Here are some of their claims, and the TRUTH about those claims:

Download a printable PDF of this Fact Sheet.

CLAIM:  Washington’s workers’ compensation system has a 95% probability of going broke and will soon be unable to pay benefits.

This is absolutely false. It is based on December 2010 findings by a private actuarial firm (not the State Auditor, as is often reported) that there is a 95% chance that the Accident Fund Contingency Reserve will be insolvent in the next 5-year period. That fund is like a rainy-day fund and is only a very small portion of the system’s current total assets of $11 billion.

That’s why the State Auditor’s assessment of the actuary’s report says, “It is important to note that insolvency [having liabilities in excess of assets] is not necessarily a key indicator of the accounts’ ability to pay claims… The probability that the accounts would not have sufficient cash and/or invested assets to pay benefits over the next 10 years is extremely low.”

In other words, the system is not “going broke” and there is very little danger to the system in the short term. The Auditor recommends long-term changes to improve solvency, but L&I is already reporting that the system’s fund balance is SIGNIFICANTLY HIGHER today than it was during the 2009-2010 audit period, which reduces pressure to increase rates.

CLAIM:  Workers’ comp rates are “skyrocketing” and the system is “unsustainable.”

“Skyrocketing” is in the eye of the beholder, but an objective look at the rate history shows that recent increases have actually been LOWER than those caused by previous recessions, despite the fact that the Great Recession of 2008-10 was long and deep, and employment levels have yet to recover.

Those moderate increases would have been even lower — and the system would be on more solid footing today — had rates not been reduced 2% in 2007 and a 6-month “rate holiday” granted — where employers and workers paid NOTHING for the medical portion of their insurance. That cost the system $315 million, or the 2007 equivalent of a 35% rate decrease. By comparison, the 12% rate increase in 2011 brought in $196 million.

CLAIM: SB 5566 addresses the problem of rising costs of long-term disability pensions.

Compromise-and-release buyouts do NOTHING to address the problem. They don’t get people back to work. They don’t promote safer workplaces.

Buyouts are simply a benefit cut. The system only saves money if injured workers accept less than what they would otherwise get. Every dollar “saved” comes directly from injured workers’ pockets and when the money runs out, the cost of those “savings” are shifted to social services for disabled workers with no income. That’s why some states (like Texas and New Mexico) are increasingly regulating and restricting these buyouts because of cost-shifting from workers’ compensation to taxpayer-funded public assistance programs.

CLAIM: Compromise-and-release buyouts are voluntary. No one is forced to take them.

This ignores the reality of families in crisis after losing their income and suddenly facing a disabling injury. Other states have found that injured workers are routinely pressured to settle out of desperation, because they can’t afford a decent attorney, due to exasperation with the claims/litigation process, and financial duress. Compromise-and-release buyouts create a financial incentive for employers to exacerbate that duress by appealing the claim and dragging the process out.

Supporters of SB 5566 know this. They are counting on the fact that many workers will settle for less out of ignorance and/or desperation. Otherwise, it doesn’t save any money, so what’s the point?

CLAIM: Washington is one of only five states that doesn’t allow lump-sum buyouts.

This is true. It’s also true that Washington is one of only four states with a publicly run system, and voters in every single county in this state overwhelmingly chose to keep it that way. Washington is a leader in many areas of state government and voters want state policies to be judged on their merits, NOT on whether we are outliers. Otherwise, we would have a state income tax like 43 other states and a corporate income tax like 47 other states.

Solutions that DON’T put injured workers and their families at risk

On March 14, Gov. Chris Gregoire signed Senate Bill 5801, which directs the Department of Labor and Industries to create a statewide provider network for injured workers, as well as expand access to the state’s Centers for Occupational Health Education. The legislation — supported by both labor and business — is expected to save $218 million over the next four years. Organized labor has also supported HB 2002, which passed the House but has languished in the Senate. It would help employers — particularly small businesses — return injured workers to light duty/transitional work via wage subsidies.

These are significant reforms that will save the system hundreds of millions of dollars WITHOUT putting injured workers and their families at risk, as SB 5566 does.

This special report was prepared by David Groves of the Washington State Labor Council, AFL-CIO.

