At the rate State Compensation Insurance Fund spends on swag (“stuff we all get” at conferences, trade shows and other promotional events), it would have spent just over $800,000 in three years. This would put it third behind two other state agencies. A battle may be brewing over what constitutes a valid marketing expense for legitimate business needs and what is just another sign of government waste and inefficiency.

The issue came to the fore with Governor Jerry Brown’s directive to all state agencies to stop spending taxpayer dollars on swag. He reasoned the state can ill afford to buy these giveaways when it faces a $26 billion budget hole. But State Fund isn’t so sure this order applies to its swag. In the case of State Fund, employers that pay premiums pay the swag bill.

Brown notes that, overall, agencies spent over $7.5 million between 2007 and 2010 on such items as pens, notepads, T-shirts and other giveaways. The Business, Transportation and Housing agency spent over $5 million during the period, the State and Consumer Services Agency spent $1.2 million and the Health and Human Services spent three-quarters of a million dollars during the period. Brown says he wants the wasteful spending stopped.

The Division of Workers’ Compensation says it will not be difficult to comply with the governor’s mandate because its big annual giveaway — a set of binders and a bag emblazoned with its logo for its annual educational conference — is paid for by the nonprofit International Workers’ Compensation Forum. And other materials it gives away are educational posters and pamphlets for employers and injured workers that are not covered by the order.

But the bigger question is how this will play out at State Fund. The quasi-governmental agency is charged by statute with being fairly competitive in California’s workers’ comp market. Is a notepad or pen emblazoned with the State Fund logo or website and given to a broker a waste of “taxpayer” dollars (in the form of a California employer’s premiums) or is it a legitimate marketing expenditure that may help bring in an account?

“Promotional items are part of our advertising outreach.”
—Jennifer Vargen, State Fund

It’s not an insignificant question in dollars and cents, but opinions differ on the answer.

SCIF spokeswoman Jennifer Vargen says the carrier spent $275,000 last year on promotional items that some might call swag, such as pens and various desk accessories given to brokers and employers. “Promotional items are a part of our advertising outreach. We have a limited selection of desk accessory-type items that we give to our customers to promote State Fund in the competitive workers’ compensation market,” she tells Workers’ Comp Executive. The carrier has a similar budget planned for this year as well.

At that spend rate, State Fund’s swag budget over three years would be $825,000, which would make it the third-biggest spender among state agencies on the list developed by the governor’s office. But State Fund says it shouldn’t be considered in the same light as other state agencies.

Vargen notes that the order seeks to put an end to use of taxpayer dollars on giveaway items, but State Fund is supported entirely by its premiums and investment earnings, so no “taxpayer” dollars are spent on the items. Additionally, she notes that State Fund is not under the governor’s direct executive authority, although she says, “State Fund will review the governor’s directive and determine what effect, if any, implementation of a similar policy would have on State Fund’s operations.”

It appears to be a direct challenge to the governor’s authority

But the governor’s office has another take on the debate. While different rules may apply to State Fund for staffing and furloughs, that’s not the case with giveaways, says Evan Westrup, the governor’s spokesman. “The directive does apply to SCIF,” he tells Workers’ Comp Executive.

So hold on to those State Fund pens and pads. They might soon become collector’s items. Then again, the issue isn’t completely settled and past attempts by politicians to apply statewide mandates on State Fund have failed, most recently on the furlough issue. Stay tuned. 

(Filed by Brad Cain in San Francisco)