't want to under-assess because we get into the situation we are in."

When faced with situations like this in the past, the DWC could borrow money from its own budget to cover potential shortages in work comp benefits. However, the agency currently has no extra money and cannot properly fund either the UEBTF or the SIBTF until the state budget is passed.

The DWC remains cautiously optimistic that the issue will soon be resolved.

"We still have a little bit of time. If a budget is passed soon, we can quickly shift money over from our budget to pay those benefits and then balance that out when we issues our assessment letters this fall," said Gard.

Stay tuned for further other developments in the area of workers' compensation defense ...

This post was provided for informational purposes only and is not to be construed as legal advice.

Related Resources:
• Calif. May Stop Paying Some Workers' Comp Benefits (Insurance Journal)

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