Greg Weeks, Ph.D. (Director of Labor Market & Economic Analysis, Employment Security Department)
Greg Weeks, Ph.D. (Director of Labor Market & Economic Analysis, Employment Security Department)
There's no need for a marketing study to figure out why Washington state employers get their workers' compensation insurance from the state: It's the only game in town -- a point made abundantly clear in this video featuring mayonnaise-flavored ice cream and a grocer who looks vaguely like Mike Myers.
It's a lighthearted video that takes less than 2 minutes to clarify a complex and serious subject. Check it out.
Related blog entries:
Want to understand the debate over Initiative 1082, the proposal to allow private insurers into Washington's workers' compensation market?
Kris Tefft, AWB's general counsel and government affairs director for employment law, was a guest last week on The Conversation, the KUOW radio program hosted by Ross Reynolds.
He outlined the reasons for supporting the measure, starting with the fact that the current state-run monopoly is in trouble.
"For at least the better part of a decade, perhaps even for a generation, that system has begun to erode at its foundation," Tefft said. "We're now at the point in 2010 where our state-run system is paying out about $1.67 in benefits and administrative expenses for every dollar in premiums that it brings in."
As a consequence, workers' comp rates are going up.
The system, Tefft said, "is charging premiums that are increasing on an alarming upward trend, but even those premiums ... are not sufficient to break even for the cost of providing that insurance."
State Rep. Brendan Williams, D-Olympia, provided the counterpoint, arguing against the initiative.
Press play below to listen to the full program (if your browser does not show a link, you can download the program here.)
The Association of Washington Business filed papers this week establishing a political action committee to raise money for Initiative 1082, which seeks to open up the workers' compensation market to private insurers.
The Committee for Workers' Comp Reform is the second PAC formed by AWB following last month's creation of Citizens for Responsible Spending, which is raising money for I-1053, the initiative that seeks to restore the supermajority vote requirement for the Legislature to raise taxes.
The moves demonstrate how important AWB believes these measures are for Washington's struggling economy, which continues to send mixed signals.
On one hand, Washington moved up one spot in CNBC's annual ranking of America's top states for business, going from 16th to 15 position.
That's a morale boost, AWB President Don Brunell told The Columbian's Aaron Corvin.
On the other hand, state officials announced Monday that collections were down $91.3 million from what was forecast, and retail sales dropped 1.2 percent in May.
Dismal job growth is one of the main factors holding back the recovery, Arun Raha, the state's chief economist, told AWB members Tuesday at the association's annual Governmental Affairs Council retreat.
"We have a recovery in progress, although it seems to have stumbled," Raha said.
"I would be kidding if I told you I'm not worried about this," Raha told News Tribune columnist Peter Callaghan. "I am very worried."
Employers are worried too -- worried that the Legislature will raise taxes again next year to close an estimated $3 billion budget shortfall, and worried that workers' comp rates will continue to spiral upward for years to come unless something is done to fix a system that is clearly broken.
AWB President Don Brunell looks back on the origins of workers' compensation in this week's column and the role played by Ed Pulaski, a U.S. Forest Ranger who was badly injured in a 1911 wildfire.
A total of 85 people were killed and 3 million acres scorched in the blaze that roared across Washington, Idaho, Montana and British Columbia.
"But almost as tragic as the death and destruction was the fire's toll on the rangers and firefighters," Brunell writes. Because there was no workers' comp insurance, Pulaski and others had to pay their own medical bills.
The scandalous treatment helped push Congress to adopt a workers' comp program for federal employees, and here in Washington, a Republican legislator from Olympia pushed through a system for private-sector workers.
Nearly a century later, Washington's system is one of the most expensive in the nation and one possible explanation is the lack of competition, Brunell writes. But this fall, voters could end the state monopoly and open up the market to private insurers by passing Initiative 1082.
Read the full column here.
An investigative report from KING 5 television reporter Linda Byron does a nice job of exposing the heart of the problem with Washington's troubled workers' compensation system: cases stay in the system too long.
The piece highlights the case of Northwest Granite & Flooring, a Whidbey Island company that has seen its workers' comp insurance rates soar nearly 30 percent because of one injured worker whose case has lingered.
It illustrates perfectly why employers are pushing for passage of Initiative 1082 this fall. I-1082 would end the state monopoly on workers comp insurance and allow private insurers into the market, something that exists in all but four states.
In the KING 5 report, the employee -- who hurt his back working on a bath tub surround -- obtained a doctor's prescription saying he should be off work for one week. That was in 2006. The claim is still pending.
"It's cost us thousands and thousands of dollars," owner Suzette Jackson says.
You might think the problem is a system overwhelmed with on-the-job injuries, Byron says. "But it's just the opposite. The KING 5 Investigators have found the number of accidents and fatalities on the job is dropping, yet more and more cases are taking longer to resolve."
