WashACE Blog

Olympia Playbook Parallels Labor's National Agenda, Will Add to Job Losses

A must-read article in The Economist incisively examines organized labor's attempts to bend national policy to promote the union agenda. (H/T LaborPains.org) As you might expect, the efforts mirror what we're seeing in Olympia and other state capitals. AFL-CIO president Richard Trumka, the magazine reports, has a jobs plan.

It can be summarised in a single word, the same one that Samuel Gompers, one of Mr Trumka’s predecessors, used to describe what his members wanted: “More.”

Washington must spend more on unemployment benefits, on roads, on schools, on green energy projects and on aid to state and local governments.

The agenda sounds familiar. In an action alert released yesterday, we called foul on efforts in the legislature to increase unemployment benefits. assuring even more hikes in UI taxes on struggling firms. Washington's UI taxes are already second highest in the nation, reflecting correspondingly high benefits.  

Similarly, job creation proposals promoted by legislative Democrats tilt heavily toward green projects. We can endorse these measures, while also noting that such targeted efforts cannot replace an overall emphasis on controlling employer costs and putting people back to work.

The unions' appetite for massive injections of public spending comes with strings. like Project Labor Agreements requiring contractors to hire union workers.

Such agreements inflate costs by 12-18%, according to David Tuerck of Suffolk University, and were banned under Mr Bush. Even where PLAs are not in force, federal contractors are obliged to pay “prevailing” wages. That actually means something close to the union rates, which is nice for the workers in question but means that taxpayers get fewer roads and schools for their money.

Similarly, the influence of public employee unions has become a major driver in increasing government costs. (I wrote about this here.) This is how The Economist explains it.

Market forces place a natural check on unionisation at private firms. In the short term, collective bargaining can raise wages. But if unions demand above-market pay and impose cumbersome work rules, unionised firms will gradually lose market share to non-unionised competitors.

...Such checks do not apply in the public sector. The government cannot easily go bust. When a company pays over the odds for labour, the money comes straight out of its owners’ pockets. They usually object. But when a politician hikes public servants’ pay, he wins votes. If this year’s budget is tight, he can promise lavish pensions, secure in the knowledge that the bill will come due only in the distant future. Unfortunately, that distant future is now, which is why so many states are in a fiscal pickle. Per hour worked, state and local government workers enjoy 34% higher wages and 70% more benefits than their private-sector counterparts, calculates Chris Edwards of the Cato Institute, a libertarian think-tank.

Case in point: Washington's public employees aggressively oppose suggestions that they reopen their collective bargaining agreement to reduce costs. Even relatively benign furlough proposals are challenged.

Hard to argue with the conclusion.

... union bosses can sound jarringly out of touch.

And yet, they're driving the agenda in Olympia, adding to private sector job losses.

Lawmakers Show Little Valentine's Day Love for Private Sector Job Creators

A quick roundup of weekend legislative activity shows few candy hearts (taxable or not) from lawmakers on this Valentine's Day holiday. Although most of the attention focused on House committee activity to suspend the I-960 supermajority requirement and to move forward with a package of tax hikes, employers express deep concern with union-backed bills to boost unemployment insurance costs. With the UI trust fund already being drained rapidly, these bills presage another increase in UI taxes on struggling firms.

As Brad Shannon writes (and I paraphrase), having passed the half-way mark on a short legislative session, lawmakers will now move quickly to make it easier to raise taxes, raise them, and adopt a budget. Here's what Shannon says:

Lawmakers need to get moving, because they have only 25 days left in their session to close a $2.8 billion budget gap with new taxes, spending cuts, federal aid and shifting other state revenues.

“I think it will be sooner rather than later. We don’t want it to be hanging around,” House Majority Leader Lynn Kessler, D-Hoquiam, said about a coming vote on suspending I-960. The House is in a hurry to get a bill back to the Senate for approval, so Gov. Chris Gregoire can sign it and the Senate can roll out its budget plan, including tax increases, as soon as Wednesday.

