Workers' Compensation Reform is Small Step in Right Direction, but May Not Prevent Tax Increases for Workers and Businesses

Contact: John Barnes
jbarnes [at] washingtonpolicy [dot] org

Seattle - The new workers’ compensation compromise bill, introduced in the House on Monday, provides several improvements to the state’s 100-year-old industrial insurance program, but misses a great opportunity to truly reform the system.

The most contentious part of the bill, structured settlements for elderly workers, will accomplish less than half the cost savings to the workers’ compensation system as the Senate’s reform bill (SB 5566). According to the Governor’s office, the new proposal will save approximately $1.12 billion over the next four years. Yet an Office of Financial Management fiscal note stated that the Senate’s version, which was blocked in the House, would have saved $1.2 billion in the first two years alone and another half a billion in each of the next two biennia.

“We are disappointed that the bill that emerged did not contain voluntary settlement agreements. This is a proven mechanism that forty-four other states use to help injured workers,” said Carl Gipson, director of small business research for Washington Policy Center. “Putting the choice in the hands of the injured worker, with adequate protections to make sure the worker is taken care of, could have saved another half a billion dollars from a system that is already on the brink.”

“I think national observers will scratch their heads again at what Washington state is doing in industrial insurance. No states require structured settlements for older workers so we don’t have concrete evidence of how successful this will be,” said Gipson. “And the Department of Labor and Industries already has a contingency fund. A second contingency fund (aka rainy day fund) is basically government holding onto an excess of premiums -- premiums that come from both employers and employees. Both of these proposals may help prevent future premium increase, but no evidence exists to suggest this.”

Other concerns surround the process and speed with which the bill was negotiated and then brought to the floor without a hearing. Though many parts of the bill were debated in various legislative committee hearings throughout the 2011 Session, structured settlements were never discussed or debated.

“We understand the legislature’s need for timely action, given the fact we are only two days away from adjournment of the first special session,” said Jason Mercier, director of the Center for Government Reform at Washington Policy Center. “However, we have seen examples in the past of drafting errors in bills that caused confusion and the potential for economic harm. There is a reason why legislation should be given adequate time for review by lawmakers and the public.”

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