The rest of the business community and public officials all benefit thanks to increased consumer spending and tax revenues to fund improved public services. So Washington would all go to extraordinary lengths to keep this company healthy and strong, right?

That “company” exists. It’s Washington’s unemployment insurance system, and in 2010 it pumped more than $4.3 billion into our state economy. But some political and business leaders tend to ignore its benefits — and the many businesses and jobs it has preserved — and focus on decrying its costs.

Washington has the healthiest U.I. system in the nation. After a two-year recession and persistent 9%-plus unemployment that continues to this day, it is sufficiently funded that our state is in a position to approve a major cut in U.I. tax rates, that will save employers hundreds of millions of dollars a year.

In contrast, as of this writing 30 states have U.I. systems that are insolvent. Idaho, for example, has borrowed more than $200 million and is about to extend its tax on employers, already at its maximum, through at least 2016 to cover a bond sale to repay the loan. The U.S. government just started imposing a 4.1% interest charge on arrears, which total more than $42.5 billion for all the delinquent states.

So, which state has a better business climate on this issue? One with responsible tax rates that can pump billions into the state economy and avoid raising taxes when the state economy is struggling? Or one with artificially low taxes that not only pays lower benefits — providing less of an economic safety net for businesses — but also requires a major tax increase amid a recession?

WHAT IS UNEMPLOYMENT INSURANCE?

One reason the U.S. economy spiraled into the Great Depression was that millions of Americans lost their jobs and their ability to pay for the basic goods and services needed to survive. This lack of consumer spending led to even more business closures and more layoffs. And so on.

That’s why in 1935 the unemployment insurance system was established and it’s largely why America has kept economic recessions from spiraling into depressions since then. Jointly financed through federal and state employer payroll taxes, states manage the programs and determine the benefit levels and taxes necessary to fund them. Those taxes are experience-rated, meaning that employers that lay off workers pay higher taxes, just like employers with high work injury rates pay higher workers’ compensation premiums.

The U.I. system is designed not only as a safety net for families who’ve lost their sources of income through no fault of their own, but also as a safety net for businesses. It provides economic stability in times of recession, like the current one.

U.I. also helps businesses maintain a stable, skilled workforce during economic downturns, instead of forcing laid-off workers from their homes or to other states in search of employment. Boeing and other companies that historically have laid off workers during downturns and recalled them when conditions improve have especially benefited.

UNEMPLOYMENT INSURANCE: THE BEST STIMULUS

Our U.I. system provides temporary partial wage replacement for struggling families, helping them pay rent and keeping food on their tables. In 2010, as the most severe recession in a generation ended, about $4.3 billion in benefits were paid out in our state.

The U.S. Department of Labor estimates that for every $1 of benefits, $2 of purchasing power is created in the economy. Unemployment benefits are the best kind of economic stimulus because recipients don’t save their money, they immediately spend it, circulating money into local economies. That’s why its economic impact is magnified.

In 2010, our unemployment insurance system created more than $8.6 billion in purchasing power on Main Street, Washington:

• $127 million in Benton County
• $212 million in Whatcom County
• $221 million in Yakima County
• $260 million in Thurston County
• $383 million in Clark County
• $499 million in Spokane County
• More than $1 billion each in Pierce and Snohomish counties
• More than $2.5 billion in King County.

This money is saving jobs and businesses. That’s what it’s designed to do, and that’s what it’s doing every day.

WHAT DOES IT COST?

Employers in Washington pay an average tax rate of 1.26%, which ties us for the 5th highest rate in the nation, according to 2010 U.S. Dept. of Labor data. (Neighbors Oregon and Idaho both had higher rates at 1.66% and 1.92%, respectively.) But most employers here pay less than that 1.26% rate. According to the state Department of Employment Security, about half (48%) of Washington employers pay 0.95%, the lowest.

WHAT’S NEW IN 2011?

“The employer coalition’s tax model is a pay-as-you-go system that would dramatically increase rate volatility for employers and overall system instability… What that means is that during a recession or economic downturn employers’ UI premiums would increase dramatically as they are forced to lay off workers.”

The Washington State Labor Council wrote that in its 2003 Legislative Report about the new U.I. tax system supported by a coalition of business organizations and approved by the Legislature that year. It is the U.I. tax system still in place today — and the prediction above has proved prescient.

