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Home / Washington Business - May/June 2005 / Win Some, Lose Some: Savvy Lobbying and Targeted Ad Campaign Helped Salvage 2005 Session |
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Win Some, Lose Some: Savvy Lobbying and Targeted Ad Campaign Helped Salvage 2005 Session |
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Written On: May/June 2005 |
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Written By: by Charles Henry Thomas and Paul Schlienz |
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Editor’s Note: As Washington Business Magazine went to press, the 2005 Legislature adjourned. The following is an overview of the session’s impact on AWB members and our state’s competitiveness. A complete analysis by our lobbying team will be published in the next issue along with our annual legislative voting record and report card on the governor.
The 2005 legislative session had its ups and downs, wins and losses for employers. It was a salvage operation for the Association of Washington Business to plug leaks in our competitiveness and keep our fragile economy afloat while navigating some rather heavy political seas.
"Our staff did a great job," AWB President Don Brunell said. "This could have easily been a rerun of 1993 if not for their hard work."
"We held our own, killing some bad business legislation while passing some good bills which will benefit our members," Gary Chandler, AWB vice president of governmental affairs and chief lobbyist, said. "Now we have to focus on getting ready for 2006 because many of these bad bills will be back."
"We approached this session knowing the political odds were stacked against employers," Brunell said.
For the first time since 1993, Democrats controlled both houses of the Legislature and governor’s office and faced a lengthy list of "wants" from unions, environmentalists and others who invested heavily in the gubernatorial and legislative races last fall.
A Large List of Costly Wants
The "wants" all came with heavy price tags, and since employers pay 54 percent of state and local taxes, including workers’ comp and unemployment, the fear was those added taxes, fees and program costs would come directly from struggling employers’ pockets. In the end there were no general B&O, sales or property tax increases, but other taxes went up.
If you smoke cigarettes, you pay 60 cents more a pack or drive across the state line or to a tribal smoke shop to make your purchase. Hard liquor increased by $1.33 per liter, and lawmakers, prodded by the governor, reinstated the "death tax," a revenue source the state’s Supreme Court tossed out in January.
"The estate tax sends out a terrible message to small companies, entrepreneurs and family businesses that somehow your death should trigger a potential dismantling of your business," Sen. Tim Sheldon, D-Potlatch, said. "It’s very discouraging for a small businessperson to see that looming on the horizon."
"We pushed the governor and Legislature to follow the same priorities of government approach used in 2003," Brunell said. "We wanted them to look at expenditures and available revenues to balance the state’s budget, but that didn’t happen. Now we have a budget built on soft ground."
Lawmakers and Gov. Christine Gregoire also kicked many of the problems ahead, betting a growing economy will generate enough tax revenue to cover a 12 percent hike in state funding and plug a $200 million hole in the state’s unemployment trust fund created by a union-backed bill to reverse key cost-containment provisions incorporated in the 2003 reforms.
The biggest cost driver in the state budget is health care, yet the Legislature and governor did little to control its skyrocketing costs. A bill that would have allowed insurance companies to offer stripped-down, non-mandate coverage did not pass. Neither did a measure that would have allowed state employees to open health savings accounts, an innovative and cost-cutting health insurance option that is increasing in popularity.
"The bottom line is unless they get their arms around health care costs, there never will be enough money to adequately fund education in our state," Brunell said. "Unfortunately, they decided that is a problem for another day."
Even the governor admitted publicly the budget will be difficult to sustain and the day of reckoning may be less than two years away if increasing energy costs and rising interest rates slow job growth and the economy.
Ad Campaign Focused on Fragile Economic Recovery
While the governor and legislators in both parties said they understood how fragile and tenuous our state’s recovering economy is, AWB, the Washington Roundtable and the Coalition of Washington Business Organizations raised more than $300,000 to fund a radio, newspaper and direct mail campaign designed to remind them of that fact and to avoid more legislatively imposed costs of doing business. More than 300 AWB members gave more than $150,000 for that effort, which the Association’s Executive Committee authorized to continue during its planning meeting in April.
"I’m convinced that the campaign and our strong grassroots effort had a lot to do with killing anti-competitiveness legislation," Brunell said. "We positioned ourselves much better than we did in 1993 when we had $1.3 billion in new taxes, fees and costs added to business."
When the final gavel fell adjourning the session, employers were not hit with a $680 million B&O increase like they were in 1993. Nevertheless the Legislature raised taxes by $500 million to balance the $26 billion state operating budget.
AWB opposed those taxes, believing the added $740 million boost in the state’s revenue forecast in March could cover state expenses and still add money for needed education and workforce programs—if the Legislature and governor would put some cost containment measures in place on health care. They didn’t and hiked state spending by a whopping 12 percent.
Transportation Funding Approved
Lawmakers ended the session by passing an $8.5 billion transportation package that includes a 9.5-cent gas tax implemented over four years — the biggest increase in state history. The package raises the gas tax by 3 cents a gallon the first year, 3 cents the second year, 2 cents the third year and 1.5 cents in the fourth. It includes $2 billion for the Alaskan Way Viaduct in Seattle, $972 million for Interstate 405 through Bellevue, and $500 million for replacing the Highway 520 Bridge over Lake Washington.