Supporters of Initiative 1053, which seeks to restore the two-third vote requirement for the Legislature to raise taxes, delivered 333,000-plus signatures to the Secretary of State's election offices this morning, concluding what has been a busy week for initiative backers and government watchers.
It's one of three ballot initiatives bound for the November ballot that Washington employers are watching with particular interest. The others are I-1082 -- which would open up the state's workers' compensation system to private insurers -- and I-1098 -- which would impose a state income tax for the first time.
AWB has endorsed I-1053 as a means of controlling state spending, and I-1082 as a way to begin to begin to address the serious problems with Washington's workers' compensation insurance system.
AWB opposes I-1098, which threatens not only to hamper job creation but also to expose the state budget to extreme volatility.
I-1053 was borne of the Legislature's decision this year to suspend the two-third vote requirement thrust upon them by voters in 2007 with the passage of Initiative 960. Once they jettisoned the requirement, lawmakers approved nearly $800 million in new taxes.
A year earlier, when they were similarly faced with a budget shortfall, lawmakers did not raise taxes, a fact not lost on The Seattle Times in this editorial.
"I-1053 would force the Legislature to find ways other than simply raising taxes to adjust to the state's economic realities," the newspaper writes.
That's what voters intended three years ago when they approved I-960.
And that's what the state needs more than ever as lawmakers prepare to encounter yet another budget shortfall, estimated to be $3 billion, when they reconvene in January.
"Voters approved I-960 three years ago. They wanted to limit the growth of government and taxes," AWB President Don Brunell said in a press release. "Now the state's in a budget crisis and Democrat lawmakers have revoked the will of the people. That's why our member have expressed such strong support for 1053."
The backers of Initiative 1082, which seeks to end the state's monopoly on workers' compensation insurance, delivered a little more than 340,000 signatures to the Secretary of State's election office Wednesday morning, two days before the deadline.
The number is well above the approximately 241,000 required, and apparently secures the initiative a place on the November ballot alongside several other initiatives with implications -- both good and bad -- for Washington employers.
More than a dozen representatives from various business groups celebrated Wednesday as they unloaded boxes full of signed petition forms from a van outside the offices.
"If we don't do something, employers are facing long-term double-digit tax increases for workers' compensation," said Amy Brackenbury, deputy legislative affairs director for the Building Industry Association of Washington.
It's time for the state get out of government-owned monopolies that the private markets can better serve, AWB President Don Brunell writes in his weekly column.
"With state government billions of dollars in the red, it’s time to prioritize state spending on only the most essential services. Few can argue with a straight face that selling Johnnie Walker Scotch is an essential role of state government," Brunell writes.
Provided that these initiatives can get enough signatures, voters will get the chance to vote on two initiatives that will privatize two long-held government monopolies this fall. Initiative 1100 would end the monopoly on the retail sales of hard liquor. Initiative 1082 would end the state's monopoly on workers' compensation insurance.
"Washington residents won’t stand for another $800 million tax increase if state
lawmakers refuse to pare back government spending," Brunell writes. "Instead of battling to hold
onto state monopolies on liquor sales and workers’ comp, the state should focus
on public safety, education and assistance for the truly needy."
Read the full column here.
Washington's employers, frustrated over the failure of political leaders to address workers' compensation and frightened at the prospect of huge rate increases, have resorted to the ballot initiative, AWB President Don Brunell writes in his weekly column.
I-1082 would end the state's monopoly on workers' comp insurance, and open up the market to private insurers.
As it is now, Washington has one of the most expensive programs in the nation and yet Gov. Chris Gregoire and Democrats in the state House and Senate would not even consider some proven reforms that are working in other states, Brunell writes.
Aggravated employers see no end in sight to the rising tax bill and are "fed up with the political stalemate."
"In fact, in a recent poll of 7,000 member companies of the Association of Washington Business, respondents overwhelmingly agreed that things will change only by passing of Initiative 1082," Brunell writes.
Passing the initiative is only the beginning. But experience has shown that bringing competition to workers' comp insurance reduces costs and improves quality.
Read the full column here.
A report released this week rates Washington's tax system fifth-best in the nation for entrepreneurship and small business.
That's good news, and will no doubt prove helpful in attracting new businesses. Neighboring states did not fare nearly as well in the analysis: Oregon ranked No. 43 on the list, five spots ahead of California at No. 48. Idaho came in 39th. The District of Columbia ranked last.
Washington's lack of a state income tax appeared to be a major factor behind the strong showing. None of the states that ranked in the top five have an income tax, and seven of the top 10 states lack a state income tax.
Of course, that could change soon if Initiative 1077 makes it onto the ballot this fall and is approved by voters.
Also, the report doesn't erase concerns about a number of other cost factors that pose challenges for Washington businesses.
