This post focuses on the third of three key reforms I believe have the potential to significantly benefit the workers’ compensation system in California. Together, these changes could save the system more than $1 billion, not only improving the ability to keep prices within reasonable levels for California employers, but also encouraging insurers that underwrite workers’ compensation to remain active in the California market.

The State Legislature created State Fund in 1914 as a public enterprise to be a competitive carrier for all California employers including, but not limited to those who cannot find coverage in the private market.

This is the fourth post in our “Gathering Storm” series. If you’re just joining us, you might want to check out the first three to provide some context:

I’m pleased to share our latest annual report with you. As we did last year, we are publishing it online to reduce our environmental footprint.

In this and my next two posts, I will focus on the key areas, which if reformed properly, have the potential to significantly improve the workers’ compensation system and the employers and legitimately injured workers it serves. These changes could save the system more than $1 billion, not only improving the ability to keep prices stable for California employers but also encouraging insurers that underwrite workers’ compensation to remain active in the California market.

Recently, in a post titled “The Gathering Storm in California Workers’ Compensation”, I put forward three ideas for reforming workers’ compensation in California that I believe are beneficial to the system and should assist in maintaining a stable and competitive market for California employers while providing excellent care and support for injured workers. These reform ideas are designed to help avoid systemic price increases, which would hurt employers across California and threaten the fragile economic recovery underway. In subsequent posts I’m going to discuss those reform ideas in more detail but today, I want to take a step back and focus on the coming storm.

Since March 28, 1948, when U.S. Air Force forecasters Ernest C. Fawbush and Robert C. Miller issued the first tornado forecasts from Tinker Air Force Base in Oklahoma, our ability to predict severe storms has increased exponentially. Our ability to predict storms in the workers’ compensation system is not nearly as well developed, but a careful look at some key data points does provide some clues. In this post, I’ll share the reasons we believe a storm is brewing for workers’ comp in California, and suggest three key reforms that would help mitigate the severity of it. In subsequent posts I’ll discuss the gathering storm and these reform proposals in more depth.

State Fund’s mission is to help California’s employers make California workplaces safer for all employees – not just those covered by our policies. I’m very pleased to announce that Len Welsh has joined State Fund to help us do just that as the Chief of Workplace.

As you probably know, last year we launched an ambitious multi-year plan to redesign our operations, improving efficiency and reducing costs for California employers. Inherent in a plan like this are difficult elements, including reductions in staff size, real estate holdings, and other assets that no longer meet the demands of the market or an efficient State Fund. Although hard for our staff, these initiatives are improving our ability to help California businesses manage the cost of workers’ compensation insurance. This is an update on our progress and plans for a more efficient and valuable State Fund.

As we ring in 2012, I look around at where California is today and I see two stories. One is in the statistics – and let’s face it, they’re scary. Our economy is struggling to emerge from the recession, our unemployment rate remains stubbornly high, our revenue isn’t sufficient to pay for everything we need, and many homeowners are still underwater. The second story is much brighter, and the true source of our collective strength. It’s about the optimism and resilience that Californians share. And that’s the story I think we should keep in mind to balance the sobering reality around us.

Recently we announced a dividend of $50 million, just over 5 percent of our 2011 premium. It’s our first dividend in a decade, and reflects the significant changes we’ve made in how we do business.

California is the nation’s top agricultural state, an honor it’s held for more than 50 years. We produce more than 350 crops, including some, like almonds, dates, and sweet rice that are only produced commercially here. California grows more than half the nation’s fruits, vegetables, and nuts, and leads the nation in milk production, with over 1.8 million dairy cows.

It’s been 16 months since I joined State Fund as CEO and in that time, we’ve refocused our vision and implemented some big changes, from a restructuring of the organization that significantly reduces our workforce, real estate footprint, and operating expenses, to the expansion of coverage to include out of state employees. We’ve redefined our pricing strategy, and declared a dividend for the first time in a decade.