Olympia Business Watch

Washington's minimum wage not going up next year

News is out today that Washington's highest-in-the-nation minimum wage is not going up next year.  It will stay at $8.55.

By initiative passed in 1998, the state minimum wage is tied to an annual rate of inflation -- and inflation is actually down nearly 2 percent.

So why isn't the minimum wage going down 2 percent, reasonable minds might wonder?

I addressed that question back in August, when word came out that Colorado's similar minimum wage law was actually decreasing that state's minimum wage. 

Bottom line, some mild statutory ambiguity notwithstanding, the labor interests than passed the initiative appear to have drafted it as a one-way ratchet.

Could reforming lawsuit abuse help curb workers' comp costs?

Our state's workers' compensation system was created in 1911 as a kind of tort reform.  Workers injured on the job receive defined medical and wage loss benefits regardless of fault, and employers receive immunity from lawsuits for on-the-job injuries.  It's a system that in theory is designed to avoid litigation, providing "sure and certain" relief to injured workers without the need for attorney representation and adversarial judicial processes.

A century later, we know it hasn't always worked out that way.  Representing workers' comp claimants is a lucrative cottage industry in the legal profession, with its own powerful lobbying and political arm, and increased attorney involvement and adversarial delay in the resolution of claims is one of the lesser examined cost drivers weighing down the system.

Sure, Washington's Forbes business ranking looks good, but ...

While many of the state's business leaders were busy last week trying to make sense of Washington's business climate at AWB's annual Policy Summit, a couple of outsiders were heaping accolades on the state for its, well, business climate.

First came the Tax Foundation, the Washington D.C.-based nonprofit, non-partisan tax research organization. On Tuesday, the group came out with its annual report on the business-friendliness of state tax systems. Washington ranked ninth, up from 14th the year before.

The next day, Forbes came out with its annual ranking of the best states in the nation in which to do business. Washington came in second, behind only Virginia and up a position from last year's ranking.

Both rankings are good news, AWB President Don Brunell said. But the party hats mostly stayed in the closet, in part because business leaders were still absorbing the news that workers' compensation taxes will likely go up 7.6 percent in 2010.

Reporter Austin Jenkins, who moderated one of the Policy Summit panel discussions, couldn't help but note the irony of the timing in this Crosscut piece.

Brunell, AWB's Kris Tefft and others took to the air and elsewhere to call for reform of the state's workers' comp system.

Boeing: Workers' Comp, UI costs too high in Washington

Today's Everett Herald story on the Governor's report to Boeing corporate leadership on location of the second 787 line contains some relevant information about the workers' comp developments we've been covering.

Boeing said it appreciated the thoroughness of the report but emphasized that it still views workers compensation and unemployment insurance costs as too high.

“While Washington state has made progress, there is still work to do to deal with the high costs of doing business,” Boeing spokesman Bernard Choi said.

Snohomish County Executive Aardon Reardon makes a similar point:

. . . Reardon found the governor’s business case lacking. Instead, he would have liked to see it address issues — workers compensation, unemployment insurance and workforce training — that Boeing has raised repeatedly.

While “it appears Washington is losing the competition to South Carolina, some (lawmakers) in Olympia still seem to think that everything is fine,” Reardon said.

Curiously the Governor's report did not mention workers' compensation at all, and its discussion of unemployment insurance focused on fund solvency rather than employer costs. 

It's time for business!

But then, don't just take the Seattle Chamber's word for it.

There's plenty of familiar AWB members in their new "It's time for business" video to remind you of just a few of the successful and innovative (yes, dancing clams were innovative!) businesses that call Washington state home.  

This new campaign, launched last Friday by our colleagues up at the Greater Seattle Chamber of Commerce, is an effort to help ALL businesses in our state get the word out about the great things they're doing, even in this tough economy. And while big names like Alaska Air, Microsoft, Qwest and Starbucks make guest appearances in the video, it's the smaller companies the chamber hopes to attract and shine the light on through this effort. 

Washington state businesses looking for a little free self-promotional "shout out" can go to the Web site and share what's new/hip/exciting/innovative/exciting or downright award-winning about themselves. Businesses can also post upcoming events to the site, submit articles, photos and videos. The site is relying heavily on social media channels like  Facebook and Twitter (follow them at #time4biz) to also help buzz things up.

Kirk Nelson, the chamber's new chairman of the board and Washington president for Qwest Communications (and AWB board member), said the effort is designed to "play to the [region's] strengths" and "drive a policy agenda that enhances business competitiveness.”

Cue the video!

L&I's 2010 rate hike: What's going on in other states?

L&I's explanation for its proposal of a 7.6 percent increase in workers' comp taxes next year is tied directly to the economy.  Three factors behind the rate increase the agency highlights: reduced investment returns, fewer premiums paid because of reduced work hours, and fewer jobs to which injured workers can return.

While true to a point, focusing on the economy deflects scrutiny from underlying cost trends that have proven durable through good times and bad -- such as average missed days from work, up over 38% since 2001, or the uncontrolled awarding of lifelong pensions -- up over 300% since 1996.   

