Should state’s workers’ comp be fixed? Or is that a ‘wrecking ball to a safety net’?

A once little-known corner of the workers’ compensation system is facing a pivotal moment.

With soaring projected costs and a surge in claims that shows no sign of slowing, California Gov. Gavin Newsom is pressing to overhaul the program through a budget trailer bill — a move critics say is too sweeping a change to push through without full legislative debate.

Proponents counter that the reforms are long overdue.

At the center of the fight is the Subsequent Injuries Benefit Trust Fund, or SIBTF, which began as a narrowly focused program to encourage employers to hire injured war veterans.

“(The fund) was established in 1945 to help World War II veterans with severe disabilities, such as missing limbs, return to the workforce at a time when employers avoided hiring them,” said Crystal Young, deputy secretary of communications for the state’s Labor & Workforce Development Agency. “...(It has) exponentially grown beyond its original scope in ways that strain both the severely injured workers it is meant to help and the employers, including public entities, who fund it.”

Those advocating for a fundamental reset — including Newsom, businesses, cities and counties — say a cottage industry of consultants and attorneys have morphed the claim process to include common ailments such as high blood pressure and toenail fungus. According to a July 2025 report by the Legislative Analyst’s Office, nearly all SIBTF claimants receive the state’s most generous disability benefit — $1,700 per week for life — which the LAO called “a rarity in standard workers’ compensation.” Those payments can add up to millions of dollars, with attorneys who work on contingency, paid around 10% of the total award.

According to the LAO, employer contributions to fund SIBTF have grown from $35 million in 2014-15 to $850 million last year. The LAO noted that the costs fall not just on private businesses but on cities, counties and school districts, which pay their SIBTF assessments directly out of operating budgets.

This is not the first attempt at reform of the SIBTF process. Last year, AB 1329, sponsored by Assemblywoman Liz Ortega, D-San Leandro, included some of the reform measures in the current budget trailer bill and the backing of the Applicant Attorney’s Association, which represents worker’s compensation attorneys.

Ortega’s legislation passed the legislature, but Newsom vetoed it saying it did not go far enough. Newsom also said in his veto message that he was ordering DIR to come up with a more comprehensive reform proposal, setting up this year’s showdown

The current trailer bill tightens who qualifies for SIBTF benefits, narrows which pre-existing conditions count toward eligibility and strengthens oversight of the medical evaluation process. According to testimony from DIR officials before the Assembly Budget Subcommittee in March, the reforms would also cut down on the years long backlog of cases.

Opponents of the trailer bill — including a former attorney general — say about 30,000 permanently disabled workers, many of whom have waited years to have their cases adjudicated, would see their in-process claims effectively canceled under Newsom’s plan.

The coalition opposing the bill, which includes firms with a financial stake in the outcome, has published constituent letters making the human case against reform.

Moral issue?

“While I understand that reform may be necessary, disallowing or restricting these claims will have real and lasting consequences for deserving individuals — particularly first responders,” Drew Whyte, a retired San Jose firefighter, wrote to State Sen. Dave Cortese, D-San Jose. “….These benefits are not a windfall; they are a lifeline for those whose bodies paid the price for service.”

Former State Attorney General Bill Lockyer, who served from 1999 to 2007, is now lobbying against the bill on behalf of the California Coalition for Injured Workers. “This is far too important an issue to make wholesale changes through an obscure trailer bill,” he said in an interview.

Lockyer, who served during the administrations of governors Gray Davis and Arnold Schwarzenegger, said the fight against the bill is not only for the benefit of affected workers, but a moral issue. “Why do you want to bring a wrecking ball to the safety net for disabled workers, just to address a few cases that you think are unmeritorious?” he said.

Lockyer said he is a registered lobbyist for the CCIW. A review of financial filings showed that the coalition was founded by Steve Chamberlain, the founder of two companies that assist attorneys in SIBTF cases and perform medical evaluations.

Through April 30, the coalition has spent $100,000 on lobbying. Funding has come almost exclusively from contributions of $1,000 to $12,000 from physicians who work for medical evaluation companies. The coalition said it has also formed a nonprofit, though no public filings have occurred to date.

An opposing view comes from industry advocates backing the governor’s proposal. A letter supporting the trailer bill, authored by the California Chamber of Commerce and signed by dozens of industry associations, states: “The financial burden to finance this out-of-control system works as a tax on jobs because it is paid by employers as an assessment on their workers’ compensation premiums. The massive expansion in cost is weighing down small and large employers alike in the private sector, and is burdening stressed state and local budgets as California struggles to backfill federal funding cuts.”