Our experience-rated pay-as-you-go tax system requires U.I. rate increases when unemployment is high. As more and more unemployed people began drawing benefits since 2009, U.I. rates increased each successive year (as they have in states across the nation), making it harder for employers to hire folks back. That’s why, in 2011, Washington businesses face an average 36% rate increase, unless the Legislature takes action to prevent it.

The good news is that our state’s U.I. Trust Fund is in healthy shape and has a $2 billion, 14-month reserve. That means the 2011 State Legislature, which is poised to slash $5 billion worth of public jobs and services in every area of state government, is in a position not only to prevent the 2011 U.I. tax increase, but also to have more than half of all employers pay less in 2011 than they did in 2010. Remember, this is happening at a time when most states are raising U.I. tax rates not only to cover benefits during the nation’s jobless recovery, but in the case of 30 states with insolvent systems, to pay back money borrowed from the federal government to pay past benefits.

As of this writing, at the request of Gov. Chris Gregoire, the Legislature is poised to approve a $300 million rate decrease in 2011 for state businesses.

United for Washington Families, a coalition of labor and community organizations advocating for families suffering from unemployment, is proposing to balance those U.I. tax cuts with benefit improvements. The coalition supports a $15 per child weekly benefit increase to assist struggling families. Making that change would secure $98 million in federal U.I. modernization incentive funds that would pay nearly half the cost over the next six years. The remaining cost will be about $100 million, or one-third what businesses will get in lower tax rates.

The Washington State Labor Council hopes that state lawmakers take this, or some other alternative approach to balance its concern for struggling businesses with concern for struggling families. Given the demonstrated positive economic impact of U.I. benefits, such balanced legislation could be a win for business, a win for working families, and a win for the economy of this state.

This special report was prepared by David Groves of the Washington State Labor Council, AFL-CIO.

One of the most persistent myths about Washington state’s business climate is that our workers’ compensation costs are higher than in most other states. The fact that many employers and public policymakers believe this to be true is another indication of the power and resonance of the negative internal rhetoric about our competitiveness.

As with overall business-climate rankings, analyses from outside the state tell a very different story. In fact, the gap between the truth and the negative rhetoric about our workers’ compensation costs is shocking. Washington has lower employer costs than most other states. Meanwhile, our model state-run system is able to provide comparatively high benefits to injured workers.

That’s how the myth took hold that Washington is not competitive in this area. Business lobbying groups deliberately decry the level of benefits, not employers’ actual costs, in their quest to cut premiums even more.

The danger for Washington’s working families is that lawmakers could lose sight of the goal of our workers’ compensation system — “sure and certain relief for workers, injured in their work, and their families and dependents” — and shred this critical safety net in a misguided attempt to improve our business climate.

WORKERS’ COMPENSATION is America’s original tort reform. Until this system was established about 100 years ago, workers injured on-the-job could sue their employers for damages. But workers gave up that right to sue in exchange for this no-fault insurance program that pays medical costs and partially reimburses the lost wages of workers who suffer job-related injuries or illnesses.

So it’s important to remember that workers’ compensation is not a poverty program, nor is it some kind of welfare. It is a mandatory insurance program, and it was sought by American employers as a way to protect them against potentially ruinous lawsuits over an injury or illness caused by their neglect.

Also known as “industrial insurance,” workers’ compensation coverage for more than 99% of the businesses in Washington state is provided through the nonprofit government-run State Fund. Fewer than 400 businesses, employing between one-quarter and one-third of the state’s workforce, are large enough to operate their own industrial insurance programs and are called “self-insured employers.” These companies, including Boeing, Weyerhaeuser, Safeway and Microsoft, pay the same benefit levels set forth in state law, but they have more control over the claims administration process. Presumably, these employers’ costs are lower than they would be in the State Fund system, or else they wouldn’t self-insure.

HOW DO OUR EMPLOYER COSTS COMPARE? The Oregon Department of Consumer and Business Services (ODCBS) conducts a biannual state-by-state study of workers’ compensation premiums that is widely cited not only among public policy experts and state labor agencies across the nation, but also by private insurance professionals. The latest edition, published in October 2010, found that Washington state had the 26th highest overall premiums in the nation. So, right smack dab in the middle.