Chief among them are workers' compensation -- which the study did not consider as one of the 16 comparison measures -- and unemployment insurance. Washington is second highest in the country in workers' comp rates behind Alaska, and the state came in No. 44 on the rankings for the best unemployment tax rates according to the WashACE Redbook.
Washington is a great state, and it's nice to receive to receive recognition.
Let's hope our lawmakers don't celebrate for too long when there's still plenty of work to be done.
The Department of Commerce press release on the report is available here.
House Speaker Nancy Pelosi wasn't kidding when she said "[w]e have to pass the bill so you can find out what is in it." Tucked away among the various new tax provisions and insurance industry regulations is an important, but seemingly unrelated, new employment law. Covered employers will want to take note, and take steps to ensure compliance.
Section 4207 of the Patient Protection and Affordable Care Act amends the Fair Labor Standards Act to require employers provide rest breaks and facilities for nursing mothers to express breast milk. The new provision reads:
(1) An employer shall provide--
`(A) a reasonable break time for an employee to express breast milk for her nursing child for 1 year after the child's birth each time such employee has need to express the milk; and
`(B) a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public, which may be used by an employee to express breast milk.
`(2) An employer shall not be required to compensate an employee receiving reasonable break time under paragraph (1) for any work time spent for such purpose.
`(3) An employer that employs less than 50 employees shall not be subject to the requirements of this subsection, if such requirements would impose an undue hardship by causing the employer significant difficulty or expense when considered in relation to the size, financial resources, nature, or structure of the employer's business.
`(4) Nothing in this subsection shall preempt a State law that provides greater protections to employees than the protections provided for under this subsection.'.
Note that smaller businesses, with fewer than 50 employees, are not as such exempted from the provision. Such an employer may still be covered unless it can demonstrate an "undue hardship" complying with the law.
Idaho Gov. Butch Otter touched off a political firestorm with his "Love Letter to Our Neighbors," AWB President Don Brunell writes in his weekly column.
But it should not come as a surprise that Idaho or any other state wants to lure away Washington's employers, especially its plums like Boeing, Costco, Microsoft and Starbucks. It's a competitive world.
Boeing's decision to move some of its production to South Carolina was a wake-up call, Brunell writes.
Otter's love letter is yet another wake-up call.
"Washington, like other states, has its advantages as well as its drawbacks," Brunell writes, noting the state's skilled workforce, access to research and technology and quality of life -- as well as its high business costs, including the business and occupation tax, workers' compensation and unemployment insurance.
"The constant recruitment isn't going to stop," Brunell writes.
Read the full column here.
Imagine a business the size of Washington state without a chief financial officer.
Unlikely as it may seem, that's exactly the scenario in which Washington finds itself, State Auditor Brian Sonntag said Thursday at AWB's weekly Lobby Lunch meeting.
Although there is an Office of Financial Management, it's a budget office, Sonntag said, and not one with the powers of a true chief financial officer.
As the state struggles to balance its budget following the recession, adding an office with that capability is just one several things that officials could do to better prepare for the future, he said.
Plenty more ideas could emerge soon as the Auditor's Office works through a plan to evaluate 30 state government programs between now and June 2013.
The programs include major components of the state's education, social service and health-care systems, as well as the workers' compensation system.
Using money from the state's workers' compensation trust fund to pay for its administration is.
AWB's Kris Tefft and three others representing the business community called on lawmakers Thursday to stop the expansion of what has become a decade-long raid on the workers' comp trust fund.
The fund is supposed to pay claims for injured workers, but it has turned into something of a cookie jar for lawmakers.
The proposed pilot farm worker intern program contained in SSB 6349 would represent the latest assault on it.
Members of the business panel asked legislators in the House Health & Human Services Appropriations Committee to either find another source of funding for the intern program, or drop it entirely.
Democrats hold a clear majority in the Washington state Senate, but they have yet to coalesce around a plan for solving the state's budget crisis, Sen. Rodney Tom said Thursday during AWB's weekly Lobby Lunch meeting.
It's apparent by now that tax increases will figure prominently in the final solution, but details about which taxes -- broad ones such as the sales or targeted ones like sin taxes and tax incentives -- are far from clear, said Tom, D-Medina, vice chair of the operating budget for the Senate Ways & Means Committee.
"I have no idea what direction we're going to go," Tom said.
His preference would be to target sin taxes and tax incentives that may not be giving the benefit that was expected.
That's the opposite view of Rep. Kelli Linville, chairwoman of the House Ways & Means Committee.
Linville, D-Bellingham,told AWB that she favors a small, across-the-board sales tax increase that would go away when the economy improved as opposed to numerous smaller tax hikes aimed at specific targets such as the oil industry.
It's not possible to "nickel and dime our way" until the economy improves, Linville said.
Workers' compensation, unemployment insurance and other workplace issues were front and center at the AWB/Society of Human Resource Management 's HR Day on the Hill Wednesday. Nearly 70 HR professionals from around the state toured the Capitol, met with legislators and participated in the event at AWB.
