The proposed 1 billion dollar sale is a motion heavily supported and endorsed by California's governor Arnold Schwarzenegger, for the purpose of balancing the state's budget concomitant with his belief the sale will serve a second purpose of stimulating the California economy by encouraging competition amongst insurance carriers.

But, Poizner voices such a strong opposition to the plan that now he has decided to sue. "In these tough economic times, the state should be doing everything possible to create jobs, not use budget gimmickry to hurt the economy," he remarked. "The Schwarzenegger Administration simply got it wrong with their proposal and the Legislature failed to adequately scrutinize the consequences." 

Overall, Poizner vociferously expresses his view that the plan is far too risky, and he spoke disparagingly of it when he stated, "The pilfering of funds used to pay the claims of injured workers to instead help fill the state budget gap is both unconscionable and unconstitutional. This $1 billion sale of SCIF assets could not only endanger the solvency of SCIF, but is a direct affront to the state's jobs and business climate."

The suit is expected to be filed in Sacramento County Superior Court in the coming days. The defendants will be the director of the Department of Finance and the state treasurer. 

The governor and his administration believe they "can execute a sale of a portion of (State Fund) in a way that is legal and does not effect the integrity of the Fund," H.D. Palmer, spokesman for the state Department of Finance, which represents the governor's administration of the budget, said in an interview Thursday. 

The constitution requires the state to maintain State Fund, and the insurer would be maintained, he said, "We are not proposing the outright sale of the Fund" -- just a portion of it, he noted.

The legislation that was adopted to authorize the partial sale of State Compensation Insurance Fund to benefit the state's General Fund is not "appropriate legislation," Poizner contends.  Other states have made similar efforts, the news release said, and those efforts failed. "In both Colorado and Utah, legal authorities have determined that funds could not be transferred from their respective insurers to the states' general funds."

State Compensation Insurance Fund, a nonprofit created by the Legislature ninety-five years ago, is the state of California's largest workers' comp provider, with 23 percent market share last year.  The State Fund board voted in July to oppose the sale.

Many stakeholders of California's workers' compensation system have said they don't understand how the partial sale of State Fund would work, and question the ramifications to the marketplace, including costs to employers.

But, the governor's office views the fund as a resource to be cashed in on. "We believe the state is sitting on an asset that has significant value," H.G. Palmer said back in June. The plan to shed something that is not "a core mission of state government" is consistent with Schwarzenegger's effort to streamline the government, he further elaborated.

The state estimates that State Fund is worth $20 billion plus its $5 billion in reserves.  The state figures it could get $1 billion by selling a part of it.