The Key Recommendations

The state’s Council on Competitiveness targeted five areas for change. Here is an analysis of key recommendations:

WORKERS’ COMPENSATION

Recommendations: Aggressively prosecute fraud cases; replace the current insurance rate-setting system with a competitive bidding system; limit stress claims by employees; give employers more discretion to control costs of medical care; revise standards for disability claims.

Analysis:

These proposals are not new and are likely to meet with stiff opposition from labor and possibly the health care and vocational rehabilitation industries. Past efforts to reform the workers’ compensation system have stalled in the Legislature.

GOVERNMENT AND REGULATION

Recommendations:

Coordinate agencies and streamline regulatory process; create one-stop environmental regulation that eliminates “command-and-control” rules and factors in costs; require that California environmental standards generally not exceed federal ones; make the “Comprehensive Plan” the main tool in land-use permits. Also, target industries such as aerospace and high technology for government support and create a state Office of Management and Budget.

Analysis:

The business community applauds efforts to cut through regulatory red tape but environmentalists and consumer advocates argue such moves would put the environment at risk. Past efforts to direct government assistance to specific sectors of the economy have often met with strong opposition because they are perceived as being part of a coordinated “industrial policy.”

TAX POLICY

Recommendations:

Cut capital gains tax on new investments in companies with fewer than 500 employees; phase in 100% net operating loss carry-overs that allow companies to extend losses to future tax years; create tax credits for plant expansion; streamline banking regulation; expand use of foreign trade zones; oppose new tax initiatives.

Analysis:

The business community, especially small companies, endorses such proposals, but they can be expensive and there is widespread concern that they would worsen the state’s already severe budget problems. Such proposals are likely to get caught up in budget wrangling.

EDUCATION

Recommendations:

Create a statewide advisory council; tighten school accounting procedures and possibly institute statewide collective bargaining; broaden parental choice within school districts; extend the school year from 180 to 200 days; add one hour to each school day; boost career training for high school students; give parents the right to choose schools within a public district.

Analysis:

The cost of these proposals could be enormous at a time when California schools are struggling to avoid deep cuts. Just extending the school year by 20 days would cost California about $2 billion a year. The political and labor hurdles are significant too. School boards and local teacher unions may resist giving up negotiating powers. Also, the issue of “free choice” of schools within public districts raises many painful questions about favoritism, equity and ethnic diversity.

LEGAL SYSTEM

Recommendations:

Impose sanctions on lawyers who file frivolous lawsuits and prohibit deceptive lawyer advertising; encourage arbitration of disputes; limit time-consuming discovery procedures; limit manufacturers’ liability for faulty products; repeal the Corporate Criminal Liability Act, and amend the state Constitution to limit punitive damages.

Analysis:

Proposals to reduce legal costs to business are certain to encounter strong opposition from organized trial lawyers and face tough going in the Democratic-controlled Legislature. But attempts to limit business liability may prove more successful before the state Supreme Court, which has sharply curbed awards in some such cases. The state high court now is considering a far-reaching case that could bar damage awards to workers and others who are injured after knowingly assuming risks.

Contributing to the analysis were Times staff writers Patrick Lee, Larry Gordon, Philip Hager, George Skelton, Stuart Silverstein and Daniel M. Weintraub.