OLYMPIA — Democratic lawmakers are pushing legislation that would take a multimillion-dollar bite out of one of their party's biggest political enemies — the Building Industry Association of Washington.

The move sets up a bitter showdown between the BIAW, a powerful conservative force, and the liberal Washington State Labor Council, which has been trying for years to clip the association's wings.

And it comes at a time when the home-builders group is at the forefront of the state's biggest political controversy, temporarily dedicating its operations to unseating Democratic Gov. Christine Gregoire.

Rep. Cary Condotta of Wenatchee, the ranking Republican on the Commerce and Labor Committee, called the bill, which would reduce the BIAW's income from workers'-compensation refunds, a "blatant political attack" on one of the GOP's biggest supporters. And he called the timing of the legislation "very suspect."

The bill's chief sponsor, Rep. Bill Fromhold of Vancouver, said the measure is aimed at numerous groups, not just the BIAW, and denied it is politically motivated.

In recent years, the BIAW has spent millions of dollars pushing its causes and trying to elect Republican candidates.

The group is one of the nation's largest home-builders associations. It gets some money from membership dues and from a health-insurance program it manages for its members. But the group gets the bulk of its income through the state's workers'-compensation system.

State law allows businesses to form workers'-compensation pools to share insurance risks. The BIAW, which operates the state's largest such pool, gets refunds from the state every year its premiums exceed claims.

The BIAW keeps 20 percent of the refunds and gives the rest to members who participate in its workers'-comp pool. The association's take in 2004 was more than $5 million, half of which went to its 15 local chapters.

Under the legislation introduced this week, House Bill 1070, groups like the BIAW could keep no more than 10 percent of their refunds. In other words, the BIAW's income would be cut in half.

The Washington Farm Bureau, which runs the state's second-biggest workers'-comp pool, also would take a big hit. Like the BIAW, the Farm Bureau retains 20 percent of its members' refunds.

There are nearly 60 groups that run workers'-comp pools, covering more than 16,000 employers statewide. The state doesn't track how much each association keeps, but some say they take less than 20 percent of their refunds and others charge members a fee up front.

The BIAW plows much of its refund money into business operations such as marketing, claims management and worker-safety programs. But the group has also been putting more and more into politics every election year.

The group spent more than $1 million on Republican candidates during last fall's election. It was one of Dino Rossi's biggest backers in his bid for governor, and ran scathing attack ads against Gregoire. It was also instrumental in helping elect Rob McKenna as attorney general and Jim Johnson to the state Supreme Court.

The BIAW has had other big victories in recent years, including a 2003 initiative that repealed the state's workplace ergonomics rule.

For the past several weeks, Tom McCabe, the association's executive vice president, has assigned most of his staff to help Rossi and the state Republican Party in their legal effort to overturn Gregoire's 129-vote victory. BIAW staffers, for instance, have been sifting through criminal records to find examples of felons who voted illegally.

McCabe insists there's nothing wrong with how the BIAW uses its refund money. "Does Boeing spend some of its profits on politics?" he asked.

Others disagree.

House Commerce and Labor Chairman Steve Conway, D-Tacoma, said the BIAW's 20 percent take is exorbitant, and he contends the workers'-comp program was never intended to be a major source of profit for industry groups like the BIAW. And he thinks it's wrong for them to be pouring those profits into political causes.

"It's a little odd that businesses will complain about workers'-comp costs and some of these organizations are funding millions for political programs," said Conway, a co-sponsor of the bill and one of labor's biggest allies in Olympia.

Using the workers'-compensation system "as a cash cow for their political ambitions is flat out corrupt and should be stopped," said Democratic Sen. Karen Keiser of Kent, who works as communication director for the Labor Council when the Legislature is not in session.

She said she had no doubt the Democrat-controlled House and Senate would agree to legislation to end the program and that Gregoire would sign it.

Gregoire said this week she hadn't even heard about the bill and would need to review it before taking a position.

The Labor Council for years has been trying to stop the BIAW from using the workers'-comp refund money for political purposes.

"They're just mad because we compete with them in the political arena," BIAW spokesman Erin Shannon said.

In 1997, the council filed a complaint with the Public Disclosure Commission (PDC), the state's campaign-finance watchdog, claiming the BIAW was breaking state law by using part of its workers'-compensation rebates for political purposes. But the PDC disagreed and cleared the BIAW.

A few years later, the Locke administration adopted a rule that included a 10 percent cap similar to the one in Fromhold's bill. But the BIAW sued and a state judge overturned the rule change.

Fromhold said he introduced the bill because he has received numerous complaints from members of workers'-comp insurance pools who were upset over how their refund money was being spent.

He didn't offer any names but said some of the complaints have come from home builders.

"That's a bunch of baloney, and he knows it," said Shannon. "I challenge him to come up with more than one BIAW member unhappy with our program."

Seattle Times reporters David Postman and J. Martin McOmber contributed to this story.

Ralph Thomas: 360-943-9882 or rthomas@seattletimes.com