Oregon’s Workers’ Compensation System Under Legislative Attack

Making it easier for lawyers to file lawsuits one of the goals of 50-page bill. Also, Cap & Trade, business taxes putting small-business owners in the crosshairs

State Director Anthony Smith reports from Salem on the legislative activity up to March 1

The 40-day mark of the 160-day Oregon Legislative Session has passed, which means we’re officially one-quarter of the way to adjournment. Here’s what’s happened since the last update:

Cap & Trade: Public Hearings around the state have now concluded on House Bill 2020. The Joint Committee on Carbon Reduction traveled to Springfield, Medford, The Dalles, and Bend – and took live streaming testimony from Oregonians in Baker City and Newport. Legislators finally heard from real people – not just lobbyists and environmental activists that swarm the Capitol on a daily basis.

Business Taxes: The Joint Committee on Student Success Subcommittee on Revenue heard revenue-raising proposals from the “Coalition for the Common Good” and the “Revenue Roundtable.” Both groups claim to be coalitions of business and labor organizations but are heavily dominated by union special interests.

Workers’ Compensation: Oregon’s stable and successful Workers’ Compensation system is under attack. Gov. Kate Brown’s office and the Oregon Trial Lawyers Association both have proposals in the works – one would sweep funds from SAIF to pay down PERS and the other would open the system up to a tidal wave of new lawsuits.

Rural Oregon Speaks Out Against Cap & Trade

The Joint Committee on Carbon Reduction heard hours and hours of testimony over the last two weeks from real-life Oregonians – people from sectors of the economy that would be devasted if Oregon adopts a Cap & Trade policy.

All of the partner organizations involved in the Partnership for Oregon Communities did a fantastic job getting the word out about the opportunity to testify – and thousands of Oregonians have taken action by testifying in person or via live-stream, submitting written testimony, and calling or emailing their legislators (including several hundred emails from NFIB members via our Action Alert system!) Thank you for your willingness to engage on this important issue!

The Committee will now return to Salem and get to work on amending the bill. Hopefully, legislators heard enough common-sense testimony from the people who would be most impacted by this legislation that they will realize that their desire to feel good about “doing something” (that will have virtually no impact on global climate change) DOES NOT outweigh the real and known economic pain that will be inflicted on real people trying to earn a living in our state.

Just FYI, NFIB isn’t fighting Cap & Trade at the state level only – we’re also fighting it at the federal level in the courts. You can read more about how NFIB has filed a friend-of-the-court brief in Juliana v. United States – urging dismissal of this controversial lawsuit, which seeks to compel the federal government to more aggressively address climate change.

If you’re still looking for more information on Cap & Trade – and our efforts to defeat it, you can also read my guest column in the March issue of the Salem Business Journal. It’s an online pdf document, so scroll down to page 17.

Business Tax Proposals are Taking Shape

The Coalition for the Common Good presented its plan for $2 billion in new revenue on February 21. This group includes public employee labor unions, such as the Oregon Education Association (OEA), SEIU Local 503, and Oregon AFSCME. Its business members include Nike, although Nike did not show up to testify before the committee. It was clear from CCG’s presentation that their preference is an Ohio-style commercial activities tax, which is a gross receipts tax with a broad tax base and a low rate. This is also the form of consumption-based, business-entity-level tax system that appears most attractive to the co-chairman of the committee, Sen. Mark Hass (D-Beaverton), although rarely does anyone advocating for the tax bring up the fact that when Ohio enacted their CAT in the mid-2000s, it was part of a tax reform package that significantly CUT taxes. The Coalition for the Common Good also made it a point to state that they do not believe that new revenue should be dependent (or even linked) to conversations about containing the out-of-control costs of government. This is in stark contrast to the OBI/Oregon Business Plan alternative that inextricably links new revenue to cost-containment.

The committee then invited a group called the Revenue Roundtable to present its revenue-raising options on February 26. This group is made up of labor unions like AFL-CIO and the Oregon School Employees Association (OSEA), advocacy organizations like the Oregon Center for Public Policy (OCCP) and Tax Fairness Oregon (TFO), and even one business group called the Main Street Alliance (MSA). Numerous other groups participated in the development of the proposal. The policy options presented to the committee mostly included increasing and expanding Oregon’s current business tax structure to increase state revenues – again, there was no emphasis on cost-containment. You can view their full presentation here and a companion document here, but some of the options they presented include raising the corporate income tax rate, increasing the state’s corporate minimum tax (and expanding it to be based on a percentage of gross receipts), and eliminating the state’s preferential pass-through entity tax rates.

NFIB members strongly oppose a new consumption-based, business-entity-level tax. Simply put, if Oregon adopts such a tax (regardless of whether it’s called a GRT, a VAT, or a BAT) based on gross sales in Oregon – and not profit, government will always get its slice of the pie first before anyone else gets paid. And when Oregon inevitably needs more revenue in the future, it will always be more politically expedient to raise tax rates on businesses (whose owners are a political minority) than it would be to raise personal income tax rates (nearly every voter.)

Oregon’s Workers’ Compensation System is Under Attack

If Cap & Trade and $2 billion in new business taxes aren’t scary enough, news broke recently about efforts to undermine Oregon’s workers’ compensation system. Evidently, the Oregon Trial Lawyers Association doesn’t think there are enough work-related injury lawsuits, so they have proposed a 50-page bill that would essentially redefine the term “compensable injury” in Oregon’s workers’ comp statutes.

House Bill 3022 would make drastic changes to Oregon’s workers’ compensation system, including changes to the Mahonia Hall reforms. In 1990, labor and management joined together to reform the workers’ compensation system in Oregon. Before 1990, Oregon’s workers’ compensation system was in crisis: Oregon had the highest frequency of workplace injury claims, third highest medical costs, and sixth highest premium costs. The Mahonia Hall reforms improved worker benefits, established safety programs to reduce injuries, and balanced worker benefits with employer rates.

These reforms have worked for both employers and employees. The emphasis on safety and avoiding the addition of cost to the system resulted in maintaining competitive rates while ensuring excellent employee benefits. Since 1990, claims and premiums have decreased by 70 percent. Employees are having fewer injuries and employers are paying smaller premiums. If changes are made to the fundamentals of the Mahonia Hall reforms, the ramifications would be widespread throughout the workers’ compensation system, and Oregon’s economy as a result.

NFIB and a host of our partner organizations provided testimony to the House Committee on Business and Labor on February 27. We showed up in force, even though advocates for the bill had trouble making it to the 8 a.m. hearing on time (it was a very snowy and icy morning in Salem.)

Just as serious as this threat is, The Oregonian/OregonLive’s Ted Sickinger recently reported that “Gov. Kate Brown is considering selling the state’s workers’ compensation insurance corporation or tapping its substantial capital surplus to hold down future pension costs for school districts around the state, according to documents obtained by The Oregonian/OregonLive under a public records request.” You can read the whole story here. If the Governor sweeps funds from SAIF to pay down the PERS unfunded actuarial liability, it would be a total disaster. First, SAIF’s “surplus” funds are not a true surplus – it’s their operating capital – and a large part of what keeps their workers’ comp premiums low and stable. Second, if the “surplus” was unnecessary, we would be the first ones to cry foul – it’s our members’ money! And finally, stealing money from a responsible and fully-funded, state-owned operation to pay for an irresponsible, unfunded, public pension system is terrible governance. In the private sector, business practices like this would drive a company into bankruptcy in no time. Still, this is a real threat – and we’re taking it very seriously.