Article by Erik Smith. Published on Wednesday, February 17, 2010 EST.

Business, Labor Spar Over Expansion of Benefits – Compromise Plan Brings Back-Room Battle

 


By Erik Smith

Staff writer/ Washington State Wire

OLYMPIA, Feb. 17 – Efforts to overhaul Washington’s unemployment-insurance laws collapsed in the final hour Tuesday as business and labor interests found no ground for compromise, and House Democrats decided not to force a deal.

            That means a business-backed bill designed to reduce sharp spikes in unemployment insurance costs is dead for the year. Barring one of the miraculous resurrections that sometimes occur in the state Legislature, so are proposals favored by labor interests that would have expanded unemployment benefits and permanently increased costs to employers.

            Labor interests admitted defeat Tuesday as a 5 p.m. deadline for bill-passage ticked by in the state House and Senate. “As far as we know, the UI bills are dead for the year,” said Kathy Cummings, spokeswoman for the Washington State Labor Council. “The Democrats didn’t want to step up to the plate for a modest proposal that would have helped both business and labor.”

            Meanwhile, business interests were cheering. They dodged a bullet, they said.

            Behind it all is the fact that unemployment insurance rates have increased dramatically this year because unemployment spiked to record levels last year. The underlying tax rate rose about a third, but many businesses, particularly those that laid off workers, have seen much higher increases – some of them on the order of 1,000 percent.

            Drama Plays Out in House Caucus

            The central play of the drama took place in a meeting of the House Democratic Caucus just off the House floor on Monday. For two hours Democrats met behind closed doors to debate a labor plan that would have tied together all of the year’s big unemployment proposals. Reporters are not allowed in the caucus meetings, but reports from members indicated that some lawmakers brought along copies of recent unemployment-insurance tax bills that demonstrated the severity of this year’s increases. Final decision was to reject the plan.

            Labor interests kept pressing members for action right up until the Tuesday deadline, but conceded defeat for 2010 as the clock struck five. “We’ll be back, year after year after year,” Cummings said.

            Labor had proposed a package deal to the governor’s office and Democrats in the House and Senate. In return for the business-backed bill on unemployment-tax “smoothing,” labor wanted three items:

n      Extension of unemployment benefits to workers seeking part-time employment,

n      Extension of unemployment benefits to workers who quit voluntarily in cases  of duress,

n      And an increase in the “multiplier” that is used to calculate unemployment taxes, from 3.85 percent to 4 percent.

Business Willing to Give Up on UI Proposal

Business lobbying groups mounted a full-bore effort against the plan. Making it easier was the fact that business was not united on the unemployment tax-smoothing concept. That proposal, sponsored in the House by Cary Condotta, R-Wenatchee, and in the Senate by Janea Holmquist, R-Moses Lake, would have deferred some increases in unemployment taxes into the future, when employers might presumably be better able to handle them.

Though the proposal was favored by small-business lobbying organizations and groups representing contractors, it was opposed by organizations representing the state’s larger businesses. They maintained it might cause temporary cash-flow problems in the state’s unemployment insurance trust fund.

On second thought, maybe it wasn’t such a strong idea, Condotta said – it didn’t reduce taxes, only deferred them – and at any rate, labor’s price was too high.

“Evidently there just aren’t enough votes to expand the system, which I’m thrilled to hear,” he said.

In the Senate, Holmquist said she was saddened to see the “smoothing” idea shot down. Business saw a $352 million increase in unemployment taxes this year, and the increases scheduled for next year are even higher – some $690 million, she said. Putting off some of the increase into better years might have reduced the strain on business, she said.

But the idea of permanent increases in unemployment benefits is just as distasteful, she said. “I don’t think employers and workers can afford increases in taxes right now,” she said.

Meanwhile, out in the Capitol-building lobby, representatives of even those business groups that supported the “smoothing” measure said labor offered a trade-off they couldn’t accept. Explained Amy Brackenbury, lobbyist for the Building Industry Association of Washington, “Business said, ‘no way!’ “

            Will be Back

Steve Conway, D-Seattle, chairman of the House Commerce and Labor Committee, an advocate of the expansion proposals, said they will resurface again, most likely next year. Extending unemployment benefits to workers seeking part-time jobs will qualify the state for $98 million in one-time stimulus funds. The federal government is offering the money to states that “modernize” their unemployment insurance rules. It would be a shame to forego the money, Conway maintains, and next year will be the last chance for Washington to qualify.

State estimates indicate that the cost to business would be $36 million every two years.

Meanwhile, Conway has argued that the voluntary-quit extension is designed to protect workers who feel compelled to quit because of abusive workplace conditions. That would double the cost to $72 million every two years.

Conway is quick to point out that business is measuring this year’s increase against 2008 rates, which were at a historic low because of the boom times of the previous few years.

“Both these bills had quite a bit of discussion, and there was no consensus on any approach,” he said Tuesday just before the deadline. “So we’ve kind of held unemployment insurance today in the House and Senate. There is quite a deal of concern about the impact of rising unemployment taxes, and business has been lobbying hard on it.”

Though Tuesday marked the deadline for bills to be passed by the House and Senate, there is an exemption for bills that are considered “necessary to implement the budget.” It is not clear whether any of this year’s unemployment insurance legislation will qualify.

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.