AWB Government Affairs Director Kris Tefft kicked off the event with an overview of legislation that could affect every workplace in the state, including:
HB 3024, also sponsored by Conway, mandating 30 minute meal and rest breaks for hospital employees.
Donna Steward, AWB government affairs director on unemployment and health care issues, shared her insights into those two key issues. Steward said Washington is on the verge of enacting an important piece of health insurance reform. HB 3015, sponsored by Rep. Eileen Cody, D-Seattle, would allow Washingtonians the opportunity to purchase health coverage from across state lines. The bill is moving in the House with bipartisan support and may be up for a floor vote in the coming week.
Steward warned against expanding unemployment insurance benefits under provisions for employees who voluntarily quit their jobs. Additionally, some employees who are fired for cause from their jobs are still getting benefits, paid by their employers.
Peter Bogdanoff, Gov. Chris Gregoire's executive policy advisor on labor issues, also addressed the group, stressing that the budget was the governor's top priority.
The best way to help those who are unemployed is to create new jobs, AWB President Don Brunell writes in his weekly column.
But employers can't spend money on hiring if they're paying it into the state's unemployment system instead.
And yet that's exactly the scenario that Washington businesses are facing right now. Many businesses were forced to lay off employees to survive the recession, which meant more workers received unemployment benefits.
State officials need to replenish the rapidly diminishing unemployment trust fund so what do they do? Raise taxes.
It's the ultimate no-win situation, Brunell writes. A true Catch-22.
And it would only be made worse if lawmakers chose now to expand benefits.
Read the full column here.
Rep. Steve Conway pledged to work with the business community to resolve some of the problems with Washington's workers' compensation system.
"Does it need reform? Yes," Conway, D-Tacoma, said during the labor and workforce panel discussion at AWB's Legislative Day in Olympia.
Without some changes, the system is a "potential powder keg" of rate increases in the coming years, he said.
Conway acknowledged that many in the audience were disappointed the bill did not receive a hearing. The real reason it did not, he said, is because there was not enough time in short, 60-day legislative session.
The major components of the issue include compromise and release, establishing medical provider networks, and occupational diseases, Conway said.
"I am absolutely committed to working with you on these issues," he said.
Workers' comp reform is dead, at least this year, according to Sen. Jeanne Kohl-Welles.
But business leaders refuse to give up hope that lawmakers will act this year to reform a system that is on track to give them year after year of hefty rate increases in an effort to keep it solvent.
The uphill struggle for HB 2950 ran into its latest obstacle Monday in a work session of the Senate Labor, Commerce & Consumer Protection Committee.
Kohl-Welles, chairwoman of the committee, told a room full of business leaders that "we're not going to have resolution on workers' comp in a short legislative session. It's just not going to happen."
Later in the day, a coalition of business groups rejected Kohl-Welles suggestion to form a task force and instead issued a new call for reform this year.
"A task force on workers' compensation would be a waste of time and we would boycott it," said Patrick Connor, Washington state director for the National Federation of Independent Business.
At the same time, talks continue with lawmakers from both sides of the aisle to build support for reform this session.
Late night talk show host David Letterman sometimes says that about celebrities embroiled in scandal.
But it could just as well apply to the state of California, where the latest evidence of financial turmoil is an unemployment trust fund that leads the nation in the size of its shortfall.
The California Manufacturing & Technology Association reported last week that California's Legislative Analyst office has forecast an $18.4 billion deficit for the fund by the end of 2010. To date, the state has borrowed $6 billion from the federal government in order to cut unemployment checks, and it will probably borrow more, according to the article.
This should be a sobering warning to Washington lawmakers who are considering adding more benefits to a system that's under considerable strain as a result of continued high unemployment.
For the moment, Washington's unemployment trust fund is in relatively good shape. It's in the minority of U.S. unemployment funds not already in the red or forecast to soon be broke, according to this analysis by Pro Publica.
Washington lawmakers would be wise to protect our state's endangered status.
We don't want to end up like California or Oregon.
Or a monkey on a rock.
The bad economic climate and the loss of Boeing's second 787 assembly line to South Carolina have given a new hearing to longtime complaints over Washington's troubled workers' compensation system, the Seattle Weekly writes this week.
Shortly after the introduction of House Bill 2950, the paper came out with a comprehensive report that begins with an arresting anecdote about mangled loggers and reality TV and then shifts gears into a full-blown analysis of the issue.
It was one of two reports in the news media exploring the issue this week. Reporter Austin Jenkins writes on his blog about the behind-the-scenes political maneuvering over the legislation.
The Seattle Weekly article quotes Judy Coovert, owner of AWB-member Printcom, AWB's Kris Tefft, Boeing spokesman Bernard Choi, Costco's Katrina Zitnik, and George Allen, senior vice president of government affairs at the Greater Seattle Chamber of Commerce.
