April 29, 2008
Issue 28

One of Cliff Clavin's little known facts is that Cal/OSHA is not funded by revenue from penalties assessed to employers for violations of workplace safety and health regulations. Instead, penalties paid by employers are deposited directly into the state's General Fund.

That is significant because, with California facing a budget short-fall estimated this week at $20 Billion, Cal/OSHA's activities are seen as creating positive cash flow for the state. Therefore the agency is not expected to face budget cuts as severe as those being planned for non-revenue agencies. Despite this, Cal/OSHA's financial future still looks bleak.

Cal/OSHA's two High Hazard units depend upon the Targeted Inspection & Consultation Fund (TICF) to pay for its activities. This fund is assessed as a percentage of affected employers' workers' compensation premiums and has been in place for the better part of a decade.

But the Law of Unintended Consequences has caught up with Cal/OSHA: The recent reforms to California's workers' comp system have worked so well that decreases in benefit payments have meant that claims cost less. Less costly claims translate into lower premiums for employers. And lower premiums have cut Cal/OSHA's TICF income substantially. In fact, last year TICF income ran so low that Cal/OSHA had to borrow $13 Million from its friends at the Division of Worker's Compensation (DWC) to keep the High Hazard units in business. That money has to be paid back soon.

And Cal/OSHA needs new funding sources for two more reasons. First, another little known fact is that Cal/OSHA receives a significant portion of its budget from Fed/OSHA. But Fed/OSHA has its own budget problems and intends to cut Cal/OSHA's allowance by $600,000 next year. Second, Cal/OSHA needs to find a way to fund salary increases promised to its staff before things went sour.

Cal/OSHA plans to solve these problems with two new revenue enhancers. Cal/OSHA Chief Len Welsh told the Cal/OSHA Reporter that employers should see these new charges as "…an investment well worth making."

The first fix will increase TCIF assessments by as much as 43% for employers with annual payrolls over $4,500,000. That change affects 1,146 employers who, frankly, can afford it.

The more significant change will be the creation of a permanent new funding source to be called the Occupational Safety and Health Fund. This fund will affect all California employers, big and small, and will give us a new acronym: OSHF.

The new OSHF fund is expected to generate $19 Million per year by increasing the assessment tacked onto every employer's workers' comp premium by 69 cents, to $7.70 per $1,000 of premium.

These ideas are likely to be approved by a legislature desperate for fixes to the budget mess. But it is hard to fathom how these assessments constitute "an investment well worth making," unless Cal/OSHA also plans to change the way it treats the state's employers.

Add further funding schemes: Assembly Bill 1988, introduced by Assemblyman Sandre Swanson (D - Oakland), would impose a $250.00 filing fee on employers with 25 or more employees who decide to appeal a Cal/OSHA citation. This bill also would require employers to comply with Cal/OSHA's abatement mandates, even if the employer is contesting the existence of the underlying violation. Of course, employers can avoid the illogic of abating conditions they contend do not exist… by paying another fee to file a separate appeal.

We are working with the Cal Chamber of Commerce to stop this bit of irrational legislation. Your comments, as always, will be welcome.