OLYMPIA, Wash. — Washington state lawmakers grappling over how to fill a projected budget shortfall of $5 billion may first have to end a stalemate on a more contentious issue: workers’ compensation.
There is widespread agreement in Olympia that lawmakers must do something to curb the surging costs within a state-run system that doles out billions in benefits, and Gov. Chris Gregoire said this week she doesn’t think lawmakers can leave the Capitol for the year without dealing with the issue. But the House and Senate — siding with labor and business, respectively — have pushed competing proposals that won’t get consideration in the opposing chamber.
“I think both are now dead,” Gregoire said. “We need to put our minds together and comes up with something that serves as an alternative — some middle ground that will allow us to get out of here.”
Senate leaders have approved a measure that includes an option of reaching lump-sum settlements with workers who receive benefits for a prolonged period, and Gregoire said senators are not interested in finalizing a budget until workers’ compensation has been settled. But leadership in the House has made it clear they aren’t accepting a measure that includes a settlements provision.
“There are alternatives,” said House Majority Leader Pat Sullivan, D-Covington. He said a large number of members in his caucus have deep concerns about offering settlements.
Workers’ compensation in Washington is a state-provided insurance system that provides about $2 billion in benefits each year — largely funded by premiums paid by businesses. If a worker is injured on the job, they can file claims and receive money while they heal. Some large companies choose to self-insure.
The compensation system surfaced as a key issue after the state auditor said last year that reserves in the system are at risk of insolvency. About 85 percent of compensation costs come from 8 percent of all claims, which involve workers who are receiving benefits for a prolonged period or have lifetime pensions, according to the Department of Labor and Industries.
Workers’ compensation rates increased by an average of 12 percent for 2011, and business groups fear another double-digit rate increase in 2012.
Gregoire told reporters this week that the state must either cut benefits or offer settlements. In a more detailed proposal distributed to stakeholders on Friday, she recommended that the state either offer the option of settlements to those over the age of 55 or limit payments for those who are receiving Social Security benefits.
Rebecca Johnson, who lobbies on behalf of the Washington Labor Council, said labor groups oppose settlements because they believe it will lead workers who are in a vulnerable position to accept a deal that equates to just a fraction of the benefits they should be receiving. She said labor is more interested in finding ways to get disabled workers healthy and back on the job quickly.
“The fundamental problem with the buyouts is that it only saves money if workers take less,” Johnson said.
House leadership has pushed a series of proposals, including a new program approved by the governor that would establish a health care provider network to treat injured workers and include a focus on returning to work. Another proposal passed by the House but not taken up by the Senate would freeze cost-of-living payments.
Kris Tefft, general counsel at the Association of Washington Businesses, said the House proposals simply aren’t enough to reform the system. He said Republicans, the governor and the Senate may have to bypass the House leadership in order to win approval of the changes they want.
“Our pitch is really aimed at the hearts and minds of the moderates in that caucus, continuing to encourage them to look at solutions that may allow them to forge this bipartisan majority,” he said.
Closed-door meetings on the topic will continue in the coming week.