Although not mentioned in L&I's official news release or any of the brief press reports today (PSBJ, AP), what's important to notice is that L&I got its earlier forecast right: according to the agency's own experts, the cost of running the state's workers' comp system will increase by 19.4 percent -- or $270 million -- next year. The rate proposal is lower, seeking about $120 million, because L&I has a savings account called the "contingency reserve" that can make up the $150 million difference.
But this reserve account, depleted over the last year by an economic downturn mixed with poorly controlled claims costs -- to the tune of over $1 billion -- cannot last forever. What's needed is systemic legislative reform to the cost drivers that make our system a national outlier -- like an average of 266 days off for injured workers who miss work; or a pension crisis that has created an unsustainable 300% increase this decade in the number of lifetime annuities awarded each year.
As AWB's statement today makes clear, today's rate proposal underscores the need for the Governor and the Legislature to make some fundamental changes to our workers' comp system to help curb these costs.
