How to Put and End to this Billion Dollar Boondoggle
The legislature MUST finally pass Retro Reform in 2010
Regardless of the excuses for not passing retro reform in the past, there is no longer any excuse to maintain this corrupt system any more. The information in this report, combined with the information in the August 2009 Wyman report, makes it clear that retro is a huge waste of tax payer money.. perhaps the biggest waste of tax payer money in State history.
Both political parties need to consider whether they want to be associated with a Retro Rip-off Insurance Scam that is costing tax payers at least one billion dollars a year with no public benefit. This is the perfect case of deciding between the public good or corporate greed.
The biggest obstacle to passing retro reform is that both political parties have gotten used to getting millions of dollars a year from the BIAW and other corporations which make hundreds of millions off the Retro program.
But on the other hand, if either party blocks Retro Reform in the 2010 legislative session, they will have to face the wrath of the voters in the 2010 election.
Hopefully, both political parties will agree that there is something more important than millions of dollars in kick backs from retro PAC’’s and that something is protecting the tax payer money from being used for political purposes.
I would hope that there will be a unanimous vote in the House and the Senate to reform retro in the 2010 legislative session.
We have started a website (retroreform.org) to provide the public with information about the need for Retro reform. One of the purposes of the website is to post for the public to view which legislators are supporting Retro Reform and which have not yet committed to supporting reform. The public needs to know who is on the side of retro reform and who is on the side of continuing the use of taxpayer revenue to fund political campaigns.
Given that the retro program has cost working families more than two billion dollars during the past 15 years, we need a retro reform bill that is more than just a slap on the wrist – we need to fix this problem by permanently over-hauling the retro program and the Department of Labor and Industries. We are asking that several steps be taken to stop this misuse of tax payer dollars and to recover, to the greatest extent possible, tax payer dollars currently in the hands of Retro Agencies and their PAC’s:
First, we are asking our Governor to order the Director of the Department of Labor and Industries to require Retro agencies to return the entire $500 million in overpayments that were issued to Retro agencies as a result of miscalculation of the retro to non-retro tax burden by L & I.
Second, we are also asking our Governor to appoint an independent expert to investigate the many issues raised in this report. So that all concerned can have confidence in the fairness of this investigation, such an investigator must not be affiliated with the Governor’s office or with the Attorney General’s Office or with the Department of Labor and Industries. We ask that this investigation begin immediately.
Third,, if it is found that the “Retro Refunds” involve the use of tax payer dollars or the inappropriate use of any other funds outside of the Retro program, we ask that the Retro Refund/Subsidy program be immediately halted until a final determination can be made as to the appropriate distribution of funds.
Fourth, we ask that the accounts and balances of the BIAW, BIAW-MSC, - and all 15 BIAW affiliates - be frozen except for those funds needed to maintain current payroll and other essential administrative costs. The purpose of freezing these accounts is to return to the State treasury as much tax payer dollars as possible.
Fifth, we ask that the accounts and balances of all BIAW affiliated Political Action Committees be frozen except for those funds needed to maintain current payroll and other essential administrative costs. The purpose of freezing these accounts is to return to the State treasury as much tax payer dollars as possible.
Sixth, we ask that any political campaigns, political action committees or other political organizations which have been given contributions from the BIAW or the 15 BIAW affiliates or the 20 BIAW affiliated PAC’s return those contributions directly to the State Treasurer.
We believe that BIAW PAC’s currently have at least one million dollars of tax payer money in their accounts and that millions more are in the accounts of BIAW, BIAW MSC and the 15 BIAW affiliates. We would like it all returned to the State Treasury as soon as possible.
Finally, we ask that a bill be introduced and passed in the 2010 legislative session to prevent any further misuse of tax payer dollars. We need a Retro Reform bill which at a minimum contains the following 7 provisions:
1. An immediate, complete and permanent end to any and all Retro Refunds.
Rather than refunding money to private administrators who have proven they can not be trusted, L & I should keep over-charges as credits towards the next year’s premiums.
In other words, instead of giving refunds, we should lower premiums for the following year.
2. Prohibiting any refunds or credits when the cost of the program (claims plus administration) exceed the income (premiums plus interest). In other words, the State Retro program must become entirely self supporting without diverting any revenue from non-Retro programs or from the State treasury to the Retro program. (Alternately we should consider just abandoning the entire Retro program as a failed billion dollar boondoggle).
3. Clarifying RCW 51.48.260 to make it clear that L & I must require retro groups to fully return all retro subsidies resulting from errors in L & I formulas which are inconsistent with WAC 296-17-90402. In particular, the entire amount of the double coding error ($150 million) and the entire amount of the occupation disease assignment error ($300 million) MUST be returned to the Accident Reserve Account with interest.
4. Prohibiting insurance premiums from being spent on anything other than reasonable administration costs and improving worker safety and requiring a verifiable audit trail for every dollar spent on premiums. This includes the BIAW 1.5% administration fee, of which two-thirds is currently kicked back to local BAIW PAC’s to control local elections. The BIAW would still be free to solicit political contributions from its members. But it would no longer be permitted to spend either tax payer dollars or Retro insurance dollars on political campaigns.
5. Adding a 4th Retro Adjustment at 60 months to capture long term cost differences.
6. Requiring L & I to restore the Contingency Reserve to at least 20% of Basic Plan liabilities within the next 10 years.
7. Greater transparency by L & I and all Retro agencies of income and expenses.
Passing a Retro Reform bill which contains these 7 provisions will save Washington State tax payers over one billion dollars during the next four years. With the economic crisis faced by our State, we can simply no longer afford giving away hundreds of millions of dollars in tax payers subsidies to Retro Insurance agencies.
We also need to pass an education funding bill to put before the voters for approval in the 2010 General Election which will restore school funding in our State to at least the national average (which is where it was before the BIAW corrupted the entire political process in our State).
We also need a Homeowners Warranty bill to prevent families from losing their life savings by purchasing a defective home (also blocked by BIAW).
We also need to pass a campaign finance reform bill which reduces the role that money currently plays in buying votes and buying elections by increasing the role of the Voters Guide Statements. Our Democratic process is placed in jeopardy when the outcome of the election is determined by who can get the most corporate money rather than who will act in the best interest of the voters in their District. Imagine what the 2010 election would look like if the focus could be on solving the problems facing our State rather than filling the airwaves with BIAW-sponsored (and tax payer paid) corporate attack ads. Imagine millions of dollars less being spent on political campaigns and millions of dollars more being spent on our public schools. This is a future we can and should achieve.
The legislature can be forgiven for not passing Retro Reform in 2009 because few outside the BIAW realized that their funds were really coming from tax payer dollars. But the same cannot be said for 2010. There will be a comprehensive Retro Reform bill introduced in the 2010 session. Each and every legislator will have to decide whose side they are on.
This is not about taking money away from builders during the middle of a recession. In fact, Retro Reform should lead to much lower premiums because 20% of their premiums will no longer be diverted for political purposes. This Report is about preventing public tax payer dollars from being used to fund political campaigns. Diversion of tax payer dollars to private political campaigns is a harmful practice which must be stopped. Hopefully, the end of tax payer give aways will lead to the restoration of funding for public schools.
Regards, David Spring M. Ed. Executive Director, Fair School Funding Coalition
P.O. Box 303, North Bend, WA 98045
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About the Fair School Funding Coalition:
We are an independent, non-partisan, non-profit research and educational organization whose goal is to restore school funding in our State to at least the national average.
Questions? Please visit fairschoolfundingcoalition.org for more information.