Despite a drop in employees because of the recession -- and going for a year without filing a single workers' comp claim -- Coovert tells the paper that her industry's rate went up 11 percent.
A bill that would bring badly needed reform to Washington's workers' compensation system had its first reading this morning and was referred to the House Commerce & Labor Committee.
AWB members are calling on lawmakers to give the bill a hearing.
But the bill would not diminish protection or care for injured workers. Rather, it would lower the cost of the state's industrial insurance system through a number of targeted changes, including:
All three reforms are described in a new policy brief by the Washington Research Council, which concludes: "Such opportunities can relieve significant and unnecessary cost burdens without reducing injured workers' benefits."
Washington has done a good job of improving workplace safety. The number of annual claims filed since 1990 has dropped 55 percent.
But the state has fallen short when it comes to controlling expenses.
Lawmakers didn't waste any time this, the first week of session in Olympia. Here's a quick recap of testimony by AWB staff and members on some of the business-related bills heard this week in committee:
But anyone following the debate in Olympia over whether to reform Washington's workers' compensation system could be forgiven for doing a double-take over the candy maker's ad imploring readers to "file for workman's chompensation."
It's just one in a series of made-up words from Snickers, part of their ad campaign urging Americans to speak "Snacklish."
We'll be watching for any bills containing even a hint of Snacklish.
Unemployment insurance taxes are rising dramatically this year for many Washington businesses -- as high as 1,300 percent for some.
It's a painful but logical symptom of the severe economic recession that's just showing signs of abating. As businesses struggled to survive in 2009, many were forced to layoff workers.
The layoffs led to a huge increase in payouts from the state's unemployment trust fund -- about $4 billion in 2009, up from $1.2 billion in 2008.
That's one reason why it's critical that lawmakers carefully consider the consequences of adding to the state's already generous unemployment insurance benefits, Donna Steward, AWB government affairs director, told the House Commerce & Labor Committee on Wednesday.
Steward joined representatives from the Washington Roundtable and National Federation of Independent Businesses in opposing a pair of bills that would expand unemployment benefits to some part-time workers and some workers who voluntarily quit their jobs.
The online news publication quoted AWB's Kris Tefft and Patrick Connor, state director for the National Federation of Independent Business, on the need to reform the system. According to a recently released audit commissioned for the state Auditor's Office, the state's accident fund is in danger of becoming insolvent.
Tefft noted that several studies have demonstrated that Washington's workers' comp system pays comparably high benefits, but at a cost that is not sustainable.
"I think the more worrisome thing in the audit is the use of the 'S' word -- not solvency but sustainability," Tefft said.
The article leads with Judy Schurke, director of the Department of Labory & Industries, defending the health of Washington's industrial insurance fund, and criticizing an editorial in The (Tacoma) News Tribune that said the state audit should "set off alarms."
The department also issued a press release declaring that the workers' compensation system is "sound."
But those claims contrast with the reality of an average 7.6 percent increase in the cost of workers' comp insurance that will hit Washington businesses this year, just as they're struggling to rebound from the recession.
And state officials have acknowledged that even that increase was not enough.
If it wasn't already obvious, the audit showed without a doubt that Washington's workers' comp insurance rates are not adequate to support the cost of services.
It's equally clear that Washington businesses cannot afford to continue absorbing significant rate increases year after year.
It's time for reform.
It's no secret that Washington's industrial insurance system is broken.
AWB has been in the forefront of business groups urging lawmakers to make some big changes to a system that will cost employers an average 7.6 percent more this year, just as businesses are struggling to emerge from a major recession.
But it turns out things are worse than we thought.
An actuarial firm contracted by the state Auditor's Office to study the system has concluded that the state accident fund -- one part of the system -- has a nearly 75 percent chance of becoming insolvent in the next two years.
And this is after the rate hike. Without the increase, the odds would have been more than 82 percent, according to the report by Towers Perrin.
And even those odds are generous. At the last quarterly meeting of the state's Workers' Compensation Advisory Committee in December, department officials states the accident fund will go insolvent for an unknown period of time later this year. The fund's reserves were at a mere $63 million at the end of the last quarter, down almost three-quarters of a billion from $776 million at the end of 2008.
In order to remain solvent, the accident fund would need a 33 percent rate increase, Towers Perrin estimated. That compares to the 4.5 percent increase it will actually receive as part of the 2010 rate hike.
UPDATE: State Auditor Brian Sonntag spoke about the workers' comp audit Wednesday on KUOW's The Conversation. Sonntag told host Guy Nelson: "It's really an issue for the Legislature to tackle, along with L&I, to set rates and make sure that it's sustainable and the fun can carry on."
To listen to the interview, click here.
