"The situation is just out of control," said Suzi Blackman, president/CEO of the Sunnyvale Chamber of Commerce.

State figures show that the total amount that insurance companies collected for workers' comp premiums was $6.4 billion in 1997. That number rose to $15 billion in 2002, and the situation is going to get worse in the next year, with an additional $3.5 billion in workers' comp benefits that have been signed into law but haven't gone into effect yet.

Rising medical costs and higher claims being made by injured employees have caused rates to skyrocket, said Blackman. She also said some employees have made false injury claims, contributing to the problem.

Some Sunnyvale business owners have seen a huge increase in their workers' comp rates, while others haven't had it as bad, Blackman said.

For instance, Jazzfood, a catering business in Sunnyvale, saw an increase in its workers' comp rates a year ago. Jane Crisler, who owns and runs the company with her husband, Steve, said their rates have gone from $1,600 a month to $4,000 a month, even though the company only has seven employees.

In the past six years Crisler said there has only been one workers' comp claim.

Some state legislators have suggested businesses pass on the rising rates to their customers. Crisler said she hopes it doesn't have to come to that. "We're going to have to review that idea. It's something we might have to consider if we want to survive," Crisler said.

The rising rates are anti-business, she said. "It's been more and more difficult to pay that bill every month when it comes around," Crisler said.

But the situation is worse for nonprofit organizations, according to Blackman. "Nonprofits get hit with the slumping economy, which makes it difficult for them to raise funds," said Blackman. With slumping budets and rising costs associated with workers' comp rates, nonprofits are in the worst shape, Blackman said.

The Pacific Autism Center for Education in Sunnyvale is one such nonprofit that has seen a dramatic rise in their workers' comp rates.

David Tollner, executive director for the center, said the increase in rates raised the center's premium from $70,000 in 2001 to $400,000 in 2003.

The center has to come up with $330,000 for workers' comp, in addition to cuts Tollner expects from the state. The center receives funding primarily from the state and school districts, Tollner said. "With the state's economic problems and the school districts' financial problems, we're not able to make up for that increased overhead," Tollner said.

The situation has forced the center to make cuts to many services.

The center is a school for children that have autism and cannot succeed in public schools. The school has low student-teacher ratios, but this could change, Tollner said.

The effect will be devastating to the students, Tollner said. "We're working with children with severe disabilities who don't communicate well at all. In order to teach them to communicate and to focus, we need to give them extra special attention," Tollner said.

The center is looking at removing a vocational program that helps prepare the students for life after they leave the center.

The center also has a residential program that houses students who need more attention than others. The staff essentially plays a parental role in the children's development, Tollner said. But some of the center's residential homes may be closed in the next couple of years, he said. "I don't want to see that," Tollner said. "The state will end up having to take care of those kids that are left behind when organizations like mine close down."

Tollner said the center has already laid off around 10 staff members and will not hire any new employees when others leave the center.

Tollner has appealed to state legislators to control workers' comp rates before nonprofit organizations are forced to shut down. Indeed, closing shop seems to be the worst-case scenario for small-business owners and nonprofits across the state.

There are currently no reforms to workers' comp rates being proposed by state legislators. "Everyone's first priority is the economic situation. By the time they deal with this, it will be too late," Tollner said.