For the first time in many years, as legislators depart Olympia, small businesses can breathe a sigh of relief. Rather than enduring another legislative session in which some lawmakers enacted more policies that will increase the cost of doing business, the small business community should actually see some much needed relief this time.
This is good because our economy is not doing as well as many had expected at this stage of recovery. There are artificial cost increases that policymakers can control, like tax hikes and expanding government programs, and natural ones that they cannot (despite their press releases to the opposite).
Earlier this year, business, labor, legislators and the Governor all agreed on one thing: the average 40 percent increase in unemployment insurance premiums for the second year in a row was going to do more damage than good. Even though labor had pushed for an unwise expansion in unemployment benefits based upon the number of dependants in a household, legislators instead enacted a premium relief plan. This will save businesses about $300 million over the next two years and tens of millions in the following years. This was a good move by everyone involved.
The story on workers’ compensation was not as rosy. Even though what passed the legislature is a step in the right direction, lawmakers should have done more. Chances are high there will be little appetite to revisit this issue next session, so a golden opportunity was lost.
Last year State Auditor Brian Sonntag warned the state’s workers’ compensation fund is heading towards insolvency in the next several years if nothing was done. The Department of Labor and Industries (L&I) had raised premiums by 8 percent in 2010 and 12 percent in 2011, which again increased the cost of doing business in our state (all the while, Oregon decreased its premiums in both years).
Unfortunately, even though L&I raised their premiums both years, from an actuarial standpoint, they should have raised premiums even more in order to address the growing deficit. But officials knew that an 8 percent increase followed by a 12 percent increase was already pushing businesses, and the employees who also contribute to their premiums, to the limit.
Because voters turned down Initiative 1082 last fall, which would have opened up the workers’ comp system to private sector competition, policymakers had to go back to the drawing board to look for ways to decrease system costs without leaving injured workers in the lurch.
The proposed solution came in the form of voluntary settlement agreements (or “lump sum payments”). These settlements would have allowed an injured worker who qualifies for a pension to take about 80 percent of the value of the pension in an up-front payment. State officials expected thousands of people to have opted into this system, which would have saved the state about $1.2 billion over the next two years and about $500 million each biennium after that. Even though the Senate agreed with this approach, as did the Governor, the House majority leadership did not.
After weeks of negotiating, the Governor as well as House and Senate leadership agreed to a watered-down compromise by which “structured settlements” will replace voluntary settlement agreements. This new structured settlement option is only available to workers 55 years or older, but that age limit will drop to 50 by 2016.
This is a step in the right direction, but the concern is that this new option will not save enough money over the next few years to avoid large rate increases. State officials expect to save $1.1 billion over the next four years, as opposed to $1.2 billion over the next two (and a billion more in the following four years) from voluntary settlement agreements. And because the state’s workers’ comp. trust fund was in such bad shape, it is difficult to declare smooth sailing for small businesses from here on in It seems that after the last several legislative sessions the discussion revolved around what policymakers did to small businesses, instead of what they did for small businesses. Thankfully, for one year at least, policymakers in Olympia largely stood up for small businesses and the long-term economic growth that we so desperately need.
Carl Gipson is the small business research director at Washington Policy Center, a non-partisan independent policy research organization in Washington state. For more information visit washingtonpolicy.org.