The Department of Labor & Industries announced Monday that workers' compensation insurance premiums will rise an average of 7.6 percent next year, confirming what had been expected since September when officials first announced they would seek the rate hike.
Two of the biggest reasons for the higher rate were health-care inflation and wage inflation, up 8.5 percent and 3.4 percent respectively last year, officials said.
"I do understand how difficult the economic environment is right now and wanted to keep the increase as low as possible," L&I Director Judy Schurke said in a press release.
Schurke said she has convened a group of business and labor leaders at Gov. Chris Gregoire's direction to look for ways to control long-term costs to the workers' comp system, including pensions.
The Department of Labor & Industries is also looking for ways to reduce operations costs while protecting benefits to injured workers, according to the release.
AWB has called for reform of the workers' comp system, saying that any rate increase in this precarious economic climate is a burden for struggling businesses.
The Business Examiner has published an interesting article (subscription required) examining the state's monopoly approach to liquor control and the selling of workers' compensation insurance.
Washington is among the few states that hold business monopolies on those areas, reporters Breanne Coats and Hilary Reeves write in the introduction.
Many business advocates, they write, wonder whether it's best to open up these two services to the private market.
The article quotes Mark Johnson of the Washington Retail Association making the case that state-run liquor stores should be privatized, but the examination of workers' comp is more nuanced.
AWB member Larry Treleven, owner of Tacoma-based Sprague Pest Solutions, notes that "a monopoly in anything is not good," while Kris Tefft, AWB general counsel and government affairs director, finds some good to say about the state's current system as he continues calling needed reforms.
"Our state fund does a good job of fraud prevention and rooting out premiums that ought to be paid in by employers who aren't currently," Tefft says. "On the other side of the ledger, there are some problems with the management of claims."
Tefft notes, for example, that the number of complex claims that remain in the system for years at a time is rising, and he points out the huge disparity between pensions paid out annually in Washington -- 1,800 -- versus Oregon -- nine.
For readers of this blog, the arguments will sound familiar. Last month, Tefft called on state officials during a hearing to fix problems with the workers' comp systems, and he's published several items on the subject in recent months, including this and this.
AWB called on state officials Wednesday to think carefully before going ahead with a proposed 7.6 percent average workers' compensation rate hike.
"You have heard how the day-to-day operations of real jobs providers in this state are affected by any increase in cost, but especially an increase in cost that is this significant at this time," said Kris Tefft, AWB general counsel and government affairs director, during a public hearing in Tumwater.
Tefft's testimony came during the middle of one of six public hearings held by the state Department of Labor & Industries on the proposed rate hike.
Many business owners also testified at the Tumwater meeting, giving first-hand accounts of their frustrations with the workers' comp system, and the damage that will come from a rate hike.
Approximately 65 people turned out for a hearing Thursday in Bellingham, and many of them echoed similar concerns, according to this report in the Bellingham Herald.
It's true that the bad economy partly explains the state's need for a rate hike, Tefft told officials.
On its Sunday editorial page, the Longview Daily News hit the nail on the head about the need for workers' comp reform in Washington:
Local businesses and their employees are about to get hit with significant tax bill just when they can least afford it. Daily News business writer Erik Olson reported this month that workers’ compensation insurance rates are due to increase 7.6 percent at the first of next year. That’s the biggest increase since the eye-popping 29 percent rate hike in 2003 revived talk of making fundamental changes in this state-run insurance program.
Unfortunately, that talk produced no changes. The cost of workers’ comp continues its upward march in good economic times and bad, burdening Washington employers and employees and giving pause to businesses and industries that may be looking to move into the state.
The editorial considered the distressing effect of the rate hike on two local businesses:
Workers' compensation insurance rates will drop 6.8 percent next year in Florida, the state's insurance commissioner announced this week.
It's the seventh consecutive decrease in Florida's workers' comp rates, and it will save Sunshine State employers an estimated $166 million annually, officials announced.
The cheery news not only lies in stark contrast to Washington's recent announcement of a proposed 7.6 percent rate hike next year, but it also differs sharply from Florida's own not-too-distant experience.
Before a series of legislative reforms in 2003, Florida had the highest workers' comp rates in the country.
Last year, even as the nation struggled in a deep recession, Florida's workers' comp insurance rates dropped to 28th highest. The most recent reductions are expected to place Florida among the 10 lowest states in the country, according to the insurance commissioner's office.
In old politics, like the old physics, every action seems to result in an equal and opposite reaction.
So when Republican members of the Senate Labor committee took to the editorial pages of the Seattle Times a few weeks ago pointing out problems with our workers' comp system, decrying the announced 2010 tax hike, and pointing out paths toward reform, this predictably provoked an opposing op-ed yesterday from the chair of that committee, Sen. Jeanne Kohl-Welles, D-Seattle, as well as her House counterpart, Steve Conway, D-Tacoma.
