Article by Erik Smith. Published on Saturday, February 14, 2011 EST.

Believe it or Not, Biggest Fight of Session Ends With Smiles – Now Come Bigger Battles

Everybody’s smiling — see? In this crowd you’ll find every player in the Legislature’s unemployment battle, from business, labor, the Rs and the Ds. Somehow they got it done, and it seemed to astonish even them.

By Erik Smith

Staff writer/ Washington State Wire

OLYMPIA, Feb. 12.—The year’s big unemployment bills finally landed on the governor’s desk Friday after a near-unanimous vote in the state Senate. And after all the arm-breaking of the last couple of weeks on the issue, even Gov. Christine Gregoire was astonished.

            As lawmakers lined up behind the governor for the official bill-signing photograph, State Sen. Janea Holmquist Newbry, the Senate Republican lead on the issue, asked the governor, “Did you ever think you see a day with two UI bills with such good bipartisan support?”

            Gregoire said, “No, never. It’s for Ripley’s Believe it or Not.”

            The battle over the unemployment bill had embroiled the Legislature for the first full month of the 2011 session. Business and labor interests fought tooth and nail over a plan to expand benefits for the state’s unemployed workers. The warfare embroiled both Republicans and Democrats. In the House and Senate, centrist Democrats revolted against their leaders. Some threatened to vote with Republicans. Some actually did it.

            It was a development that may prove important as lawmakers turn to bigger debates later in the session over the budget and workers’ comp.

            But in the end, lawmakers forged a compromise that passed the House 98-0 and the Senate 41-4.

            And they struggled to remember a time when a bill on any contentious business-versus-labor issue passed with such broad support. “I’ve heard it’s been 25 years since we had a vote on an unemployment bill that was 98 to nothing,” marveled House Labor chairman Mike Sells, D-Everett.

            Big Tax Break for Business

            There was plenty at stake in the debate. First there was the expanded benefit, which provides an extra $25 a week for the state’s unemployed workers who file new claims between March 6 and Nov. 6.

            Then there’s the big tax break for business. That one cuts this year’s average rate increase of 36 percent down to about five percent, and will save the state’s businesses about $300 million. The state Employment Security Department is already readying the new bills that will go out to the state’s 170,000 businesses for their first-quarter tax payments, which are due April 1.

            And finally it makes a tweak to state law that allows the state to collect another $320 million in federal money so that the state may continue providing checks to the state’s longest-term unemployed. Without it, nearly 70,000 workers would have been cut off from state benefits this spring.

            The final form of the unemployment deal required two bills. One of them, Senate Bill 5135, enacted the tax break and the extended-benefit provision. The other, House Bill 1091, provided the extra $25-a-week benefit. The last of the bills cleared the Senate Friday morning and the governor signed both bills into law Friday afternoon.

            State Trust Fund is Healthy

            What makes the tax break possible is the fact that the state’s unemployment insurance trust fund is the healthiest in the nation. That’s another way of saying that the state has been collecting more money than it needs in unemployment taxes. Right now the state unemployment insurance trust fund has over $2 billion, enough to cover benefits for about 14.5 months. The tax break will draw down the fund to about 11 months.

            That’s something to be proud of, the governor said. Right now, after more than two years of recession, 35 state funds are technically bankrupt and have been forced to turn to the federal government for loans.

            The problem was that the state’s tax structure was going to keep businesses paying high rates at a time when they couldn’t afford it, she said. The state had to pass some kind of a bill to keep another tax increase from automatically taking effect.

            “Thank goodness, frankly, that we have the capacity to do this,” she said.

Near Revolt in Democratic Ranks

            Lawmakers were under intense deadline pressure because the Employment Security Department faced a Feb. 8 deadline to start rewriting the tax bills. The result was one of those legislative battles with intricate parliamentary moves and plenty of vitriol. And what happened over the last couple of weeks was notable because it showed that Democratic-party leaders didn’t have a firm grip on their own members. Republicans are touting the emergence of a new “philosophical majority” on business and fiscal matters – a team-up of Republicans and centrist Democrats.

            Democratic leaders are downplaying the matter. But it certainly seemed to be one of the things that drove the breakthrough in the House on Wednesday.

The tax break and the extended long-term benefits weren’t controversial. The real fight came down to the best way to expand benefits.

            Business and Labor do Battle

            In order to qualify for a one-time payment from the feds of $98 million, the state had to do something to permanently expand unemployment benefits. The governor, business, Republicans and centrist Democrats favored a relatively inexpensive approach. Their plan was to provide unemployment benefits to workers enrolled in retraining programs.

            But labor was pushing for something twice as expensive – a new benefit for workers who have dependent children, $15 a week per child, up to $50 a week. It assembled a coalition of social service groups on its side, and Democratic leaders, who rely on labor support, took their side.

            Democrats Vote With Republicans

At one point the debate shut down the Senate. Six Democrats voted with the Republicans on one of the measures 10 days ago and delivered their leaders a wallop. Republicans even boasted the emergence of what they called a new “philosophical majority.”

            The revolt forced Senate leaders to pass a bill favored by business.

            Over in the House this week, Democratic leaders found a way to compromise – by providing a more modest expansion of benefits that won’t cost business as much in the long haul. But there was still plenty of disagreement over exactly how much money was going to be spent.

            Ten centrist Democrats signed an amendment that supported the Republican position. That meant the House Democratic leaders would have been defeated at that point if they had brought the bill to a vote.

            Leaders Say Revolt Didn’t Matter

            Exactly what happened in the House appears to be a matter of dispute, two days after the fact. Members milled around on the floor for two hours while they waited for party leaders to come to a deal in the back offices of the House chamber. Republicans say the Democrats threatened to adjourn for the day if the Republicans held firm. That would likely have killed all consideration of any unemployment legislation this session. “We were told we were going to adjourn,” said House Minority Leader Richard DeBolt, R-Chehalis.

            But if Democratic leaders made that threat, they can’t remember it now.

            “Well, I didn’t make it, so I don’t know,” said House Speaker Frank Chopp, D-Seattle.

            State Rep. Larry Springer, D-Kirkland, said the amendment from the 10 Democrats had no effect in forcing the compromise.

            “It didn’t have any effect on the debate because in point of fact we were minutes away at that time from virtually closing the deal, so for all intents and purposes negotiations were nearly over by the time that happened.”

            The Final Deal

            If it all sounds a little complicated, there are a thousand other details as well. That’s how deals like this one often are.

But the most important ones are these. The final deal allows the state to get the $98 million from the feds, because it provides the permanent retraining benefit.

            That $98 million is going to be spent pretty quickly. By increasing unemployment benefits for nine months and providing the new retraining benefit, the federal money will be exhausted in two years. Businesses will see a slight increase in taxes after that point because of it.

Your support matters.

Public service journalism is important today as ever. If you get something from our coverage, please consider making a donation to support our work. Thanks for reading our stuff.