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Wash. firms to avoid $300M in unemployment insurance hikes

Sun., March 27, 2011

OLYMPIA – In a legislative session marked by economic uncertainty, Washington businesses got one bit of certainty very early on: a change in the unemployment insurance system that should keep their rates from going up.

It was one of those rare pieces of legislation that involved business and organized labor, Democrats and Republicans, senators and representatives, and the governor’s office. While not everyone loved it, most of those involved agreed it was better than the current system, saved businesses $300 million in scheduled rate increases and gave unemployed workers a bit of extra cash. It was, in the overused vernacular, a win-win when it was signed Feb. 11 by Gov. Chris Gregoire.

The question is, was it the first win, the biggest, or the last? Here are some of the other key business issues as the Washington Legislature enters what’s scheduled to be its final month of work:

High hurdles to raising taxes

The budget for 2011-13 is out of balance, and theoretically there are two ways to close the gap: cut spending or raise taxes. But Gregoire and legislative leaders of both parties agree taxes can’t be raised in the face of a two-thirds majority requirement reinstated by voters last November.

The initiative extends beyond new taxes to cover existing tax exemptions approved for specific businesses or industries over the years. Although some progressive groups and state worker unions argue the state could cover some or all of its projected $5 billion shortfall by ending what they call tax loopholes, the supermajority makes that nearly impossible, too.

Anyone looking for a significant exemption or a lower rate, however, may be out of luck.

Clash over workers’ compensation reform

The rapprochement between business and labor that helped ease the unemployment insurance issue through the Legislature evaporated for major changes in the workers’ compensation system sought by such groups as the Association of Washington Business and the National Federation of Independent Business.

Washington’s unique workers’ comp system, which is run by the state for all but the largest employers, has long been criticized by businesses as too expensive, too generous and too slow to get injured workers back on the job. After failing to get voter approval last November to insert private insurance companies into the mix, businesses are backing more modest changes.

One is Senate Bill 5566, which would allow employers to settle a claim with an injured worker for a lump sum rather than ongoing payments. That system, known as “compromise and release,” had Gregoire’s support and passed the Senate with bipartisan support, but organized labor is strongly against it.

That proposal is bottled up in a House committee, which last week was considering its own bills to revamp the total disability pension system, to cancel any cost-of-living increases for workers receiving disability payments this year, and to set up a rainy day fund in years when the fund has excess money, rather than granting “rate holidays” to businesses or workers, who also pay into one of the compensation funds.

Late in the week, Gregoire said she would seek sponsors for a new bill that saved as much as $1 billion in the system over the next four years but does not have “compromise and release.”

Poor prospects for Spokane medical school

It’s not a statewide business issue, but when some 80 members of Greater Spokane Inc. descended on Olympia in January, most had one project at the top of their lists: a four-year medical school for the Riverpoint Campus in Spokane. Legislative leaders listened politely, but generally offered a gloomy outlook: It’s a tough year to be asking for a $41 million capital project.

Gregoire’s capital budget proposal, released in December, has no money for the new med school, and since that spending plan was written the state’s gap between expected income and scheduled expenses got bigger. Although the $5 billion gap is for the general fund operating budget, the size of the capital budget is related in part to the operating budget.

But that also means the legislative capital budget proposals are typically written after the operating budget, and Spokane-area legislators are holding out the possibility that some money for the med school could be added in for the second year of the two-year spending plan, when the state will have paid off some bonds and have more borrowing capacity.

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