But the news is even better for employers here. Washington is the ONLY state in the nation where workers pay a portion of the workers’ compensation premiums, currently estimated to be about 24% of total premiums. When that and the cost of supplemental pensions are factored in — which the Oregon study does not — Washington ranks 36th in the nation (see chart).

Business lobbying groups within our state — where No Good Business-Climate News Goes Unchallenged!™ — argue that the Oregon study is not reliable because Washington has a unique system of calculating premiums based on hours worked rather than payroll dollars.

ODCBS Research Coordinator and study co-author Mike Manley stands by the rankings. He acknowledges Washington is a unique state that is more difficult to measure, but he says there is no evidence that the hours- to payroll-based conversions artificially help or hurt Washington’s performance in the rankings. Those conversions are provided by actuaries at the Department of Labor and Industries and Manley says there has never been any indication this data underreports our premiums in comparison with other states.

HOW DO OUR BENEFITS COMPARE? Washington has comparatively high workers’ compensation benefits. The National Academy of Social Insurance’s most recent analysis of 2008 data found that Washington paid $1.69 in benefits for every $100 in covered wages, which ranked our state third highest.

Therefore, Washington is considered a low-cost, high-benefit state.

Naturally, business lobbying groups inside the state decry the high benefits and deliberately avoid mention of the comparatively low premiums. In the context of their continual criticism of our state business climate, they know that their audience — whether it’s fellow business executives, legislators or the media — will assume that higher benefits mean higher costs. They don’t.

Washington’s state-run workers’ compensation system — one of only five such systems remaining in the U.S. — is viewed as a national model for its efficiency. It can afford high benefits while charging low premiums because there are no profit margins, commissions or brokerage fees, as there are in privatized systems. It has significantly lower claims administration costs and no marketing or advertising costs.

But when you’re in the business of lowering business costs, low is never low enough, especially when even more could be saved by cutting benefits for injured workers.

That’s why advocates for injured workers argue that all proposed benefit cuts must be measured against our values as a state and not a manufactured panic about our business climate.

THE GOAL OF OUR WORKERS’ COMPENSATION system, as set forth in Washington state law (RCW 51.04.010): “The welfare of the state depends upon its industries, and even more upon the welfare of its wage worker. … Sure and certain relief for workers, injured in their work, and their families and dependents is hereby provided.”

Organized labor believes all changes to our system should be measured against that goal. Is the motive for a proposed change to ensure “sure and certain relief” for injured workers? Or is it the product of a perceived — but demonstrably untrue — competitive disadvantage with other states?

Consideration should be made to ensure our system’s costs stay competitive with other states. But it is absurd to make our goal to cut benefits so they are more in line with other states. Washington must not engage in a race to the bottom where injured workers and their families are thrown into poverty with no recourse. To engage in this benefit-cutting race, especially when employers in our state already have below-average workers’ compensation costs, is immoral and unacceptable.

WHAT’S NEW IN 2011

In 2010, business lobbying groups financed last fall’s Initiative 1082 to privatize Washington’s workers’ compensation system. Their campaign sought to portray our state-run system as expensive and inefficient. Washington is one of the only states with a “government-run monopoly,” they said, implying we were outliers that needed to get with the privatization and deregulation program. In the end, voters rejected their arguments and decided to keep our public system public, rather than hand it over to the insurance industry. I-1082 was rejected by a margin of more than 18 points.

Undeterred, the business groups are supporting legislation in 2011 to deregulate the system. And once again, their efforts are guided not by the law’s requirement to provide “sure and certain relief” for injured workers, but simply by cutting employers’ costs by cutting injured workers’ benefits.

There most significant proposal is to legalize lump-sum buyouts of injured workers, which is called “compromise-and-release.” Click here for a Fact Sheet by the Washington State Labor Council explaining why this proposal is so harmful to the interests of injured workers.

This special report was prepared by David Groves of the Washington State Labor Council, AFL-CIO.

If Al Franken was still on Saturday Night Live portraying life coach and self-confidence guru Stuart Smalley (instead of serving in the U.S. Senate), some of our state’s elected leaders could have a session in front of his mirror repeating, “We’re good enough, we’re smart enough and doggone it, business people like us!”