So far, we don't know what that final tax plan will look like. The House Finance committee considered HB 3176 on Saturday without bringing it to a final vote. Here's a Washington Research Council analysis of the bill.  

Legislators have also proposed doubling the estate tax, increasing the state sales tax by 15.4 percent, and tripling the tax on hazardous substances. 

I'm sure we're not done, but the menu is already getting crowded and caloric.

Meanwhile, the state seems destined to fall short in its effort to capture Race to the Top Dollars for the public schools, a point well made by Washington Roundtable president Steve Mullin in this edition of Up Front on KING 5. The News Tribune editorial board writes succinctly today:

We now know the Legislature plan’s for competing for Race to the Top education dollars: Too little, too late.

So we miss out on federal funds designed to spur innovation and student achievement, while lawmakers pave the way for tax increases, many (if not all) of which will dampen private sector investment and hiring, costing more workers their jobs. Inexplicably, this is when some legislators think employers should be burdened with yet another large payroll tax hike. It's not as if they haven't already been hammered this year, as AWB president Don Brunell writes here. 

Growing momentum behind the labor-backed legislation prompted Steve Mullin to send this letter to the governor and legislature. Read the letter for specific positions, but this excerpt frames the employer community's position:

The Roundttable understands that the legislature is considering a number of proposals that add permanent new costs to the unemployment insurance system – increasing the eligibiity for persons who voluntarily quit their jobs, raising the multiplier  for determining benefits to four percent, and extending benefits to people seeking part-time work. These measures will increase employer rates, which will further hinder job creation.

Employment growth, private sector employment growth, is the key to economic recovery. And, as the Olympian reports, the state's top forecaster, Arun Raha, sees a long slog ahead.

[Raha] also says job growth is under way in Washington, but that it will be two more years before the state has the same level of employment it had in early 2008, when the recession began here.

Possibly, but if legislators follow their present course, the rebound will likely take much longer.

Key Senator Says No to Sensible Workers' Comp Reform

In the Seattle Weekly, Laura Onstot, whose comprehensive look at workers' comp we cited here, reports that yesterday's discussions of workers' comp reform did not go well for employers hoping to mainstream Washington's workers' comp system.

Sen. Jeanne Kohl-Welles (D-Seattle), whose committee oversees workers' comp, made it clear this morning that she will not support any bills related to changing the system because "we just cannot get legislation, policy-wise, through this 60-day short session."

Rep. Steve Conway (D-Tacoma), Kohl-Welles' counterpart in the House, has already said he will not hear any bills on the subject. That makes Kohl-Welles' statements today pretty much the final nail in the workers'-comp reform coffin for this legislative session.

The Weekly's headline: "Sen. Jean Kohl-Welles Kills Workers' Comp Bills

On the Senate Democrats' blog, Kohl-Welles spins it this way: Deliberative approach sought for workers' com.

Kohl-Welles has introduced Senate Bill 6775 which directs L&I to convene a task force to make recommendations on how to improve our Workers Compensation system so that it continues to serve injured workers and is fair to businesses.

Another task force, another year of rising claims, rising premiums, and avoiding essential reforms.

For a clear picture of what's happening, read Austin Jenkins Crosscut report, Labor tightens the screws on Democrats in the Legislature.

I asked [Rick Bender, president of the Washington State Labor Council] last week if organized labor “put its foot” on a workers’ compensation reform bill before it could even get a committee hearing. The bill’s sponsor is Speaker Pro Tem Jeff Morris, a top Democrat in the House. Several other Democrats have signed on as co-sponsors. Bender’s response: “We gave [Democratic leaders] a list of a number of bills that we don't think should be heard [in committee], those that should be heard, and we do that every session."

Bender also acknowledges that Democratic lawmakers can get “a black mark against them” for simply sponsoring or co-sponsoring a bill — like Morris’ workers’ comp bill — that labor opposes. In this case, Bender says the Morris bill is a “very bad bill for injured workers.”

