State needs more oversight over Retro programs

FINDING the truth in Olympia can be difficult when business as usual is threatened — and a perfect example has been workers' compensation reform, where political attack machines are working overtime to block common-sense reforms that are long overdue.

Senate Bill 6035 would bring oversight and transparency to a state-run program that affects thousands of Washington businesses. The Retrospective Ratings Program (Retro) was created to promote workplace safety by allowing small businesses to pool resources, share risk, and benefit from good worker-safety practices. Contractors and small-business owners who keep workers' compensation claims lower than non-Retro members are able to receive a refund of a portion of their premiums. These refunds are managed by business trade associations.

The need for better oversight of this program became clear last month when the Department of Labor and Industries (L&I) discovered a very expensive accounting error while conducting a review of its Retro program required by the Legislature. A computer programming mistake led L&I to overpay business trade associations by at least $100 million and possibly as much as $225 million since 1994.

We have no way of knowing exactly how these funds were spent; there are no limits on how the associations spend the refunds owed to employer members, and they are not required to provide an accounting of Retro expenses to their members or to the state. We do know that some associations divert substantial workers' compensation funds into uses other than worker safety, such as millions of dollars to political campaigns.

One thing is clear: This program has been operating without proper oversight or disclosure requirements for far too long.

SB 6035, as passed by the Senate, requires L&I to conduct annual actuarial reviews for the next five years to ensure there are no more systematic errors. The bill allows Retro groups to retain a portion of the refund to pay for operational expenses and additional funds for other legal purposes. In turn, Retro groups must report to L&I the amount of money they spend to operate the programs. Additionally, Retro groups must report annually to members how much money is retained from refunds, including expenses not related to the operation of the Retro program.

Since employers are required to pay worker' compensation taxes, those taxes should be managed in a way that is fair, transparent and accountable. There should be controls in place to prevent abuses, and to prevent 15-year, $100 million-plus mistakes — mistakes that come straight out of business members' pockets.

Powerful business interests are working hard to kill this bill in order to avoid government oversight. They have generated an impressive din of disinformation, including the claim that the bill would limit trade associations' political contributions and even destroy the Retro program.

This is simply untrue. The measure places no limits on political contributions, or on the ability of any employer to support any trade association's political campaigns. All it does is give members information and control over the refunds they have earned, if they so choose, at a time when Washington businesses need a break. They can use this money themselves or agree to the retro groups' retention of the money for any legal purpose.

Sending the refunds back to the employers who pay the premiums and guarding against the loss of industrial insurance funds in overpaid refunds are common-sense steps everyone should support. Just as important, it returns the focus to the original purpose of the program — worker safety.

Sen. Jeanne Kohl-Welles (D-Seattle) is chairwoman of the Senate Labor, Commerce & Consumer Protection Committee. Laura Feshbach is the co-owner of Harmatta Construction, Inc.