DEBATE MUST BEGIN TODAY ARNOLD'S FRIDAY DEADLINE NEARS ON WORKERS' COMP REFORM.

Byline: David M. Drucker Sacramento Bureau

SACRAMENTO - State lawmakers today expect to begin debating the merits of a compromise drawn up by Gov. Arnold Schwarzenegger over the past week and a half to overhaul the troubled workers' compensation system.

A conference committee of state Senate and Assembly members was preparing to take it up today, after administration officials met with legislative leaders Tuesday evening to try to resolve some of the remaining barriers to an agreement.

One disagreement is whether employers or workers should select doctors who treat injured employees, the governor said Tuesday afternoon following a rally for an initiative he vows to put on the November ballot if the Legislature fails to agree to a reform plan by Friday.

Schwarzenegger used the campaign event to collect signatures for the initiative, which he claims would reduce premiums by $11 billion. Friday is the deadline to submit signatures to qualify the measure for the Nov. 2 election.

The Republican governor also said he won't accept state regulation of workers' compensation insurance rates, which Democrats have advocated.

``I have looked into rate regulation over the last three weeks, and I have looked at the various different places where they had it. It was not productive.''

State law requires businesses to carry workers' compensation to cover the costs of medical treatment and disability payments for employees hurt on the job.

Labor officials and other opponents Tuesday criticized Schwarzenegger's plan, saying the free market won't lower premiums as much as state regulation would.

``The argument about the marketplace - I believe that's just a fancy spin campaign by the insurance companies to avoid passing on savings to employers,'' said Sen. Richard Alarcon, D-Van Nuys.

The governor said a key element of reform is creating a marketplace that encourages more companies to sell workers' compensation insurance, fostering competition to keep rates low.

With the Legislature's deadline looming, and with Democratic and Republican leaders still not agreeing to a deal, this week the governor has been crafting what he felt was the best possible compromise and preparing to submit it to each side for review.

Republicans have yet to see the governor's compromise in final written form, but already are hearing from business groups that are expressing concern about it, sources said.

State Senate President Pro Tem John Burton, D-San Francisco, reportedly balked at Schwarzenegger's original proposal on causation - the degree of responsibility for an injury that would be blamed on an employer - and there are indications the governor might be willing to bend on this issue.

Burton, who has emerged as Schwarzenegger's primary negotiating counterpart on the issue, has informed the Senate to prepare for a mandatory Friday floor session on workers' compensation.

``Because the initiative is coming due by Friday, the Democrats know that is the witching hour,'' said Assembly Minority Leader Kevin McCarthy, R-Bakersfield.

David M. Drucker, [phone]

david.drucker(at)dailybulletin.com