Conway said earlier that business would have to find a compromise acceptable to labor before he'd give workers' comp reform a hearing. There are a lot of things you can say about the way legislative leaders have handled the issue this year. "Deliberative" is not the first word that comes to mind.

TNT's Must-Read Editorial Supporting Workers' Compensation Reform

In this forceful and direct editorial, The News Tribune stands behind sensible reforms in our state's workers' comp system. Please read the whole thing.

A sample:

The state workers’ compensation system is simply unsustainable as is. All signs point to the need for reform – all signs, that is, except the signal coming from labor.

Another:

...the unions ... have people in powerful places in the Legislature. Rep. Steve Conway, a Tacoma Democrat who serves as secretary-treasurer for Local 81 of the United Food & Commercial Worker’s Union, is chairman of the House Commerce and Labor Committee that would handle workers’ compensation legislation.

Conway is refusing to hear any workers’ comp bills this year – not even the measure sponsored by his own speaker pro tem, Jeff Morris of Mt. Vernon. Conway says businesses will have to find a compromise that’s acceptable to labor before he’ll let it through.

As the editorial points out, the employer-supported legislation sponsored by Morris is mainstream.

Conway should let the bill be heard.

State Unemployment Rises to 9.5 Percent

The state's unemployment rate for December climbed to 9.5 percent, as reported by the Employment Security Department.

Washington’s unemployment rate rose in December to 9.5 percent from November’s downwardly revised level of 9.0 percent. The labor force decreased by 0.2 percent between November and December while the number of unemployed jumped by 5.9 percent.

 As the Seattle Times notes, the decline in jobs is the worst since the Boeing Bust.

Last year was the worst in recent history for job losses in Washington, the state Employment Security Department confirmed Wednesday: 106,200 jobs, or 3.6 percent of payroll employment here, were eliminated in 2009.

Those figures blow past the recession at the start of the 2000s and the double-dip recession of 1981-82. The last comparable downturn was the "Boeing bust" of 1970, when the state lost 5.3 percent of its payroll jobs, or 58,900 positions in that era's much smaller economy.

Given the precarious situation, AWB president Don Brunell offers some good advice to lawmakers.

What can the Governor and lawmakers currently meeting in Olympia do about it?  On unemployment, don't add more costs to employers by increasing benefits as union officials want.  Doing so will raise UI taxes to struggling employers.

Even without the expanded benefits, Erik Smith writes that employers - who just saw enormous hikes in the UI taxes - can expect more of the same next year.

When you make hiring more expensive, you get fewer new hires. Policy makes a difference. Expanding UI benefits now guarantees more unemployment.

The Everett Herald editorial board gets it right.

Workers' Comp Legislation Deserves a Hearing

As we noted yesterday, employer-backed HB 2950 contains three essential, common-sense reforms to our state's ailing workers' compensation system. Yet, primarily because of inexplicable union defense of the status quo, the bill may not even receive a hearing. Good background in Austin Jenkins's blog.

Now entering the mix is an initiative filed by the Building Industry Association of Washington to privatize the state's unusual monopoly (only four states, including Washington, operate exclusive state funds). 

And speaking of unusual, the Seattle Weekly devotes an inordinate amount of space to a well-researched and highly readable workers' compensation story by Laura Onstot. She notes business concerns with the high costs of workers' comp here and its effect on interstate competitiveness.

Given the bad economic climate and the shocking loss of Boeing's assembly plant, these longtime complaints are getting a new hearing, as even liberal politicians worry about the state's "business climate." Two bills have already been introduced in the current legislative session to try to reform the workers'-comp system.

But politically powerful labor unions aren't likely to let much happen. They treasure Washington's system, which offers the third-most-generous benefits package among all states, according to the National Academy for Social Insurance, a D.C.–based think tank that evaluates government programs like Social Security and workers' comp.

In Washington, an injured employee can start collecting a paycheck from the state after just three missed workdays, rather than the seven required in most states. While most states only replace two-thirds of your salary while you're off work, Washington pays as much as 75 percent. And for people who are declared unable to work for life, the annual amount they receive to cover lost wages is adjusted for inflation, something most states don't do.

