Gregoire proposes changes to jobless-insurance rates, benefits program

Businesses would save more than $300 million in unemployment-insurance taxes this year and receive subsidies to return injured employees to light duty under a set of job-creation bills proposed Tuesday by Gov. Chris Gregoire.

Unemployment-insurance tax rates, which ebb and flow with layoffs, will rise by an average 36 percent this year under a statutory formula if no action is taken. Even employers who have not laid off employees face much higher taxes because of how the formula works, officials say.

Washington's $2.5 billion unemployment-insurance fund is "the healthiest trust fund in America," Gregoire said, and should support businesses during this downturn so they can create jobs.

Gregoire said her proposed changes to the formula would result in a lower tax bill for about 90 percent of employers in the state. The Legislature must act before Feb. 8, Gregoire said, to ensure employers can pay the lower rates this year.

"We hope this will allow us to accelerate our growth, put our people back to work again and see our way out of this recession sooner than we thought," she said.

Gregoire also proposes a temporary change to state law that will allow thousands of long-term jobless workers to collect federally funded "extended benefits" through the end of this year.

The state will qualify for $98 million in federal funds also by making changes to state training benefits, she said.

Meanwhile, she proposed significant changes to the workers' compensation system that she said would add up to $720 million in savings over four years.

The state runs the seventh-largest workers' compensation system in the nation, one that covers 2.3 million workers employed by 163,000 employers. Washington is the only state that requires employees to contribute a portion of the cost.

The changes, among other things, would require health-care providers who are rehabilitating injured workers to become credentialed by the state and follow "best practices" in occupational health care.

Injured workers now can see any health-care provider who registers with the state Department of Labor & Industries, which administers the workers' compensation system.

Gregoire's proposal also would offer subsidies to employers who bring injured workers back on light duty. The subsidy, which would not be available to self-insured employers, would replace up to half the wages of the injured worker.

A major cost-containment feature of the proposal is aimed at lowering lifetime pension costs to the workers' compensation system.

Lifetime pensions represent about 8 percent of workers' compensation claims but account for 85 percent of the system's costs, Gregoire said. And the share of these claims that convert to pensions has doubled over the past decade.

Washington's criteria for determining eligibility for pensions considers injury-related impairment and employability. In this recession, a growing number of those eligible for pensions are older than 50 and cannot return to a job in their field.

"Clearly we have a problem in the pension system," Gregoire said. "This is reform we have to do if we're going to continue to have a stable system."

With the goal of reducing pension costs, Gregoire's plan would increase permanent partial disability awards and offer injured workers age 55 and older a lump-sum settlement instead of retraining. Relatively few of those workers are able to find jobs again, state officials say.

Business and labor leaders reacted enthusiastically to Gregoire's proposals but cautioned they were awaiting details in writing.

Kris Tefft, a lobbyist for the Association of Washington Business, said he was concerned the plan didn't clearly delineate occupational diseases to ensure coverage is "truly related to on-the-job conditions."

Jeff Johnson, president of the Washington State Labor Council, said the state could have chosen a different tactic to qualify for the federal funds — providing a small benefit to dependents of jobless workers.

Gregoire said she tried to find middle ground in her proposal. "Nothing you do is loved by everybody."

Sanjay Bhatt: 206-464-3103 or sbhatt@seattletimes.com