For those of you who are not familiar with the name State Fund, it is one of the state of California’s biggest workers’ compensation insurance companies, with few competitors on the same scale. It is important to note that State Fund is a government controlled company. The company is getting ready to cut back about 1,800 members of its workforce. The layoffs, which must be done during next year, will actually represent a cut of almost one quarter of the insurance companies overall staff. All of the staff that are going to be laid off will be let go by June of 2012.

These layoffs are being done for the usual reasons. The company wants to be able to cut down on its operating expenses and streamline its operations. At the current moment they have announced no plans to reduce the number or type of services that the company offers.

The company will lay off 1,800 civil service workers by the end of June, because they estimate that they are 30% overstaffed. In many cases that may seem like it is just management double speak, but when you consider that this is the first time that the San Francisco-based State Fund has laid off workers since the 1930’s it does give the situation a level of credibility other organizations’ would not have in the same situation.

Tom Rowe, chief executive of the State Compensation Insurance Fund, said in an email sent to the entire company that, “The positions being eliminated are in areas where business processes have changed significantly enough that work has been substantially reduced.” As well as, “We spend more operating the company than we do on benefits to injured employees.”

The loss of these 1,800 jobs is expected to save the State Fund roughly $350 million in operating expenses each year. In 2010 State Fund was able to collect about $1 billion in premiums from the about 150,000 employers that use their services. The State Fund was created by the state of California Legislature 97 years ago. Their primary function is to provide a last resort option for employers who were not able to obtain the required workers’ compensation coverage that was required by law from their private insurers.

A change to state law eight years ago changed the game. The California Legislature made alterations to the states workers compensation laws that created more competition in this area of insurance. It also significantly lowered premiums, up to 60% over the last few years. These changes allowed companies to buy from other provides with lower bids.

State Fund market share dropped by 15% in the last year. Their premium volume is roughly one-eight of what it was just six years ago. During this same span of time the number of people working at then State Fund only decreased by 21%, leaving a noticeable gap between the two areas. Despite the fact that is a state agency, it does not receive any of its funding from the California State treasury.