Superficially, the Legislature appears to be working hard on the overhaul of workers' compensation that Gov. Arnold Schwarzenegger, backed by employers, say must be done to rein in skyrocketing costs.

One day last week, in fact, Assembly and Senate committees were simultaneously holding hearings on Schwarzenegger's plan that would, he said, squeeze as much as $11 billion in costs out of the system and bring them in line with other states' as well as the alternatives advanced by other politicians and interest groups.

Schwarzenegger has told lawmakers that they have until March 1 - less than two weeks - to complete action or see works' comp reform placed before voters in November via an initiative.

That's a short time frame but not altogether arbitrary. Signatures on a workers' comp initiative must be submitted by mid-April to guarantee it a place on the ballot, and business groups must have their signature-gathering campaign in full swing by early March to meet the deadline.

Lawmakers have indicated that they might be able to get something to Schwarzenegger's desk by the end of March. It's a game of chicken, with Schwarzenegger and employers demanding a major overhaul and Democratic legislators and their allies hoping that the governor will accept something less.

Nor is it certain that the GOP governor and business groups would be successful in persuading voters to change workers' comp in the way they want - especially their demand that benefits to some injured workers, those with so-called "permanent partial" disabilities, be scaled back.

"Permanent partial" is ground zero of the workers' comp struggle, because it involves huge amounts of money, both to workers who receive benefits and their lawyers and medical care and rehabilitation providers. Critics say that not only is the system of apportioning injuries too litigious, but the system tends to grant benefits to those who do not truly need or deserve them.

Workers' comp, however, is one of the most complex political issues ever to confront the Capitol, and it would be difficult for business groups to reduce reform to simple terms that would appeal to voters. On the other hand, those who oppose changing permanent partial disability can air television ads with men and women in wheelchairs denouncing the business-backed initiative.

Last week's hearings and a blizzard of press releases from the contending factions served mostly to frame the political struggle.

The Legislature's dominant Democrats are closely allied with two of the major workers' comp factions, labor unions and attorneys who represent applicants for benefits. They agreed to last year's mild workers' comp reform that took financial bites out of doctors and other medical care providers but claim that rapacious insurers have failed to reduce rates by the several billion dollars in supposed savings. Insurers, meanwhile, contend that they can't reduce rates because they're still losing money and have some support from Insurance Commissioner John Garamendi, who is opposing the union-lawyer demand for direct regulation of workers' comp rates but wants to bring back minimum premiums to stop cutthroat competition.

Garamendi is being caught in the middle between the Democrat-union-lawyer alliance and the Schwarzenegger-employer-insurer coalition that wants changes in permanent partial benefits and no one, except himself, is backing his middle-ground approach.

Looming over the conflict, meanwhile, is the status of the quasi-public State Compensation Insurance Fund (SCIF), which now writes more than half of the workers' comp business in California. Garamendi has been feuding with the SCIF's management over its financial condition and his right to regulate it as an insurer, and now is demanding that the SCIF board be overhauled. "State Fund is the game," Garamendi said last week.

Chances are that with the pressure from Schwarzenegger and employers, the Legislature will produce another reform plan by late March - but whether it'll be enough to forestall a ballot battle in which the contending factions will spend tens of millions of dollars is uncertain. The only certainty, in fact, is that with billions of dollars at stake, the Capitol's workers' comp war will continue indefinitely.