Critics Suspect Politics Played a Role – Timing Prevents a Month of Nasty Headlines

The Department of Labor and Industries headquarters in Tumwater.

By Erik Smith

Staff writer/ Washington State Wire

OLYMPIA, Aug. 19.—The most difficult announcement ever for the state worker compensation program is being put off for a month – and some folks think a bit of political game-playing is involved.

            The Department of Labor and Industries is under attack from a business-sponsored ballot measure, Initiative 1082, which would for the first time allow private companies to compete with the state insurance program for injured workers. Next week, at a meeting of a worker’s comp advisory committee, the department was set to make an announcement that likely would have sent chills through the state’s business community. Actuaries were expected to say a sizeable rate increase would be needed in order to keep the fund solvent.

            Now that actuarial recommendation won’t be announced until Sept. 21. That’s right about the time the department is expected to announce a different – and lower – rate increase for 2011. That means the opposition won’t have a month to beat the drum.         

            The department says it just isn’t ready to talk numbers yet.

            But the initiative’s biggest boosters in the business community say the politics behind the move are obvious.

            “By throwing both of these out there at the same time, they’re ripping the bandage off all at once,” said Patrick Connor of the Washington chapter of the National Federation of Independent Business.

            They’re also avoiding an announcement that would have frightened the dickens out of the state’s business owners for a month, he said. Smart move for the department in the middle of a political campaign.

            Big Recommendation Was Expected

            If the actuaries follow the same pattern as last year, they are expected to say that a big rate increase is needed. Last year they said a 23 percent rate increase was needed for 2010, because the state lost big money in the stock market collapse, and because the expenses of the insurance program were skyrocketing. Those two factors together amounted to a billion-dollar hit.

            Later, the state auditor’s office took a look at the same numbers and concluded the problem was even worse. It said an increase of about 30 percent would be required to stave off collapse. The state accident fund, largest of the worker compensation funds, required a 33 percent increase, it said, and it predicted a 74 percent chance of insolvency within – years without a big rate hike.         

            In the end, the department announced a 7.6 percent rate increase for 2010. It doesn’t have to follow the actuarial recommendation, because the insurance fund is backed by the credit of the taxpayers of Washington state. The department pointed out that it has weathered similar storms in the past – when state investments have tanked, the stock market generally recovers quickly.

            “They were kicking the can down the road,” Connor said. And because of it, he said this year’s news was likely to be just as bad.

            The key point is that there’s normally a lag-time between the actuarial recommendation and the rate announcement. Sometimes it’s a month. Last year, the department delayed the bad news from the actuaries for a few weeks, but there was still plenty of time for the state’s business community to work itself into a froth.

            The warning signs from the actuaries are one of the reasons the Building Industry Association of Washington and other business groups decided to take the matter to the voters this year. The Legislature, buttressed by labor organizations, failed to make changes to the program during the 2010 legislative session that might have reduced costs of the program. Labor argued that the changes would have put workers at a disadvantage.

            Just Not Ready

            For its part, the department points out that it’s not taking a position on the initiative, and I-1082 had nothing to do with the delay. The problem is that the department couldn’t get all the data together in time.