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Senate Advances Negotiating Position – Passes Worker’s Comp, K-12 Reform Bills and Spending-Limits Measure

Scene on the Senate floor Saturday as the weekend sessions began to put the pieces in place for a session-ending deal.

Scene on the Senate floor Saturday as the weekend floor sessions began to put the pieces in place for a go-home deal.

OLYMPIA, June 10.—The pieces started falling in place for a session-ending deal on the state budget as the Senate advanced three big pieces of legislation its leaders say must be considered as part of a compromise with the Democrats who control the state House.

The measures expand a worker’s comp settlement program, reform the management of K-12 schools, and put the emphasis on public education by limiting spending on non-education programs. They may not be the be-all and end-all list. But by passing the three bills Sunday, the Senate Majority Coalition went a long way toward  staking out its negotiating position with the House. Senate leaders declared over the weekend that reform measures are the price they will seek in return for passing roughly $300 million in tax increases.

The big picture may have been obscured a bit in recent days by all the rhetoric and accusations being hurled across the rotunda and within the two chambers, by the House Democrats’ unusual decision to negotiate their budget in public, and by all the messy legislative sausage-making details of bifurcated base-budgets and trailer bills. But at this point, a day before the current special session is due to end, it appears that the House and Senate are within striking distance of a deal.

If the Senate passes the $300 million in tax increases, a gap of only about $200 million remains with the position advanced by the House Democrats last week. Relatively small for a spending plan sure to exceed $32 billion, yet there are big differences in spending priorities, and in how the budget proposals are structured, and so it is appearing ever-more-likely that lawmakers will be thrown into a second special session to resolve those final disputes. Although the Legislature has begun tripping over deadlines for the enactment of a budget, including an unenforceable June 1 deadline that technically declares the Legislature guilty of a misdemeanor for failure to act, the state faces a hard-and-fast deadline for passage of a budget by June 30. On the following day, a new fiscal year begins, and without a budget in place state agencies will have no authority to spend money.

The Republican-leaning Senate majority, 23 Republicans and two Democrats, is saying it won’t budge on taxes unless the House is willing to deal. With a pair of floor sessions over the weekend, the Senate majority made its position plain, passing a no-new-tax $33.4 billion budget that could stand alone – but which leaves Democrats howling about cuts to social-service programs. If the House wants more money, it will have to deal with the reform measures the Senate has been passing all session long, and which the House Democrats so far have ignored, said Senate Republican Leader Mark Schoesler, R-Ritzville. “We really need to spend our education dollars for the greatest value, we need to attract and retain jobs, and [we need] something to make the budget more sustainable,” he said. “I don’t want to come back every year to a deficit for the rest of my career.”

The biggest question that remains about the Senate position is whether the three bills advanced in the Sunday floor session represent the entirety of its reform demands, or whether there are more to come. The Senate has passed more than 30 pieces of reform-oriented legislation this session, some bills with broad bipartisan support, but none have gotten anywhere in the House. Whatever the Senate wants, the bills must be re-passed during the special session due to legislative rules — which explains why the Senate had to vote for the same bills a second time Sunday afternoon. Freshman Sen. Nathan Schlicher, D-Gig Harbor, raised an odd argument against the reform measures: “There’s a time and a place for everything, and the time for policy was during the regular session.” The point, Senate leaders observe, is that the House Democratic leaders have refused to consider the reform measures until the present crunch-time, which forces them to be considered as part of the current budget debate.

Big Problems at L&I

Senate Commerce and Labor Chair Janea Holmquist Newbry, R-Moses Lake.

Senate Commerce and Labor Chair Janea Holmquist Newbry, R-Moses Lake.

One of the most striking things about the Sunday afternoon debate is the scope of the problem at the Department of Labor and Industries that is being cited in the argument for the worker-comp reform measure. Members of the Majority Caucus are now pointing to a $2.2 billion gap that presumably will be made up by higher workers’ compensation taxes on employers and workers, unless the cost of the state’s industrial-insurance program can be reined in. The figures cited on the Senate floor are roughly double the problem statement presented early in the session, when the Senate, in its first important act this year, passed a bill expanding the state’s structured settlement program. Senate Bill 5127 would allow workers age 40 and up to voluntarily settle their long-term disability claims rather than taking pensions, an option that is permitted in 44 other states.

Two years ago, the Legislature allowed such settlements for the first time, but after a knock-down, drag-out battle between business and labor, the Legislature limited the settlements to workers age 55 and over. The program hasn’t achieved the big savings that were anticipated, in part because of the restrictions imposed by the Legislature, and because of problems in the way the program has been carried out: The state Board of Industrial Insurance Appeals has been rejecting settlements negotiated by attorneys on the grounds that it cannot determine whether they are in the best interest of workers, as the law requires.

Early in the session, the argument was that the Department of Labor and Industries needed to raise another $1.1 billion to restore reserves depleted because it adopted tax rates during the recession that did not cover the full cost of the program. The department is planning to raise tax rates to cover the gap, perhaps starting next year, as part of a 10-year catch-up plan. Since those first debates occurred early this year, big gains in state investments have reduced that gap to $720 million. But lest anyone think that the problem is fixing itself, state Sen. Janea Holmquist Newbry, R-Moses Lake, told the Senate Sunday that the earlier figures did not reflect the full extent of the department’s problems.

