The rate cut reflects projected cost savings from legislative reforms adopted earlier this year. This follows an average 2.9 percent rate decrease that became effective beginning of this year.

State Fund President Dianne Oki, in defending the fund's smaller-than-expected rate cut, commented that several different factors were considered in making the decision. This rate decision, she said, "prudently balances" needs of State Fund's policyholders for immediate rate relief and the desire to pass on savings expected from two recent legislative reforms, with the fund's need to further strengthen its cash surplus.

To fulfill its mission, she noted, the State Fund must maintain its financial strength to meet its obligations to California employers and injured workers. "This rate filing achieves this objective," she said.

Ms. Oki also hinted that there could be more rate cuts to come. "Perhaps the best news is the potential for further rate reductions going forward," she said. "Some elements of reform that are unquantifiable up front will bring down rates as savings emerge in experience, while other elements of reform?such as changes in the permanent disability rating system?will be reflected in rates when they take effect next year."

Commissioner Garamendi said that, as required by law, his department will analyze the SCIF filing to determine "whether all of the available savings are indeed being passed on to employers."

The commissioner also said he would ask Gov. Arnold Schwarzenegger, who appoints State Fund's governing board, "to turn his attention to the management and operational problems of State Fund. Through his appointment of the board of directors he has the power to remove obstacles that would prevent savings from being passed on."