Since Washington is not alone in decreased assets, premium income, and employment in this economy, it may be instructive to look at what some other states are doing with workers' compensation premiums.  Among states that have so far announced statewide average premiums for 2010:

• Oregon is decreasing rates 1.3 percent next year, marking four straight years of decrease and 20 years with no rate increase;
• Hawaii has filed for a 4.1 percent decrease next year, marking a 65 percent rate decrease over the last five years;
• Florida has filed for a 6.8 percent decrease next year for a cumulative 63.2 percent decrease in the last seven years, since major legislative reform was passed in 2003;
• West Virginia, recently converted with great success from a monopoly state fund like Washington's to a private system, has filed for a 6 percent decrease;
• Texas doesn't have a state rate, but its largest workers' comp insurer is returning $75 million in premium dividends to policy holders, returning $670 million over the last decade;
• Kentucky expects a 6 percent decrease in rates, with especially safe employers seeing a drop of almost 30 percent;
• North Carolina has filed for a 9.6 percent decrease; and
• Ohio, most like Washington in terms of its size and monopoly, has had rate reductions of 5 percent in 2008, 12 percent in 2009, and now has announced a 17 percent decrease for public employers for 2010.

I'm not cherry-picking, these are rate announcements just now starting to come out for 2010.  I'll be keeping track as more states announce 2010 rates -- up or down.  But it's notable how many states are decreasing rates, sometimes significantly, despite the economic turmoil we all find ourselves in.

Now, to be fair, one nearby state may experience a substantial rate increase.  California has filed for a 22.8 percent increase in 2010 and is experiencing many of the same dynamics as Washington (fewer claims, but higher costs).  However, California's rate proposal is also tied to two recent Appeals Board decisions related to permanent disability awards that have been widely criticized as dismantling key elements of California's landmark 2004 system reform.  It demonstrates the clear link between legislative reform and system costs.  If those decisions flip on appeal, the rate increase would go down.

In any event, as we've said before, California isn't the economic company we want to keep.

Bad times expose fatal flaws in Washington's workers' comp system

That's the topic of this week's syndicated column by AWB president Don Brunell, reflecting on last week's announcement of a proposed 7.6 percent average increase in workers' comp taxes next year.  From the column:

The encouraging news — if you can call it that — is that the rate increase could have been much steeper. In its announcement, L&I officials indicated that the high costs of our state’s workers’ comp system are expected to rise 19.4 percent next year.  

Still, the pain of any tax increase, particularly right now, is difficult for employers to absorb. Remember, workers’ comp rates just don’t apply to business and industry, they apply to any employer — hospital, school, college or local government — that buys its insurance from the state.

...

During good times, the program’s weaknesses were masked by income from investing the state workers’ comp fund. But in bad times, that investment income has vanished, exposing the system’s fatal flaws.

Gergen: Presidency has become 'very tough going' for Obama

When President Barack Obama was inaugurated back in January, David Gergen said he observed a sense of goodwill in Washington D.C. that he had not seen before.

Now, eight months into the presidency, the honeymoon is over for millions of Americans, Gergen told AWB members at the 20th annual Policy Summit.

On big issues like health care reform and climate change, Obama the president is finding it difficult to win support for legislation.

While much of Obama's base remains solidly behind him, many others are not there anymore.

"We've come into a much, much harder time," Gergen said. "This has gotten to be very tough going."

Gergen, a former adviser to presidents Nixon, Ford, Reagan and Clinton, said part of the problem is that the electorate did not so much embrace Obama's programs when they elected him so much as they said, "No more Bush."

Safeway leads the way with a promising private-sector health care solution

You can't get a chocolate chip cookie at a Safeway corporate meeting anymore.

It's all fruits and nuts, Ken Shachmut, senior vice president of Safeway Inc., told AWB members at the group's 20th annual Policy Summit.

"And we're happy about that," Shachmut said. "We think."

The switch away from cookies and brownies at staff meetings is just one part of the company's aggressive effort to improve the health of its workforce and lower the cost of health care.

Safeway's work on the issue offers an example of a private-sector solution to a problem that President Barack Obama and the U.S. Congress continue to wrestle with: how to provide health insurance to everyone, and lower the cost.

One of the key discoveries for Safeway when it began looking seriously at the issue is that a huge amount of health problems are caused by just a few factors: smoking, obesity, lack of exercise, uncontrolled hypertension and uncontrolled cholesterol.

That's good news in the sense that big gains can be made from targeting just a few behaviors, Shachmut said.

Gov. Gregoire predicts tough times still ahead, vows to see state through

Gov. Chris Gregoire said today the 2010 legislative session will be another "very difficult one," but it's the 2011-13 state budget that really worries her.

More than fears about the H1N1 flu virus or the weakened Howard Hanson Dam, which could lead to severe flooding in South King County this winter, Gregoire said she is kept up at night over worries about the upcoming budget.

That's because federal stimulus money, which the state relied upon to draft its current budget, won't be there to help again.

Denny Heck, former legislator and chief of staff to Gov. Booth Gardner, moderated the conversation with the governor for about an hour. Gregoire touched on many topics during her sixth-consecutive appearance at AWB's 20th annual Policy Summit, including Boeing, health care reform, Initiative 1033, the Alaskan Way Viaduct, education, higher education funding, and her own political future.

On the topic of Boeing, Gregoire said she will meet this week with new Boeing Commercial Airplanes President and CEO Jim Albaugh to "make the business case" why the aerospace manufacturer should locate a second 787 production line in Washington.

"Without a doubt in my mind, Washington is the best place," Gregoire said.