There's too much in the story to summarize easily here. I recommend you read the whole thing, but I can't resist pointing out this exchange relative to the Oregon comparative workers' comp study that we've criticized here.

"It's real hard when you take systems as dissimilar as Oregon and Washington," acknowledges Mike Manley, who manages the Oregon study. "There's a lot of approximations and assumptions that have to go on."

Right. Business groups have asked that the state participate in a the Workers' Compensation Research Institute's comprehensive benchmarking studies. Then we might get good information like this. So far, no go.

Support HB 2950 for Good Workers' Compensation Reform

With bipartisan sponsorship, HB 2950 contains the three critical reforms to the state workers' compensation that employers are backing this year. Jason Hagey summarizes nicely in Olympia Business Watch:

... the bill would not diminish protection or care for injured workers. Rather, it would lower the cost of the state's industrial insurance system through a number of targeted changes, including:

• authorizing voluntary medical provider networks
• allowing voluntary settlement agreements
• changing the definition of occupational diseases to make sure it only covers conditions that are primarily work-related.

The Washington Research Council's policy brief on workers' comp released last week provides more information on why these reforms make good policy sense for injured workers and their employers.

Contact your legislators and let them know that this bill provides essential reform and should be passed this session.

Mainstreaming Workers' Compensation

Workers' compensation reform is a top employer community priority this year and among the WashACE legislative objectives. In this policy brief, the Washington Research Council reports on the three sensible reforms lawmakers can adopt to improve the system for workers and employers.

Three reforms will provide immediate cost savings in the workers’ compensation system without reducing injured workers’ benefits. They will improve patient care, without detriment to patient satisfaction or access to qualified health care providers. These cost-effective reforms that could bring Washington into the competitive mainstream cannot be ignored or postponed.

Right.

Employers Promote Smart Workers' Comp Reform, Resist Higher UI Costs

Two important blog posts from AWB to highlight today.

First, Don Brunell writes that a broad employer coalition will continue to advocate for sensible reform in the state workers' compensation system. As we've noted earlier, organized labor continues to back the failed status quo. Here's the bill WashACE and others support, as Don summarizes:

...the bill's provisions would:

• allow self-insured employers and the Dept. of Labor and Industries (L&I) 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 and the fees would be negotiated in advance.
• require workers to prove their injuries were job related.
• allow employers to make lump-sum settlements with injured workers.

Despite the overwrought rhetoric from union lobbyists, there's nothing there that takes anything away from workers. To the contrary, the managed care networks would provide improved rehabilitation services and the settlement option allows claims to be settled more quickly, a clear worker benefit.

Second, despite UI tax hikes of 300 percent for some employers, legislators are considering expanding benefits this year, assuring even higher taxes in the future. From the AWB coverage of the hearing.

Although it's far from clear how much either HB 2553 or HB 2647 would cost employers, there is no doubt either would make the system more expensive.

"Yes, there are some costs that will go up because of this bill," said Karen Lee, Employment Security Department commissioner, in response to questioning from Rep. Cary Condotta, R-East Wenatchee.

HB 2553 would cost the state an estimated $43 million in 2011 and $73 million in future two-year budgets, Lee told committee members. HB 2647 would cost a little more than $13 million next year and roughly $37 million in future two-year budgets, she said.

However, officials admitted that it's difficult to predict how much additional cost would come from expanding unemployment benefits to part-time workers.

Employers believe the estimates are low. Watch these measures and let your legislator know that job creation is your top priority. And it should be theirs.

Friday WashACE Conference Call

Boldly going where we've never gone before, WashACE hosted it's first open conference call to discuss competitiveness issues at 7:30 this morning. We've uploaded the call here.

In this first call, I discuss the budget and tax outlook. Gary Chandler, AWB's top lobbyist, reviews workers' compensation reform and the governor's job package.