"While AWB members supported increased funding for transportation, our members were all over the map on the amount, the revenue sources and what projects would be on the list," Brunell added. "Some members, primarily from the Puget Sound area, wanted a 15-cent gas tax, while many from eastern and rural Washington believed that a nickel a gallon was the upper limit."
Workers’ Comp Unresolved
While business has pressed for reform of Washington’s costly workers’ compensation system for some time, little legislative progress was made on this front in 2005.
Hanging over the workers’ compensation issue are the effects of two court decisions—Cockle and Avundes—which changed the historic way benefits are calculated. As a result of these decisions, significant costs were added to the system, complicating claims processing. Currently, numerous other appeals are pending in the court system, appeals which could potentially further expand how benefits are calculated for workers’ comp.
"Not getting a definition of wages was a big missed opportunity in this legislative session because these court cases keep adding pensions and other benefits to the package," Rep. Gary Condotta, R-East Wenatchee, commented. "Every time they [the courts] find that there’s an additional benefit, it adds to the cost of the program."
Though the overall reform of workers’ comp was essentially untouched this session, there were a few bright spots. A number of bills relating to labor and employment law—all supported by AWB or modified at AWB’s insistence—were passed this session. According to AWB Governmental Affairs Director Amber Carter, "Nothing on workers’ comp got through this year unless we supported it."
Perhaps the most significant legislation in this field that passed was HB 1856, which requires independent financial audits of the workers’ compensation system by the state auditor. This bill will increase taxpayer confidence in the workers’ comp system.
Other legislation that passed from AWB’s proactive agenda includes HB 1918, which requires L&I to provide greater notification to employers about workers’ comp claims being filed. Gov. Gregoire signed this into law near the end of the session. AWB firmly believes this legislation will increase communication between the employer, employee, provider and the department, which should in turn lead to increased return-to-work opportunities for the employee and a decrease in litigation because the employer is brought into the process earlier.
Unemployment Reversal Disappointing
One of the key employer objectives was to keep the 2003 unemployment insurance reforms moving forward. Those reforms were still being phased in when the unions, with the backing of Gov. Gregoire and Speaker of the House Frank Chopp, D-Seattle, blew a big hole in them.
The core of the reforms was four-quarter averaging, which just phased in this year. The 2005 bill changed the unemployment benefit calculations back to the two highest quarters, much to the advantage of seasonal workers in agriculture, food processing, fishing and construction. The pressure is off to find year-round work and avoid unemployment.
"With the unemployment system going backwards, if anybody is looking to make any kind of investment in this state, they’re going to have to be very nervous about the direction where we’re headed," Condotta said. "We’re not showing consistent support for business."
Washington's unemployment insurance costs were 317 percent higher than the national average at the time of the reforms. The immediate goal in 2003 was to cut this to 200 percent within a few years. But even that target may be in jeopardy if the unions simply lobby to remove a sunset provision and allow the 2005 changes to become permanent.
The legislation did create a study group for which AWB is to provide the employer representatives. The group is scheduled to complete its work by next January. Meanwhile, seasonal workers get a benefit hike which, according to Employment Security Dept. estimates, will cost the trust fund more than $200 million—money employers will have to make up in the form of higher premiums if the economy goes sour and unemployment claims jump like they did in 2003 and 2004.
AWB was able to keep other components of the reform, including the elimination of $65 million in benefits for people who voluntarily left their jobs, tightening of definitions for misconduct, refining job-search requirements, fraud prevention, and reducing the duration of the benefits from 30 weeks to 26 weeks.
Reference Checks Legislation Passes
On the positive side, AWB successfully lobbied to pass legislation which grants immunity from lawsuits to employers who give good-faith job references on current or former employees.
While AWB lost on efforts to kill the costly California auto emissions bill, our lobbying team managed to amend the green-buildings standard bill to make it palatable as well as stop other bad environmental legislation from passing.
AWB also managed to hold off onerous paid family-leave, pay-or-play health insurance, workers’ comp retrospective rating, and limited ergonomic standards—all issues which will be back in 2006 when the Legislature convenes.
Last year the Legislature reduced research and development tax incentives for many Washington employers in amounts up to and in some cases exceeding 70 percent. AWB successfully pushed to return the tax incentive rate to the higher 1.5 percent.
"We need to strengthen our research and development tax incentives as a way to encourage people to invest in businesses in this state," House Minority Leader Rep. Bruce Chandler, R-Granger, observed.
Summing Up
Many in the Legislature and in the business community are concerned that this session has made Washington less competitive with neighboring states like Idaho, which offers businesses lower regulatory costs, lower minimum wages, no B&O tax and a generally more-balanced tax structure.
"The state should broaden the tax base by creating more taxpayers, creating more small businesses, and allowing more businesses to expand and grow," Sheldon said. "We need to broaden the tax base instead of increasing taxes on businesses."
"In the final analysis, the result was not as bad as 1993, but not as good as 2003," Brunell concluded. "We made some progress, but we have a great deal of work to do."
"Meanwhile, employers across the state need to keep driving the message home that costs matter, and businesses and jobs will leave Washington if our state’s price to operate continues to climb."
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