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AOI comments on Workers’ Comp Rate Hike

October 5, 2010

AOI to Comment on Proposal to Hike Employer Workers’ Comp Assessment Rates
By J.L. Wilson
Associated Oregon Industries
Oregon’s largest business advocate

On September 8, the Department of Consumer and Business Services (DCBS) announced that workers’ comp premiums would fall by 1.8% for Oregon employers in 2011. But the Department coupled this welcome news with a proposal that would increase the assessment that employers pay on their workers’ comp premiums from 4.6% to 6.4% – a 39% increase. This assessment funds the Workers’ Comp Division which manages Oregon’s workers’ comp system.

It is AOI’s understanding that the Department has already cut its budget from $69M to $55M. Nearly 20% of Department employees have been laid off.  Because of shrinking payrolls and lower workers’ comp rates, the bottom is expected to drop out on revenue in 2011 – to less than $40M.  In addition, the Department must bear the additional costs of PERS shortfalls as well as new pay raises for unionized employees.  The Department is not responsible for either of these added costs – but must incur the burden of paying for them nonetheless.

The increase in the workers’ comp assessment rate is projected to bring $17M of new revenue to the Department and allow it to maintain current services.  This will nearly offset the $17.5M in cost savings that employers will gain statewide as a result of the lower premium rates for 2011. No new employees or programs will be added back to the Department as a result of the assessment increase.

The Department announced that it would seek employer comments on the proposed assessment increase. AOI will offer the following comments:

1. AOI expects that overall net workers’ comp costs will not increase for Oregon employers in 2011. We expect that premium savings for 2011 will equal or exceed the cost of the assessment increase.

2. We suggest that as part of the process by which assessments are increased and proposed, in the future the Department include broader business input before publishing. This will help to prevent the impression of a decision having already been made prior to employer input. We would appreciate sufficient time to analyze any proposals, especially those that impact employer costs, to afford AOI and other business groups the opportunity for meaningful feedback, discussion and perhaps negotiation prior to decisions made by the Department.

3. It is our understanding that the Department will be able to operate with the proposed 6.4% rate for several years. Any rate hikes in the near future will be of concern to Oregon employers.

4. It is AOI’s expectation that the Department will join with AOI in actively working against any diversions or “sweeps” of Department reserves by the Oregon legislature.  It is our understanding that the Department currently has approximately $29M in reserves. These employer-paid funds are dedicated and are not intended for the legislature’s use for government expenditures unrelated to the management of the workers’ comp system.

AOI asks that the department consider an approach that would scale back the proposed assessment increase by an amount commensurate with the increased PERS costs and new pay raises for employees. These particular added costs should be backfilled with current PAOA reserves at this time. Oregon employers should not be asked to pay directly for these added labor costs at a time when employers are struggling to maintain their own payrolls. We believe that current reserves can accommodate these costs until such a time when employer payrolls increase and reserves can be rebuilt.

  
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