One Question for Labor & Industries
Math check on the workers' comp fund.
During yesterday's state senate floor debate on a series of workers' compensation reform bills sponsored by Republian Commerce and Labor Committee chair Sen. Janea Holmquist Newbry (R-13, Moses Lake), the Republicans, who passed most of the package, said the workers' comp fund was "in danger of insolvency." The Democrats said the fund was stabilizing, which is why the fund board didn't mandate a dreaded rate increase this year—the GOP's reason for proposing the legislation in the first place.
The Republican legislation allows injured employees 40 and older to take structured settlement buyouts for injuries instead of ongoing payments. The GOP argues that taking ongoing litigation out of the equation saves money. Democrats argue that settlements stiff vulnerable workers in the long run and, as Democratic Sen. Steve Conway (D-29, S. Tacoma) puts it: "Lowering payouts shifts the burden from the employer to the taxpayer" who will have to pick up the tab on the social services end.
Workers' comp math is confusing: You have to factor in employment stats (to predict the amount of future claims); predict temporary claims vs. long-term claims (while keeping future dollar values in mind); predict the stock market; and then estimate what percentage of that pot you need in reserve to predict whether the fund will be solvent.
To figure out if the Democrats or the Republicans had a better handle on the workers' comp fund—which both workers and employers pay in to (we're the only state in the union where workers' also share some of the costs, covering 50 percent of medical claims)—we talked to the Dept. of Labor & Industries, the state agency that manages the fund.
PubliCola's One Question: Is the workers' compensation fund—which pays for time lost due to injuries on the job, medical bills, and ongoing disability—solvent?
The answer we got from L&I spokeswoman Renee Guillierie was that the fund was definitely in trouble during the Great Recession, with a reserve that stood at just six percent the projected claims for the year last year. The fund advisory board told L&I the reserve fund needed to be at 14 percent of projected annual costs within 10 years.
Guillierie explained why the fund had taken such a dramatic hit during the recession, when it was drawn down by $300 million. 1) Fewer people had jobs, so less money was going into the fund. 2) Even though fewer people had jobs, the claims were more severe (fewer workers in the workplace makes jobs more stressful, less manageable, and more risky). And 3) The stock market tanked, crashing the fund.
Oy. That's how recessions work; one bad situation compounds another. It's like unemployment—the higher unemployment is, the less people buy things, the less money businesses have, the higher unemployment is.
However, as the economy rebounds, the fund doesn't look so bad anymore. Employment is ticking up, which increases the fund, which means there's more money making money in the rebounding stock market. It's an opposite, upward spiral.
Case in point: Guillierie reports that the contingency fund went up by $80 million this year and premiums stayed flat—no increases.
Will they have to increase premiums next year? Guillierie said there were too many moving pieces to know the answer to that yet.
And check out today's installment of Isn't It Weird That for a fact check on the Republican claim that reforms don't scale back coverage for workers.