The State Worker

Chronicling civil-service life for California state workers

November 18, 2011
State Fund agrees to severance package for laid-off staff

Editor's note, 4:20 p.m.: This post was changed to accurately reflect the state's business relationship with State Compensation Insurance Fund.

The quasi-public State Compensation Insurance Fund plans to give severance packages to hundreds of employees targeted for layoffs, a highly unusual decision that could cost the organization up to $50 million by the end of the year.

The move by State Fund's board won't directly impact taxpayers since the organization, which competes with private firms in the employee compensation insurance industry, operates on returns earned from investing its clients' premiums and not tax money.

It could, however, affect premiums for the fund's clients, including the state and what the state pays for the organization to administer its claims.

The fund has been in cost-cutting mode for more than a year, closing offices, cutting its vehicle fleet, consolidating operations and, most recently, announcing that it would lay off up to 1,800 employees. And the deal isn't a "golden handshake" that the fund is offering as an inducement, since it affects only employees already targeted for layoff.

State Fund spokeswoman Jennifer Vargen said the decision to offer what the organization is calling "transition payments" to departing workers "reflects the board's commitment to doing the right thing for employees facing layoff."

The agreement gives departing employees with seven or more years of State Fund service six months of gross salary plus another $9,000 "for of the loss of healthcare and other benefits," according to the an internal memo to the organization's staff.

Employees with less than seven years at State Fund would receive a payment equal to four months of gross salary plus $6,000 for lost benefits.

State Fund expects its layoff plan to be approved around the end of this month. Employees whose jobs are targeted for layoff will have until Dec. 15 to give notice of their intent to depart by Dec. 31.

Vargen said that State Fund has set aside the money to cover the payments as though all 1,800 employees decided to leave.

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About The State Worker

Jon Ortiz The Author

Jon Ortiz launched The State Worker blog and a companion column in 2008 to cover state government from the perspective of California government employees. Every day he filters the news through a single question: "What does this mean for state workers?" Join Ortiz for updates and debate on state pay, benefits, pensions, contracts and jobs. Contact him at (916) 321-1043 and at jortiz@sacbee.com.

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