Additional workers’ comp reforms could help build up reserves

Bill Weaver, President and CEO of Canyon Creek Cabinet Company, has an op-ed in the Everett Herald about why workers’ compensation reforms passed by the Senate earlier this year are a good idea. As he writes, “continued workers’ compensation reform is a key element of our state’s economic competitiveness.”


To compete worldwide, we depend upon a stable and predictable business climate. Business costs like workers’ compensation matter.

Simply put, without help from Olympia, employers across the state can bet on increased workers’ comp taxes over the next several years as the Department of Labor & Industries starts to dig out from the recession and impose surcharges to rebuild its diminished surplus.

The op-ed includes a good overview of the reserves situation:

At the start of this year, L&I faced a $1.1 billion shortfall in its reserves. Furthermore, the agency has understated its long-term liabilities by overstating its anticipated investment returns, adding another $1.1 billion to the shortfall. The agency announced plans to cover this $2.2 billion gap by adding a surcharge on workers’ comp taxes over the next 10 years, a move primarily targeted at employers. To recover $2.2 billion over 10 years, that would be an average of $220 million in tax surcharges per year.

Last week, L&I shared some welcome news that, owing to some strong gains in its investment portfolio over the last two quarters, its reserve has grown somewhat, at least on paper. It is now about $720 million short, not taking into account the $1.1 billion in understated liabilities. This combined $1.82 billion deficit still pencils out to an average $182 million a year for 10 years in tax surcharges unless the Legislature steps in.

(For more information on the reform bills passed by the Senate this year, please read our February policy brief.)