A proposal by Governor Schwarzenegger to downgrade various crimes from felony to misdemeanor status is drawing heavy scrutiny. The proposal would reclassify 73 property and drug crimes, including the brunt of insurance-related offenses in California.

One goal is to lessen the likelihood of prosecutions leading to long sentences that would add to the state prison population, in turn reducing operational expenses. But critics charge that the associated "costs" would be too high, as downgrading offenses would cripple fraud-fighting efforts and be detrimental to public safety.

Four national anti-fraud groups were not at all reticent to voice their dismay and urged Schwarzenegger to reevaluate the state’s options.

"Taking the power out of the hands of the public prosecutor to charge someone with a felony crime will have a serious impact on public safety," said the Coalition Against Insurance Fraud, National Insurance Crime Bureau, National Health Care Anti-Fraud Association, and the International Association of Special Investigation Units in a joint letter to Schwarzenegger.

The groups believe that removing the deterrent power of felony charges will discourage prosecutors in the state from trying even serious insurance-fraud cases if they warrant only misdemeanor charges. California Insurance Commissioner Steve Poizner agreed. Poizner warned Sacramento policymakers that eliminating the discretion that prosecutors currently have to classify dozens of crimes — including types of insurance fraud — as either a felony or a misdemeanor would have the unintended consequence of severely hindering the state’s efforts to fight insurance fraud and convict criminals.

Weaker penalties and the lower threat of prosecution would serve to embolden organized fraud rings to move to California to try to bilk residents with highly damaging schemes. This would make consumers more susceptible to being victimized by costly fraud schemes.

"The costs of insurance fraud are ultimately paid for by consumers," Poizner concluded. "I hope the policymakers carefully consider the unintended consequences of this action and ultimately remove this provision from the budget proposal."