When it comes to whether Washington state can continue to maintain and attract good-paying jobs, some of our elected leaders seem to have self-image problems that simply aren’t based in reality.

The recommended therapy is simple: Stop believing the politically motivated, demonstrably untrue rhetoric generated within the state that suggests this is a bad place to do business. Instead, start looking at what national business publications and public policy organizations — which don’t have an agenda or vested interest in the outcome — are saying about us. And finally, work together to build on our considerable business-climate advantages to make Washington an even more attractive place for businesses and industries.

THE BOEING COMPANY’S decision in 2009 to add a second 787 assembly line in South Carolina instead of Washington set off another round of hand-wringing speculation among public officials and opinion-makers about whether Washington is competitive enough to keep Boeing and other family-wage jobs in the long term. (For its part, Boeing said the decision was not a reflection of Washington’s business climate but was based on the company’s desire to avoid work stoppages by expanding into a southern state that actively discourages union membership.)

In the context of persistent statewide unemployment, business lobbying groups — and corporate-funded think tanks and public policy organizations — have seized upon Boeing’s decision and other lingering negative effects of the Great Recession to pursue their agenda. They seek to blame unemployment on our state’s “unfriendly” business climate. They do so with a clear agenda: to cut business taxes and regulations. That’s what they do. The day business lobbying groups decide taxes are low enough and regulations are fair enough is the day they go out of business.

Does that mean their gripes should be ignored? Of course not. Their concerns are sometimes legitimate and deserve to be addressed. But it does mean that sweeping claims that Washington has a poor business climate, or isn’t competitive with other states, should be taken with a grain of salt. Given the potential public policy implications of such sentiments, these declarations call for independent analysis and scrutiny.

SO, IS IT TRUE? Is our state a bad place to do business? The answer you get from outside the state is very different from what we hear inside our little echo chamber.

(A 2009 study by Deloitte Consulting suggested that Washington fairs poorly when compared to other states competing for aerospace jobs. This study can’t be considered independent, given that Boeing is one of Deloitte’s major clients. Deloitte received more than $100 million in fees from Boeing while “consulting” for the state. Despite this clear conflict of interest, Deloitte was also hired by the state in 2003 to recommend how to secure 787 assembly work. Deloitte successfully recommended that its client get a $3.2 billion tax break. So it came as no surprise in 2009 when Deloitte’s study recommendations conformed precisely with Boeing’s legislative agenda. It simply cannot be considered an objective analysis of the state’s business climate.)

National rankings that analyze state business climates — including those by conservative “pro-business” think tanks and policy groups — consistently rank Washington among the very best states for business.

They say we have comparatively low business taxes, a lighter regulatory burden, a highly skilled and highly trained workforce, excellent higher education, and for those reasons and many others, our state economy outperforms those of other states.

What follows is a sampling of those national rankings, including how Washington compares with West Coast neighbors Oregon and California, plus its aerospace industry competitors South Carolina, North Carolina, Kansas and Texas:

(The titles link to those publications’ and organizations’ analyses.)

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North Carolina – 3rd Washington – 5th Oregon – 6th Texas – 7th Kansas – 10th South Carolina – 34th California – 39th

Forbes Magazine’s 2010
“Best States for Business”

Washington ranked near the top in several categories, including for access to skilled labor (2nd), regulatory environment (5th), and growth prospects (4th). We have risen since being ranked 12th in 2005. Forbes also recently ranked Washington No. 1 in retaining our college graduates in jobs in the state as opposed to the “brain drain” other states are experience where graduates move elsewhere.

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Texas – 3rd Washington – 5th South Carolina – 8th Kansas – 29th North Carolina – 38th Oregon – 39th California – 48th

The Small Business & Entrepreneurship Council’s 2010 Business Tax Index

This Virginia-based group advocates for lower business taxes across the nation and ranks states “according to the costs of their tax systems for entrepreneurship and small business.” Among the taxes included in the assessment are income, property, inheritance, unemployment, and various consumption-based taxes, including state gas taxes. (The state with the lowest taxes ranks 1st.)