Holmquist-Newbry noted that the department has adopted a more realistic “discount rate” to reflect lower anticipated investment returns over the next few years. That means another $1 billion must be made up. And she said the department has conceded that the big savings anticipated in 2011 have not materialized, putting it another $400 million behind. Together with the $720 million that needs to be made up for the reserves, those problems add up to a $2.2 billion shortfall. “I want to be clear, Mr. President, if the Legislature fails to act this session, we will be sentencing our employers and their workers to a $2.2 billion tax increase over a decade. And make no mistake, this is a budget issue, because when you talk to your small employers or your large employers across the state, whether they are cutting a check to the Department of Revenue for the business and occupations tax or cutting a check to L&I for the workers’ comp tax, it all comes out of the same pockets.”

And the more money that employers have to pay in taxes, the less money they will have to hire workers, Republicans observed. Democratic opponents argued the labor position, observing that even though workers are permitted the voluntary settlement in other states, they may not make wise choices – thus the prohibition on settlements for younger workers is a wise thing. “We’re going to put a lot of guys and women under a lot of pressure to sign now and take a very small percentage of the amount they are actually due for the nature of their injury,” said Sen. Adam Kline, D-Seattle.

The measure passed 27-18, a somewhat smaller margin than in February, when the measure passed with 30 votes. Two Democrats who voted yes last time were absent, Mark Mullet of Issaquah and Steve Hobbs of Lake Stevens. State Sen. Jim Hargrove, D-Hoquiam, changed his position and voted no.

Two Bills Require Public Votes

New Majority Leader Rodney Tom, D-Bellevue, makes a first move on the Senate floor.

Sen. Rodney Tom, D-Medina, leader of the Senate Majority Coalition Caucus.

The two other reform measures advanced by the Senate now contain referendum clauses forcing a public vote. The first is an education reform bill that would give school principals the right to pick and choose teachers who work at their schools, rather than allowing teacher assignments to be determined by union contracts and seniority. Senate Bill 5242, approved 26-19, puts the Senate on a collision course with the Washington Education Association, the powerful teacher’s union that is a major financier of Democratic legislative campaigns.

“All of the many principals I’ve talked to tell me they welcome accountability, but if they are going to be responsible for the performance of their schools, they need the ability to put the best team possible in their schools,” said Senate Majority Leader Rodney Tom, D-Medina. “This key reform makes a significant step toward accomplishing that goal, while still respecting the due-process rights of teachers.”

Changes adopted by the Senate on the floor Sunday narrow the bill’s impact to low-performing schools that are not making progress, and would require each principal to consult with two faculty members to determine teacher assignments. School district superintendents would have the right to override up to two staff-assignment decisions annually.

"The public does not need to be invoived in this debate": Rosemary McAuliffe, D-Bothell,

“The public does not need to be part of this debate”: Rosemary McAuliffe, D-Bothell,

The most striking change, however, is the clause requiring a public vote – which would place the teacher’s union with the perhaps-uncomfortable decision of having to defend its position before the public as a whole. Sen. Rosemary McAuliffe, D-Bothell, the ranking Democrat on the education committee, said the measure is opposed by lobbying organizations representing teachers and school principals. “There does not need to be a referendum on this bill,” she said. “The public does not need to be part of this debate.”

Spending Limit Measure Boosts Education

Senate Ways and Means Chair Andy Hill, R-Redmond.

Senate Ways and Means Chair Andy Hill, R-Redmond.

The final measure adopted Sunday has gotten only a limited amount of attention during this year’s session, but it could have the most dramatic long-term effect of any of them, in terms of reducing the growth of state government spending and the pressure for future tax increases, while allocating more money for schools. Senate Bill 5895, sponsored by Senate Ways and Means Chairman Andy Hill, would limit the rate of growth of spending on non-education programs to a factor of inflation and population growth. The limit would apply during the 2015-17 and 2017-19 budget cycles; presumably lawmakers will make decisions this year that will do the same thing. Essentially the measure would restrict the growth of social service programs and state-government overhead costs to six percent a biennium. Because state-government revenues are expected to grow at a faster rate, the additional money over that amount could be redirected to K-12 and higher education spending.

The proposal is reminiscent of a similar plan that was outlined by Republican gubernatorial candidate Rob McKenna during last year’s campaign. The key differences are that a public vote would be required, and the limit would apply only during the period when the state is ramping up K-12 education spending to comply with the state Supreme Court’s McCleary decision. But it also might argued that the idea has a long history. The same sort of spending limit was embodied in Initiative 601, passed by Washington voters in 1993. The limit remains on the books, but changes in definitions of state spending have pulled its teeth. The Majority Caucus proposal relaunches the idea in a different way, with a different purpose and a different starting point.

“This allows the state to commit an increasing portion of the budget to fulfill our constitutional and our moral duty to education,” Hill said. “Now this spending control lasts for only seven years to get us through the full wrapup of the McCleary case. And it includes a referendum clause, which allows the voters to have a say in this. This bill finally gets us on a course to once again making education our top budget priority.”

Democrats raised opposition to the proposal, however, noting that it comes at a time when the state is just beginning to recover from recession. The state was forced to retrench in its spending for all programs over the last four years. So to launch the limits now would cramp efforts to spring back. Said Hargrove, “If we went back and started the spending limit in 2008 and 2009, prior to what has happened these last four years, that might be reasonable.”

The argument might be taken as a tacit admission that many Democrats hope to boost spending on other areas of the budget by more than six percent a biennium over the next few years. Said state Sen. Jeannie Darneille, D-Tacoma, “I know we didn’t name this act today, but I would like to name it the ‘Defund the Human Services for the Poor and Disabled Act of 2013.’”