Business Climate

WPC's Center for Small Business focuses on improving Washington's small business climate by working closely with business owners and policymakers. The Center provides accurate information and analysis on the state's regulatory climate, tax structure, health insurance systems, and more.

What's New

Ghost Bills and Closed Meetings Fail to Solve Olympia's Budget Woes

April 17, 2010 in Publications

With Democrats very much in control in Olympia, and Republicans on the sidelines, one would expect the legislature to close this year’s looming $2.8 billion budget gap with orderly dispatch. Instead Washingtonians were treated to a dizzying round of closed-door meetings, surprise hearings, do-overs, missed deadlines and bills with no text.

Budget Brings a Cavalcade of Taxes

April 17, 2010 in Publications

Puget Sound Business Journal published this op-ed on April 23, 2010.

The 2009-11 supplemental budget recently enacted by the state Legislature, which increases taxes by $800 million, does not deal a fatal blow to any particular industry. Instead, legislators this year decided on the “death by a thousand cuts” approach to raising taxes.

Unfortunately, much of the tax increase falls directly on consumers and the business community, big and small.

State Workers' Comp Supplemental Pension Fund Bailed Out

April 16, 2010 in Blog

The Department of Labor and Industries this month announced that one of the funds that comprise our state's workers' comp system required a short-term loan in order to mete out its statutorily-required benefits to pensioners. L&I needs to borrow $15 million from the $3.2 billion Pension Fund. The Department says it will fully repay the loan within 45 days and with interest. 

However, according to a document issued by L&I, another rate increase to employers is possible in the near future; even if they acknowledge that rate increases have damaging effects:

"Q: Is there an alternative to an inter-fund transfer?
A: A mid-year SPF rate increase would have been another way to deal with this shortfall. But this could have a detrimental effect on businesse!
s and workers who pay this insurance premium
." (emphasis added)

Why did this fund dry up? According to the Department it had to do with the substantial decrease in hours worked by employees -- a 6.4% decrease from Q3 2008 to Q3 2009. Since part of the workers' comp premiums are based on the number of hours worked, and because Washington lost well over 100,000 private-sector jobs, the fund took a hit.

But that's not all. 

"Q: Did L&I raise premiums in the Supplemental Pension Fund in 2010?
A: The SPF premium rate was increased 16% in 2010, based on projected work hours and liabilities. This increase will help maintain the balance as money comes into the fund and is paid out. However, we expect to see other quarterly shortfalls in the SPF this year and in the first quarter of 2011 due to the depleted asset balance, depending on when reported h!
ours begin to increase as the state comes out of the recession!
." (emphasis added)

It is apparent that L&I is facing financial challenges, as are many state agencies. And while some will say the national economy is the cause of the fiscal problems, I would argue that the recession is actually showing the structural deficiencies in the system. Policymakers should use this crisis as an opportunity to reform the system so that the small business community will not have to fear mid-year rate increases or large future rate increases during tough economic times. 

But unfortunately, nothing was done to improve the system during the recently-concluded legislative session and so the business co!
mmunity is left to wonder, again, if another large rate increase is heading their way.

Update: Erik Smith over at Washington State Wire has a good run down on the situation from both labor and business perspectives.  

Workers' Comp fight for the ballot officially underway

April 15, 2010 in Blog

The Building Industry Association of Washington announced yesterday intentions to break up the state's monopoly of the workers comp system. The goal, according to BIAW, is to bring Washington in line with 46 other states that allow competition from private insurers in the industrial insurance market. 

In the wake of the 7.6% rate increase for 2010, the news that one of the big Workers' Comp funds stands a decent chance of becoming insolvent in the next few years, and the fact that Workers' Comp rates should have actually gone up almost 20% in order to actually p!
ay for its liabilities, BIAW will probably have some momentum behind its effort -- not to mention the fact that absolutely no reforms were even entertained during this last legislative session. 

The labor unions will come out hard and fast against this initiative, so expect a battle royale this fall.

Some background reading on Workers' Comp in Washington state:

State unemployment rate back up to 9.5%

April 13, 2010 in Blog

Though the state saw minuscule job growth during the month of March, the unemployment rate rose to 9.5%. The national rate is 9.7%. 

Year-over-year comparison (March 2009 - 2010) saw a decrease of almost 68,000 jobs. This shows a gradual leveling off of year-over-year loss -- although March 2009's unemployment rate was only 8.5%. The last few unemployment reports saw YoY decreases of 100,000+ jobs. 

From the report:

"Nonfarm payrolls declined by 67,800 jobs between March 2009 and 2010. In addition to being the job loss leader over the month, construction led all sectors in year-over-year declines, down 26,400 jobs. While most major industries sustained job losses year-over-year, three did add to payrolls: education and health services, retail tra!
de, and mining and logging."

It will be interesting to look back a year from now, after the 2009-11 supplemental budget tax increases are enacted to gauge its impact on job creation/loss. 

Idaho - Washington conflict continues over who is better for business

April 12, 2010 in Blog

Idaho Governor Butch Otter returned fire this weekend as he continues the war of words with Governor Gregoire over which state is more business friendly. In an op-ed he penned for the Seattle Times, Governor Otter says

"Business owners understand that having a state government working with you, rather than against you, makes all the difference. Just ask Areva, the French company that was looking for somewhere to build a multibillion-dollar uranium-enrichment plant in 2008. Idaho and Washington were in the running, and competition was fierce for the 700 construction jobs and 250 permanent career opportunities — not to mention many expected spinoff and support businesses.

In the end, it came down to attitude. Areva officials said after visiting Olympia, they "didn't feel welcome over there."

Otter's op-ed comes on the heels of Rogers Weed's piece defending Washington as 

"...Washington is fiscally sound. Washington earns high marks from all three major bond-rating agencies. Our unemployment-insurance fund and other key programs are solvent, while many other states have had to borrow extensively and will have to substantially raise rates to repay their loans in coming years. It all adds up to predictability for business."

To which Governor Otter replied,

"...Idaho has reduced state spending as revenues have declined, keeping our commitment to put individual citizens and family budgets ahead of government programs and live within the taxpayers' means.

Washington, on the other hand, has trimmed a little around the edges but mostly is attacking its enormous deficit by raising taxes on employers, and ultimately on consumers. Right now it appears Washington will impose hundreds of millions of dollars in business and occupation tax increases on service-related companies."

So, I find it interesting then that in the proposed supplemental budget released today, there is a line item for $3.2 million in funding for "associate development organizations" for 2010, another $3.2 million for 2011. 

What is an "associate development organization?" According to legislation passed in 2007 authorizing such entities, they are responsible for, among other things:

(b) Providing information
on state and local permitting processes, tax issues, and other essential
information for operating, expanding, or locating a business in Washington;

(c) Marketing
Washington and local areas as excellent locations to expand or relocate a
business and positioning Washington as a globally competitive place to grow
business, which may include developing and executing regional plans to attract
companies from out of state;

So, Idaho's Governor is cutting regulation and taxes while Washington increases them. But have no fear, policymakers are spending $6.4 million towards making Washington look more appealing to prospective businesses. 

Getting at the heart of Net Neutrality and FCC decision

April 8, 2010 in Blog

A good, and eye-opening debate between Public Knowledge's Gigi Sohn and NetCompetition's Scott Cleland in the wake of the D.C. District Court's decision that the FCC does not have the statutory authority to impose Net Neutrality regulations on Internet Service Providers (like Comcast, AT&T et. al.).