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Washington – 11th Texas – 13th Oregon – 14th South Carolina – 24th Kansas – 35th North Carolina – 41st California – 49th

The Tax Foundation’s State Business Tax Climate Index

The Tax Foundation’s 2011 index is a “tool for lawmakers” to assess how their business tax climates compare with other states and points out, “States with the best tax systems will be the most competitive in attracting new businesses and most effective at generating economic and employment growth.” (The state with the lowest taxes ranks 1st.)

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Washington – 1st Texas – 4th  Oregon, California, North Carolina, Kansas, and South Carolina – n/a

U.S. News & World Report’s “7 Best States to Start a Business”

This report ranks which states were the best for entrepreneurship and starting a business. (Only the top seven states were listed.) In ranking Washington No. 1, U.S. News and World Reports cited our tech-intensive economy, low taxes, and the highly productive, high-wage manufacturing workforce.

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Washington – 2nd California – 7th Oregon – 14th Texas – 18th North Carolina – 24th Kansas – 26th South Carolina – 39th

The Kauffman Foundation’s State New Economy Index

“Working to harness the power of entrepreneurship,” this nonpartisan public policy group poses the question, “To what degree does the structure of state economies match the ideal structure of the New Economy?” It measures “knowledge jobs, globalization, economic dynamism, transformation to a digital economy, and technological innovation capacity.”

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Kansas – 13th Washington – 14th Oregon – 15th North Carolina – 21st Texas – 25th California – 29th South Carolina – 42nd

The State Competitiveness Report of the Beacon Hill Institute at Suffolk University

This measures a range of variables, from fiscal policy to business development, to compare states’ ability “to attract and retain business and to provide a high standard of living for its residents over the long run.”

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Washington – A Kansas – A California – C Oregon – C Texas – D North Carolina – D South Carolina – F

The Corporation for Enterprise Development’s Asset and Opportunity Scorecard

CFED is a nonpartisan think tank, whose sponsors include Bank of America and Wal-Mart. In its Asset and Opportunity Scorecard, it assigns letter grades assessing each state’s performance in terms of “financial security, business development, homeownership, health care, education, and tax policy and accountability.”

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Texas – 3rd Washington – 14th North Carolina – 23rd South Carolina – 24th Oregon – 25th California – 38th Kansas – 40th

The American Legislative Exchange Council (ALEC) State Competitiveness Index

“Tax and economic policies are essential to the competitiveness of our states,” says this group of self-described free-market conservatives. This report presents state economic outlook rankings based on public policies that “have a proven impact on growth, revealing which states have the best chance of experiencing economic recovery, and which need to re-examine their policies before they can expect to see improvement.”

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Washington – 4th (20.2%) California – 10th (17.2%) Oregon – 11th (17.0%) Kansas – 38th (6.2%) Texas – 44th (5.1%) South Carolina – 48th (4.5%) North Carolina – 50th (3.1%)

U.S. Department of Labor’s Union Density Rankings

This is one of the Washington State Labor Council’s favorite ones. In the context of the aforementioned rankings, it dispels the myth that having a strong, vibrant labor movement is bad for business. Washington is among the most heavily unionized states — about one in five workers are union members. Many of the competitiveness rankings consider the well-trained, high-wage workforce that is associated with union membership to be GOOD for business.

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YES, THERE ARE A FEW business climate rankings that don’t rate Washington so highly. And of course, it is those studies’ rankings that are cited by business lobbying groups within Washington state. Meanwhile, with every new positive assessment of our business climate, state business groups go into “damage-control” mode by picking apart each study’s methodology and explaining why these national groups just don’t understand the unique burdens state and local governments place on businesses in our state.

Our point is not that state policymakers should be Pollyannas and ignore opportunities to improve our business climate just because Washington scores relatively well in these rankings. The point is that the state’s internal echo chamber of criticism must not be allowed to create an atmosphere of panic in this discussion. Clearly, Washington has a great deal to offer employers, and even more can be done to build on those advantages.

Politically motivated, demonstrably untrue rhetoric about Washington being unfriendly to business undermines those efforts and distracts from the real action that we should be taking to build on our success.

This special report was prepared by David Groves of the Washington State Labor Council, AFL-CIO.