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SACRAMENTO — Setting up a possible showdown between a Democratic Legislature and governor who’s twice vetoed similar bills, the state Senate voted Thursday to boost benefits for injured workers in California. 

Senate Democrats, saying that California pays some of the lowest injury benefits in the country, prevailed in a 25-13 party line vote to increase payments to workers by up to $2.4 billion across five years. 

They also maintained that their reforms, proposed by Senate Democratic Leader John Burton of San Francisco, will save employers up to $1 billion a year and cost only 2.3 percent of their annual payroll. 

But opponents to the bill, including major insurance companies and the California Chamber of Commerce, believe the cost increases could range from $3.6 billion to $4.2 billion a year. They’re hoping for a compromise in days ahead between Burton’s bill, also approved Wednesday by the Assembly, and a rival plan floated by Gov. Gray Davis. 

Davis proposes to hike payments by about $1.2 billion and cut costs by about $800 million over the same time, said Steve Smith, director of the state’s Department of Industrial Relations. 

After Thursday’s vote, insurance industry spokeswoman Nicole Mahrt, said, “We’d like the Senate to slow down a little bit and take some time and look at the package the governor has put together. 

“We’d like to see a benefits increase for injured workers,” said Mahrt, a Sacramento-based representative for the American Insurance Association. “But we’d like to see it offset by reforms.” 

California’s 88-year-old system for paying injured workers has reached center stage in recent days as powerful campaign contributors including lawyers, unions, insurance companies and businesses compete for the hearts of legislators and the governor. Attempts during the last two years to change workers’ compensation have failed for lack of agreement over higher payments to workers versus cutting costs in the system. 

Senate Republicans, voicing support for thousands of California’s small businesses, said the proposed higher costs would hurt firms already threatened by recession and higher power bills. 

Leading the arguments against the bill, Riverside Republican Ray Haynes said it’s not the reform the system needs. Instead, it will raise costs and send businesses to Arizona and Nevada, which have lower costs. 

“We are repeating all the mistakes we have made in the past,” Haynes said. “Yet having made those mistakes and sending the state into recession in the early 1990s, we want to repeat those mistakes again and send our state into recession in the first decade of the 21st Century.” 

After the vote, Burton, who carried the legislation on behalf of the California Labor Federation and the California Applicants Attorneys Association, said he doesn’t believe Davis will veto it this year. 

“When it’s all over, he will see the merit of the bill. The governor never told me he’s going to veto the bill,” said Burton, a longtime ally of organized labor. 

Davis doesn’t have a formal position on the bill now, Smith said, but the fact he’s floating an alternative “is a strong indication he is not completely comfortable with what’s in the bill.” 

The administration, Smith said, is promoting several inducements, including more money for workplace modifications to encourage employers to get workers back to work. The best solution, he said, “is to get healthy people back to work as soon as possible.” 

Davis vetoed the Legislature’s payment-boosting bills in 1999 and 2000, saying higher payments weren’t adequately offset by cost reductions in the workers’ compensation system. 

Burton’s 2001 bill is virtually the same as the two Davis has vetoed, said Michael McClain of the Oakland-based California Workers Compensation Institute, a research arm of insurance companies and self-insured employees, including Safeway, Walt Disney Co. and Pacific Gas and Electric Co. 

If Davis vetoes the bill for the third straight year, Burton said, he’ll take the issue to the voters. He promised a ballot measure that’s “more costly to employers,” one that will raise their costs to the national average or higher. 

The Senate bill, Burton said before Thursday’s vote, “does little to bring people up to the national average. But at least it’s a measure of help for people working on their job to make California great.” 

Democrats cited major disparities between other states and California for the same injuries. Michigan pays $86,000 for the loss of a toe, they said, while California pays $4,000. Pennsylvanians who lose an eye at work are paid $149,000.  

Californians who lose an eye receive $21,000.