With all the current angst in California over taxes and government spending priorities, one might reasonably ask if there is any good news at all about government finances in the Golden State. Indeed there is. Governments throughout California have realized substantial benefits from the reforms of the Workers Compensation system.

These reforms, which were a key platform of Governor Schwarzenegger’s first term, were broadly recognized as improving the states business climate. Of course, an improved business climate stimulates economic growth and job creation, which in turn leads to a host of positive financial outcomes for governments in California, not the least of which is increased government revenue from taxes coupled with lower demand for government provided social services and unemployment payments.

But local governments in California benefited even more directly from the Workers Comp reforms. The reforms have resulted in significant savings as governments throughout the state have had to allocate less to provide Workers Comp coverage for their employees. In just the first two years since the reforms were in place (FY 2004-2005 and FY 2005-2006) state and local governments (excluding school districts) saved over $1.41 billion.

To put the magnitude of these savings in perspective, the savings realized in FY2005-2006 alone ($964 million) would have been enough to pay the starting salaries of well over 18,300 new police officers (at an average annual starting salary of $52,638). In 2006 there were approximately 67,000 sworn police officers in the entire state.

Governments in California have realized substantial financial benefits from Workers Comp reform. Absent this reform, governments would have had fewer resources to finance police protection and other public services.