How did we get here?

A 2014 California Supreme Court decision expanded what can be considered an SIBTF pre-existing condition, creating a flood of claims.

The ruling, Todd v. Contra Costa County, broadened how pre-existing disabilities are defined and counted. Before Todd, applicants generally needed a single substantial pre-existing disability to qualify. According to the Department of Industrial Relations, which administers the fund, smaller pre-existing conditions include hypertension, sleep apnea, arthritis, diabetes, headaches, acid reflux, asthma, allergies and sexual dysfunction.

The rise in claims following Todd has been dramatic. According to DIR, between 2010 and 2014, about 850 new SIBTF applications were filed per year. In 2025, DIR received 5,379 applications — more than a sixfold increase.

Even rejected claims, which are rare, come with little risk. The fund still pays doctors for their assessments and covers other legal expenses. For law firms, an approved claim means a share of the benefits paid out weekly for the life of the client. Doctors who evaluate claims get paid whether the claim is approved or not.

The push to reform the SIBTF process has been brewing for several years.

A June 2024 RAND Corporation study, commissioned by DIR for $750,000, concluded that “SIBTF rules have motivated claimants, their representatives, and vendors to make more frequent claims for injuries which in past decades might have yielded smaller benefits or might not have led to any benefits at all.”

A prominent federal prosecution has added to the push for reform. In January, an elected judge and former prosecutor pleaded guilty to felony fraud charges. Israel Claustro. He was an Orange County prosecutor who was later elected to the Orange County Superior Court and ran a side business — Liberty Medical Group, a Rancho Cucamonga-based medical corporation. Liberty was paid millions of dollars by the SIBTF system.

One of Liberty’s employees was Dr. Kevin Tien Do, a physician who had served a one-year federal prison sentence after being convicted in 2003 of felony health care fraud and was subsequently suspended from participating in California’s workers’ compensation program. In January, Claustro pleaded guilty to federal mail fraud and resigned from the bench.

Stuart Girard, a member of the California Coalition for Injured Workers, called the Claustro case an “outlier.” Girard, who has worked as an executive for two companies that manage SIBTF cases, said the fraud uncovered in the Claustro case has no bearing on the trailer bill.

“The proposed trailer bill doesn’t just change policy — it risks pulling the rug out from under those who have relied on the law as written, including workers with pending claims and the professionals who serve them,” he said. “Reforms of this magnitude should be done transparently, thoughtfully, and through the proper legislative process.”

What would the trailer bill do?

The trailer bill covers several parts.

• The bill effectively nullifies the Todd v. Contra Costa County ruling by changing how permanent disability is calculated when a worker has injuries to multiple body parts, eliminating the practice that allowed claimants to combine smaller disabilities to qualify for far more generous benefits.
• The legislation rewrites the legal definition of what counts as a “pre-existing disability.” A condition is no longer qualifying if it is “treatable by medication or the use of a medical device so that the employee engaged in employment without incapacity to do work.” High blood pressure controlled by medication, or a fungal infection treated with a topical cream, no longer qualify.
• Unlike the standard workers’ compensation process, SIBTF has operated with few restrictions on who can generate medical reports supporting a claim — a gap the trailer bill would close by requiring all medical evidence to go through certified evaluators bound by stricter oversight.
• The bill creates a presumption that benefits will be reduced when a worker is already receiving money for a pre-existing condition from any source, including disability pensions — preventing what the state views as double-dipping. The bill states explicitly: “A pension is presumed to be a disability pension if the word ‘disability’ appears in the pension’s name.”

Opponents of the trailer bill said that adoption of some version is likely. The primary hope for opponents is that a compromise could be reached that would grandfather in those who have already submitted applications.

Under California law, the legislature must pass a budget by June 15, and any budget trailer amendments need to be approved prior to July 1.

“Many trailer bill decisions are largely finalized through negotiations,” Girard said.

Lockyer said that he has had discussions with the governor’s office. He said he shared a letter from a Los Angeles County firefighter and retired Navy Seal who was injured on the job four years and said the trailer bill would “purge” his application from the system.

“That clearly made an impact, I’m hopeful we can get somewhere reasonable,” Lockyer said.

This story was originally published May 27, 2026 at 5:00 PM with the headline "Should state’s workers’ comp be fixed? Or is that a ‘wrecking ball to a safety net’?."