The gist of the Kohl-Welles/Conway op-ed: We have a great workers' comp system, the envy of the country, and its recent problems are attributable not to the system but to the recession. Businesses are just using the rate hike as a pretext to cut injured workers' benefits. The Chairs framed their message as an "honest discussion" about workers' compensation.
The truth, as usual, is more complex.
One of the more persistent criticisms (here, here, here, and our own, here) of Governor Gregoire's "business case" for Boeing to build a second 787 assembly line in Washington was the initial failure to address our state's uncompetitive workers' compensation system.
Boeing, like the business community generally, has made workers' comp reform a top priority -- and that was before word of a $117 million tax increase in 2010 for employers and workers insured by the state that will only partially cover a $270 million increase in system costs next year.
Anyway, the message apparently got through. According to Jerry Cornfield of the Everett Herald today, "Gov. Chris Gregoire put workers compensation reform on her 2010 legislative agenda."
In the context of an editorial calling for continued improvement in the "business case" for Boeing to keep and grow jobs in Washington, the Everett Herald had this to say:
One business-climate improvement the governor should be pushing is workers’ compensation reform. Recent good news about the state’s business environment — Washington recently was ranked by Forbes magazine as the second best state in which to do business, up from third a year ago — coincided with the announcement of a 7.6 percent increase in workers’ comp premiums by the state Department of Labor and Industries. Especially in a recession, that’s a big hit to all industries. A report last spring by Deloitte Consulting said Washington’s workers’ comp rates put it at a competitive disadvantage in attracting aerospace employers.
The governor’s report to Boeing doesn’t get into workers’ comp reform. It should have. Pushing for moderate reforms, like establishing an option for settling injured workers’ claims so they aren’t left open for decades, would be a sensible way to benefit all employers and encourage job creation.
We totally agree. Allowing injured workers the flexible option of settling a claim is a routine and uncontroversial component of the workers' comp systems of 44 other states and one of the most effective tools in addressing cases that would otherwise stay in the system way too long. A moderate reform, and one that the Governor and Legislature should be pushing for.
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.
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.
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.
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.
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:
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.
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.
So observes the Wenatchee World, where editor Tracy Warner reflects on the proposed 2010 workers' comp tax increase. He notes:
In a state that just saw its unemployment rate bubble up to 9.2 percent, where jobs are easily lost, where economic recovery is excruciatingly slow, you would think it would not be a good time for the state to increase its tax on employment.
It isn’t, but it will. . . .
Business says the system is costly for employers and employees, pays the most generous and long-lasting benefits in the country and can’t seem to keep its expenses under control. It is a rare state monopoly. Rates have risen three years in a row and 53 percent in a decade, even while the number of claims drops, even while premiums in neighboring states with private policy options are stable.
Exactly right. And, you have to remember the agency's experts on Monday actually predicted workers' comp system costs to rise not by 7.6 percent next year but by 19.4 percent next year -- over a quarter billion dollars. The difference between that and the lower rate proposal is based, in part, on the hope that employment will pick up and economic recovery will be brisk. Indeed, we all hope so.
But what happens if, as leading indicators suggest, it doesn't? That's why legislative reform is necessary to address high costs leading to the 19.4 percent figure.
Richard S. Davis, coordinator of the Washington Alliance for a Competitive Economy, looks at that question in this morning's column, reflecting on Monday's announcement by the Department of Labor & Industries that workers comp taxes would go up by an average 7.6 percent, or $117 million, next year.
Austin Jenkins of the local NPR affiliate KUOW has filed another insightful piece on yesterday's announcement by the Department of Labor & Industries that, while the high costs of running the state's workers' compensation system are expected to rise by another 19.4 percent next year, the agency proposes an average 7.6 percent increase in 2010 with the difference covered by reserves.
Calling a decision to raise the tax rate as high as the projected cost increase "politically untenable," Jenkins notes "Washington's business lobby is demanding reforms to the state's workers' compensation system":
Originally Labor and Industries was talking about a 15 to 20 premium increase. That's because Washington's workers compensation fund has taken a billion dollar hit in the last year - due to higher costs and investment losses. But in the end, a double-digit increase during a down economy was politically untenable. So L&I is proposing a more modest 7-point-6 percent increase starting in January. Even so Kris Tefft with the Association of Washington Business says it's time to do something about the rising cost of taking care of injured workers.
Kris Tefft, AWB: "Probably the single most effective tool in other state's tool boxes for addressing long-term claims is offering the option of entering into a settlement agreement to give a lump sum or a structured annuity to an injured worker to resolve the claim."
The Washington State Labor Council strongly opposes that idea. But says it's open to discussing ways to rein-in costs.
