Article by Erik Smith. Published on Friday, June 25, 2010 EST.
Department Acknowledges Two Funds are in the Red Even as Total Reserves Increase
L&I presents updated statistics at Wednesday’s Advisory Committee meeting.
By Washington State Wire staff
OLYMPIA, June 25.—The gorilla was in the room as a blue-ribbon panel on workers’ compensation reform launched negotiations Wednesday in Olympia. Even as business and labor are preparing to do battle on Initiative 1082, which would allow private competition for the worker compensation business, both sides are participating in the talks convened by the governor.
The business team is headed by Kris Tefft of the Association of Washington Business, while the labor team is led by Jeff Johnson of the Washington State Labor Council.
The group’s meetings have been closed to the public in hopes of encouraging candid discussions. A similar negotiating effort ended in a stalemate last fall. Meetings for the new group have been scheduled into December.
Workers’ compensation reform was a top priority for the business community during the last legislative session as the state auditor’s office raised concerns about the solvency of accounts managed by the Department of Labor and Industries. It reported that the agency would need almost a 30 percent premium increase just to break even.
The department responds that it has deliberately drawn down reserves to keep rates low during the recession and still has the financial resources to meet all obligations.
Earlier in the day, at the quarterly meeting of the Workers’ Compensation Advisory Committee, the department acknowledged that it has had to shift more funds to make up for shortfalls in individual accounts. Two of the three major benefit accounts have gone into the red, the accident fund and the supplemental pension fund, while the third account, the medical aid account, has grown to the point that state fund total reserves actually increased during the last three quarters to over $600 million.
One of the reasons for the shortfalls is that premium collections have plummeted during the current recession. Employment decreased 6.3 percent at the recession’s bottom. By contrast, the 2001 recession saw only a 2 percent reduction and lasted less than a year.
Even though injured worker claims decreased dramatically, total benefit liability costs continued to increase, up $315 million over the last three quarters. Much of that is due to lengthening claims duration, twice the average of other states, and pension award rates that are twice as high as the next highest studied state.
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