Business Measure Spiked by Democratic Leaders -- No Consensus With Labor, They Say

Republican legislative leaders Rep. Richard DeBolt (left) and Sen. Mike Hewitt are flanked by small business owners at a news conference Wednesday. 

By Erik Smith

Staff writer/ Washington State Wire

OLYMPIA, Jan. 21.—A worker’s compensation bill that is a top priority for the state’s business lobby this session appears to be D.O.I. – dead on introduction.

            The chairman of the House Commerce and Labor Committee says he does not plan to hold a hearing on the bill, introduced Tuesday in the House by state Rep. Jeff Morris, D-Anacortes. Meanwhile, legislative backers say they have been told by Democratic leaders in the House and Senate that the measure will not receive a vote during the 2010 legislative session.

            The reason, they say? Labor is against it.

            Steve Conway, chairman of the House panel, says it’s a little more complicated than that. He said business and labor interests failed to agree on a worker-comp compromise before the session began. A hearing at this point would become a pointless showcase for Republican and business-lobby efforts to bash the state’s controversial worker-compensation programs.

            “It wasn’t just labor putting its foot down,” he said. “There was no consensus.”

            Bill Attempts Reforms

            House Bill 2950 is the flagship worker-compensation bill for the state’s business groups this session. A companion bill, SB 6638, has been introduced in the Senate by Sen. Jenea Holmquist, R-Moses Lake.
            Though it is strongly opposed by labor groups, it is a more modest proposal than others that have been introduced or are expected to emerge in coming weeks. The Building Industry Association of Washington is expected to present a bill soon that would allow private insurance companies to compete with the state Department of Labor and Industries. That group is threatening an initiative campaign this summer if the Legislature fails to take action.

            A Republican measure, introduced last week by state Rep. Doug Ericksen, R-Ferndale, goes even further than the BIAW proposal, turning the worker’s compensation system entirely over to private insurance companies. That bill, HB 2879, is expected to go nowhere in the Democrat-controlled Legislature.

            The Morris bill takes a more moderate approach, enacting reforms to a worker-compensation system that business interests say has spiraled out of control. It is supported by a broad coalition of business groups, including the Association of Washington Business, the National Federation of Independent Business, and BIAW.

            Among its provisions:

n      It would allow self-insured employers and the Department of Labor and Industries to establish managed-care networks to deal with injured-worker claims. Though workers would still be able to choose their own doctors, the networks would deal with everything else – x-rays, lab tests and other services. Charges could be negotiated in advance.

n      It would require workers to prove that their injuries were job-related.

n      It would allow employers to make lump-sum settlements with injured workers – an issue the unions find particularly objectionable.

Major Issue for Business and Labor

The state’s worker compensation system, which provides insurance for workers who are injured on the job, is a major point of contention between business and labor groups. Washington state is one of only four states that do not allow private insurers to compete for the insurance business. Business groups maintain that the lack of competition provides little incentive for the state to control costs.

This year the state Department of Labor and Industries raised rates an average 7.6 percent, partially covering $1 billion in losses to the insurance fund from fast-rising claims costs and the stock-market meltdown. But a recent report from the state auditor’s office contends that an increase of approximately 30 percent would be required to keep the fund from insolvency. That has led business interests to suspect that even larger rate increases are just around the corner.

The Washington State Labor Council has drawn the line in the sand on worker’s comp. It maintains that business groups want to settle injured-worker claims cheaply and deny workers fair compensation for their injuries.

“We’re not putting our foot on it,” said Kathy Cummings, spokeswoman for the labor council. “We don’t believe the system is broken. We think we have a great system. We think some tweaks can be made. We tried negotiating prior to the session, but they [business] walked away, and they didn’t want to talk about what we wanted to talk about. They’re just trying to use the recession as a way to get more tax breaks and not pay their fair share.”

No Deal, No Hearing

Conway said the Legislature isn’t about to take up the issue if the two sides can’t agree. He said the talks between business and labor, convened by Gov. Christine Gregoire, produced no result. The worker’s compensation issue is so contentious, he said, that a deal should have been worked out before the Legislature came to town. He noted that the time for the introduction and passage of new bills in the state House and Senate is coming to a close shortly, and said he does not expect a last-minute compromise. But he held open a small window:

“I’ve just said that I won’t schedule a hearing for next week,” he said.

 He said business interests seem to be all over the map on the issue, talking about reform on one hand and privatization on the other.

“My sense of this is that there are mixed messages coming from the representatives of business on this,” he said.

And he noted that the talks between business and labor on the issue didn’t start until last October – hardly enough time for the two sides to come to an agreement on an issue so central to their interests. “We need to start working on this during the interim,” he said, a reference to the period of time that falls between the end of this legislative session and the start of the 2011 session.

Business Interests, Republicans Frustrated

At a news conference Wednesday, Republicans and business interests said they are frustrated by the Legislature’s unwillingness to deal with business-tax issues. State Rep. Cary Condotta, R-Wenatchee, said labor interests have blocked efforts to deal with worker compensation. “We’ve been told the worker compensation bill will not be heard because labor is putting its foot on it,” he said.

The worker’s compensation affair is one of three major bones of contention for business. Also front and center is a steep hike in unemployment insurance rates this year, fueled by the recession, high unemployment and record payouts from the state’s unemployment trust fund. Because many businesses laid off workers laid off workers last year, they have seen increases in their “experience ratings” that have doubled, tripled, quadruped and more their unemployment taxes. Condotta and Holmquist have sponsored bills that would level out the increases over time and reduce short-term spikes in unemployment tax rates.

Meanwhile, Republicans also called for reform to the state’s business and occupations tax, the unusual tax on business gross receipts that Washington employs in lieu of a corporate income tax.

The state’s system of business taxation is causing taxes to rise at the very time when business can least afford it, Republicans said. If revived business is the key to economic recovery, big tax bills work in the opposite direction. “What we’re hoping is that we’ll get past the partisan stuff and political stuff,” said state Rep. Dan Kristiansen, R-Snohomish. “The question is, do we have the guts to do this?”

At their news conference Wednesday, Republicans were flanked by small business owners who said that the tax increases are difficult to bear in the middle of a recession. Mark Aloisio, owner of a Tacoma plumbing firm, said the recession forced him to lay off five workers, and in return his unemployment tax rate went up 400 percent, from 1.12 percent of payroll to 4.96 percent. That will represent an additional expense of $19,000 – and make it more difficult for his business to keep workers on staff.