Notwithstanding labor's expected but unexplained opposition to an effective option -- option! -- like final settlement agreements, an uncontroversial part of the workers' comp systems of 44 other states, it is promising to see the powerful interest group now willing to talk about curbing costs. It was not long ago the Labor Council was touting Washington's supposed "high benefits, low cost" system, a dichotomy heavily criticized then, and one that yesterday's rate announcement confirms is false.
But the future health of the system requires more than talk. That's why we called on the Governor and Legislature yesterday to act in January to reform the system, both for the immediate health of our economy and for the long-term sustainability of the workers' comp system itself.
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.
KPLU's Austin Jenkins filed this report yesterday on the potential for a significant hike in workers' comp rate increases. As we noted earlier this morning, the rate proposal is now set for next Monday.
Just as the economy is bottoming out, Washington businesses are bracing for a major increase in workers' compensation premiums. These are the taxes companies pay to cover their employees in the event of an on-the-job injury. This week officials will meet in Olympia to discuss the rate hike.
n recent years Workers Comp rates in Washington have mostly held steady. Now Washington employers could get socked with a 15 to 20 percent rate hike in January. The Department of Labor and Industries blames more expensive claims and the fact the workers comp fund took a billion dollar beating in the stock market. L&I spokeswoman Tiffany Scheer acknowledges the bad timing.
Tiffany Scheer, WA Labor and Industries: "We totally understand that many businesses are struggling in this economy and we are right now doing all we can to ensure that the workers comp proposal is as a low as possible while still maintaining the solvency of the state fund."
L&I says it's unlikely the rate increase will be as high as 15 to 20 percent. The Association of Washington Business says the situation is further evidence of the need for workers compensation reform in Washington.
The Department of Labor & Industries has rescheduled a meeting of the state Workers' Compensation Advisory Committee to share the proposed workers' comp tax rate for 2010. A great deal of interest has followed the Department's earlier forecast in June that as much as a 15-20% increase may be necessary next year to offset rising costs at a time of declining revenue.
The meeting, originally set for August 26th but then postponed first until today, and now postponed a second time, is announced to take place on Monday, September 21st at L&I headquarters in Tumwater. The proposed tax rate will apparently be filed the next day under the agency's rulemaking authority.
Although L&I's actuaries may suggest a break-even rate for 2010 as high as previously forecast (or, possibly, higher), employers should not expect the proposed rate to necessarily match the indicated rate. L&I is under a legal obligation to set rates that are the lowest necessary to maintain the solvency of the state funds and limit year-to-year fluctuations in rates. Although the funds' contingency reserves have been hammered over the last year, some reserves may be available to mitigate the full impact of the expected tax hike.
But even if the Department is able to temporarily use reserve money to reduce rates below the break-even point, as it has for much of this decade, the costs of providing benefits and claims administration will continue to rise without addressing some of the structural cost drivers in the system.
Public health officials, worried that doctors will be overwhelmed by a crush of patients, are calling on employers to not require a note from workers who are returning from flu-like illness.
Rather, employers who wish to confirm that workers are no longer sick can insist that workers check their own temperature and attest that they have been free of fever for at least 24 hours, said Michael Loehr, preparedness director for Seattle & King County Public Health.
Some King County doctors are already reporting that patients who have recovered from flu-like illness are coming into their offices seeking a note saying they are OK to return to work, Loehr said.
"This is creating a challenge for area physicians who already have limited time and capacity and now have to write notes for healthy people," he said.
U.S. Commerce Secretary Gary Locke made the same request last month as part of a call to the nation's businesses to prepare for the spread of H1N1, or swine flu.
More information about H1N1 is available here, including a link to information about preparing a business continuity plan.
AWB represented the businesses community at Gov. Gregoire's H1N1 summit (video is available here from TVW), and is working with the state's Emergency Management Division to keep businesses informed on the issue.
Probably not. But as news yesterday came out that the adjustable minimum wage rate in Colorado will likely go down with inflation next year (ably dilated in this blog post by the Washington Policy Center's Carl Gipson), one may wonder why our state's inflation-adjusted minimum wage rate wouldn't also go down if (and as) inflation indices trend downward.
Colorado's minimum wage law was adopted in 2006 as an amendment to the state constitution. It states, in pertinent part, that Colorado's annual minimum wage "shall be adjusted annually for inflation, as measured by the Consumer Price Index used for Colorado." Note that an "adjustment" can go either up or down.
Washington's minimum wage law, by contrast, appears to be a one-way ratchet. Our statute, adopted by initiative in 1998, says the Department of Labor & Industries shall "calculate an adjusted minimum wage rate to maintain employee purchasing power by increasing the current year's minimum wage rate by the rate of inflation." Note the third verb: "increasing".
I suppose an argument could be made that if the rate of inflation is negative, the adjusted rate should go down despite the word "increasing" -- after all, keeping the rate the same the following year because of negative inflation isn't "increasing" it either. Courts in Washington have done stranger things with statutes.
But I wouldn't hold my breath.