Two of Ventura County's larger charities have cut jobs and programs to pay for skyrocketing workers' compensation premiums that are straining budgets already depleted by a decrease in donations and the state's fiscal crisis.
The steep rise in premiums could not have come at a worse time for the agencies, many of which rely on state funding to stay afloat, officials said. With the budget and workers' comp crises converging, nonprofits are experiencing a double shock to their pocketbooks that they say they cannot absorb much longer.
"Our revenues are going down and our costs are just out of control," said Fred W. Robinson, executive director of Arc Ventura County, which serves the developmentally disabled. "I've been in this business for 34 years, and I never have experienced so many negatives."
His feelings are voiced by officials with other businesses and nonprofits hard hit by a workers' compensation insurance crisis that some blame on spiraling medical and legal costs and worker fraud. In Sacramento, lawmakers will consider some 50 workers'-compensation-related proposals in coming months.
"It's come up in a number of workshops, everyone's talking about it," said Sharon Kayser, training director for the Nonprofit Support Center, which serves 250 member agencies in Santa Barbara, San Luis Obispo and Ventura counties. "And it's not just workers' comp, but liability insurance and health insurance."
Robinson said reform cannot come too soon. Workers' compensation premiums for Arc, which has 310 employees, are expected to increase 71% this year. Last year, premiums cost $457,098, and they are estimated to be $783,636 for 2003.
That follows rises of 40% in 2002, 7% in 2001 and 55% in 2000, Robinson said.
Since January, Arc has been forced to eliminate 15 positions, eight by attrition and the remainder through termination. The organization last year had to close its community care home in Oxnard, which served six developmentally disabled residents.
More recently, it shut down its flagship program, the Magic Muffin Restaurant in Oxnard. Twenty-five developmentally disabled adults worked in the restaurant, Robinson said.
With an annual budget of $14 million, $1.5 million of which is collected through community fund-raising, Arc Ventura County serves about 900 clients a year. "The community has been good to us," Robinson said. "But we can't raise those kinds of dollars in this climate."
Arc's funding agencies, the state Department of Developmental Services and the Department of Rehabilitation, are proposing rate cuts next year ranging from 5% to 15%.
"Many of my colleagues are feeling the same pinch," Robinson said. "Everybody is just screaming about workers' comp."
With about a dozen workers' compensation claims filed in the past year by Arc Ventura County employees, the rise in costs does not begin to match the number of cases, Robinson said.
The story is much the same for Goodwill Industries of Ventura and Santa Barbara Counties, said Keith Jajko, a spokesman for Assemblyman Tony Strickland (R-Moorpark), whose Republican Minority Caucus is calling for a special session of the Legislature to address the growing workers' compensation crisis.
Premiums for Goodwill of Ventura and Santa Barbara Counties rose from $67,466 in 1998-99 to $329,065 in 2002-03, said Kathy Leahy, executive director and president. To pay for the increase, Goodwill has reduced its workforce from 160 to 115 in the past two years, she said.
That means Goodwill could serve only 281 clients last year, compared with 403 in 2001. The agency, which provides free job training and placement for people with barriers to employment, funds those services by selling used merchandise at its nine stores in Ventura and Santa Barbara counties.
Nonprofits aren't the only enterprises affected by the increase.
Frank Bauducco, owner ofBauducco's restaurants in Westlake Village and Moorpark, said he has seen his workers' compensation insurance premiums rise from $19,300 in 2001 to $43,728 in 2002 to $46,839 this year.
To make matters worse, people have cut back on eating out because of the sour economy, which has affected the entire restaurant industry, he said.
"They are choking us," Bauducco said of the premiums he has to pay on his 87 employees. "People are always talking about taxes, taxes, taxes. If we don't make money, we don't pay taxes. But if we don't make money, we still have to pay premiums."
Office manager Tammy Grant said she is cutting back on staff and ordering fewer products to stock the restaurants' shelves to save money.
"We're cutting back everywhere," she said. "They've got to get it under control."
Now, nonprofits and small businesses are bracing for an expected rate increase July 1, when many of their insurance plans are up for renewal.
"If it gets any worse, the organization won't stay in business," Leahy said Monday. "We can't keep absorbing these kinds of increases. We don't have the financial resources. We won't be able to function."