Arnold Schwarzenegger hadn't even taken the oath of office as California's new governor when he huddled with the state's insurance commissioner to craft a battle strategy for leading a top-to-bottom overhaul of California's troubled workers compensation system. And less than a week after becoming governor, he had already called a special session of the state legislature with the express purpose of scrutinizing the befuddled system. "Businesses cannot create jobs when they are burdened with the enormous weight of this dysfunctional system," Commissioner John Garamendi asserted. "The Governor-elect and I are in very close agreement on that."

Costs more than tripled

Perhaps. But Costco Wholesale Corp. isn't sure it wants to wait to see if the movie star-turned-pol can succeed where so many others have failed. With 29,000 jobs at stake in the Golden State, Costco is seriously considering pulling the plug on its California operations. "A third of our workforce is in California, yet the state accounts for 70% of our U.S. expenses for workers compensation," says Joel Benoliel, senior vice president and chief legal officer of the Issaquah, Wash.-based discount megastore chain. "Something is seriously wrong. The tragedy of all that waste is that the dollars are not going to the injured workers. They're all bound up in a system that involves applicant attorneys, chiropractors and other health professionals, a whole system that is weighted down with inefficiency."

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