WSLC: Take workers’ compensation off table

OLYMPIA (June 18, 2013) — Jeff Johnson, President of the Washington State Labor Council, AFL-CIO, sent an earnest, heartfelt letter to state leaders over the weekend urging that they set aside the workers’ compensation policy bill that some say is the “biggest stumbling block” to passing the budgets that would end the threat of a state government shutdown.

The letter offers historical context to the Republicans’ effort to legalize and expand lump-sum settlements, which Johnson considers part of their gradual effort to privatize the system. He describes a 15-year “drum beat” from corporate lobbying groups and conservative legislators to undermine workers’ protections in the name of Washington’s business competitiveness.

Here is the letter in its entirety:

June 16, 2013

Dear Governor Inslee, Speaker Chopp, Minority Leader Murray, and Majority Leader Sullivan,

Even though my staff and I have written many thousands of words about our workers’ compensation system over the past decade, I find this somewhat difficult to write, so bear with me. My ask is very simple – I am asking you to take workers’ compensation policy changes off the negotiating table.

After Governor Locke vetoed 43 of 46 anti- labor bills that came to his desk in 1997-1998, as a gesture to the business community, he created a Competitiveness Council comprised of 18 representatives of business and two from labor. The assertions coming out of this group began an all too familiar drum beat: “Business costs are too high. We are uncompetitive.”

Even though objective analyses of the data does not support these assertions and numerous national business indexes have pointed out that Washington State actually has a very good climate for doing business, the drum beat continued to get louder.

Historically Washington State has been recognized for a very strong workers’ compensation system noted for relatively decent benefits and premium rates in the middle to lower third in the country. One reason for this has been that workers pay between 25 and 30% of the total premium.

Over the last 14 years our system has endured two separate $ 200 million premium rebates to employers by Governor Locke, a $ 315 million premium holiday by Governor Gregoire, and the Dot Com bust and the “Great Recession” where the system’s reserves lost over $ 2 billion as a result of the two economic downturns. Nonetheless, rates on average over this time period have been modest.  There have been no premium increases over the past two years. Employer costs rank 22nd in the country, lower than South Carolina and California. And as the economy has improved, so has the contingency reserve fund which now sits just below $ 1 billion.

That our workers’ compensation system could survive both political manipulation and  two economic crashes is a testament to its strength and resiliency.

Nonetheless,  the drum beat continued. In 2011, we in labor and I in particular worked with Governor Gregoire to put together a plan to help reduce long term disability. This plan pulled from ongoing work by expanding the COHEs, creating a statewide medical provider network, and borrowing a “Stay at Work” program that had been successful in Oregon.

But the drum beat got louder. Even Governor Gregoire picked up the sticks. I was told that we needed to find more cost savings in the system. Given the veiled threat of settlement agreements and privatization, we offered up a COLA freeze on benefits and a significant change in the way Permanent Partial Disability Awards were considered in pension cases. All told the estimated savings came in at over $ 800 million. We now know that these savings were closer to $1.3 billion.

The drum beat became deafening. The business community wanted more, the republican’s and “road-kill Democrats” wanted more, labor said no, but the Governor and Democrats gave more. For the first time in the 100-year history of our workers’ compensation system, settlement agreements became legal for workers 55 years of age and older, sliding to 50 years of age and older in 2016.  Labor was told that lots of protections, so-called sideboards, to protect the injured worker were built into the bill, including a “best interest of the worker” standard.

Fast forward to 2013. Bad workers’ compensation policy is back on the table in exchange for the budget. What may not be obvious for all but what is painfully clear to us is that what republicans and the business community ultimately want is to privatize the workers’ compensation system. Having failed with I-1082, having failed with electing Rob McKenna Governor, the next best route is through expanding the settlement agreement process. Why? Because the most severely disabled workers in the state, when placed under tremendous financial distress will, as we have seen from 46 other states, settle for significantly less than they would otherwise receive. This is how corporations and insurance companies can squeeze a profit out of the workers’ compensation system. But to make it work you need a large enough pool of desperate workers who make the wrong choice.

I am troubled by what I hear about workers’ compensation offers continuing to be exchanged at the end of last week. My understanding is that the Majority Republican Coalition Caucus rejected an offer which would have expedited the slide to 50 and takes down a major sideboard of the 2011 legislation.

Some have argued that expediting the drop to age 50 is not a big deal since we were going there anyway. That is equivalent to arguing that a revenue source set to expire in 2016 might as well be taken away now. This would hardly be a good deal for the people of Washington State. In the one case you forgo three years of needed revenue and the other you put younger workers in jeopardy three years sooner than called for under current law.

For those that want to argue that the Zimmerman case will be lost in the courts, we only need to remember that the odds were not in favor of the ACA passing the U.S. Supreme Court last year. Let’s let the judicial branch of our government do its job. Should they strike down the “best interest” for represented workers language we can always come back and introduce a bill explicitly mandating that the “best interest” standard be used for all injured workers.

The workers’ compensation system is financially stronger than it has been in five years. Expanding or expediting settlement agreements won’t have any appreciable effect on premium rates. But it will take us one step closer to privatizing the workers’ compensation system; one step closer to the goal of those who would turn our workers’ compensation system into a profit center. For this reason alone workers’ compensation policy ought to be taken off the table.

But there is another reason to take workers’ compensation policy off the table. The struggle going on for the last 140 days has been a war over leadership and values. The Republican Majority Caucus expects that, just like in 2011, they can wring major concessions from the Governor and the House. They have used workers’ compensation, along with other policy bills, to hold the operating budget hostage. If you let them win on this it will set the tone for negotiations over the next three years. Democrats have been right on the revenue message, on the operating budget priorities, on a robust capital budget, and on the transportation financing and investment package. You have the best message that the public is not hearing.

Last Tuesday Governor Inslee struck the right tone and message when he declared that it was too late for “ideological policy bills.” This struck a chord with the Democratic base, including labor, who have watched the party make concessions on everything from workers’ compensation to all-cuts budgets. It is also a message that will resonate with the general public if they get to hear it and if you stick to the message. Walking back on that message will just create more discouragement. The opportunity still exists to express the values embedded in all three budgets and to put the blame where it rightfully belongs.

With regard to workers’ compensation the message would be something like the following. In 2011 we approved major reforms to our workers’ compensation system that haven’t been fully implemented yet but that have so far saved $1.5 billion and have helped to avoid rate increases over the past two years. Meanwhile, as the economy recovers, the system is now running a surplus and reserves are quickly being restored to safer levels. The responsible course is to allow those 2011 changes to fully take effect and then to assess their impact on injured workers and their families and on employers’ costs. It would be irresponsible to rush through more contentious cost- cutting legislation under the duress of a potential shutdown of state government. While there is no imminent threat to our workers’ compensation system there is an imminent threat to our education system and other state services our citizens rely on.

The war over leadership and the direction of our state will be won by consistently fighting for democratic values and not trading bad policy for budget items.

I respectfully ask you once again to take workers’ compensation and other policy bills that adversely impact workers off the table.


Jeffrey Johnson, President
Washington State Labor Council, AFL-CIO

ALSO at The Stand:

Why workers’ comp? What’s the emergency? (June 14)

GOP’s workers’ compensation “reform” bad for injured workers, Washington State (by Sen. Steve Conway, June 14)

Labor, community groups, injured workers advocates urge Legislature to oppose workers’ comp bill (June 13)

Phantom workers’ comp rate hikes threaten government shutdown (June 10)

Workers’ compensation system posts strong gains (May 6)

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