Still smiling? The BIAW's Tom McCabe (left), pictured here in 1997, may see his funds cut.
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One of the richest and most powerful conservative activist groups in the state could soon see its main source of cash cut in half.
The Building Industry Association of Washington, which represents companies involved in home construction, is well-known as one of the most aggressive and blunt-speaking trade groups in Olympia. ("Make Welfare as Hard to Get as a Building Permit" is just one BIAW slogan.) To further its anti-growth management, anti-regulation agenda, the association is also one of the state's biggest campaign spenders, devoting hundreds of thousands of dollars to its chosen candidates—virtually all Republican—for the state legislature.
But now, the BIAW is facing a major threat to its power, thanks to an arcane bit of insurance law that is slated to be changed at the end of this month. Washington's Department of Labor and Industries is preparing to alter the rules governing workers' compensation insurance so that the BIAW would no longer be able to pocket a sizable chunk of the refund that its members earn on their workers' comp insurance premiums.
Those refunds are the primary contributor to BIAW's political war chest, as Eastsideweek first reported in a cover story about the BIAW three years ago. Employers are required to carry workers' comp insurance (it covers the cost of injuries on the job), and businesses that pool their premiums together can participate in a "retrospective rating" program, whereby the state returns to the group whatever premium money is left after injury claims have been paid.
The BIAW runs by far the largest such "retro" group in the state, pooling nearly $100 million in premiums from some 4,500 contractors, roofers, landscapers, and the like. The opportunity to participate in the "retro" program is one of the primary inducements for home-builders to join the BIAW and its local affiliates. "This program drives our membership," says the BIAW newsletter.
While the BIAW charges participants a relatively low up front fee—just 1.5 percent of their premiums—it takes an unusually large cut from the back-end: 20 percent of the state's annual premium rebate is pocketed by the trade group. This ain't chump change either. Over the last five years, the BIAW has netted more than $20 million in retro refund money—$6 million last year alone. Half that money stays with BIAW headquarters in Olympia; the other half goes to local affiliates, such as the Master Builders Association of King and Snohomish Counties. All of it is available, once expenses are covered, for political action.
Calling the BIAW fees "excessive," Labor and Industries director Gary Moore recently proposed a new rule that would require retro associations to distribute at least 90 percent of the rebate money back to the individual employers. While conceding that he has received no complaints from BIAW companies, Moore argues that his agency has a duty to ensure that fees are "reasonable and appropriate." The ultimate purpose, he says, is "to encourage employers to have safer workplaces." In order to boost that incentive, he says, "the bulk of the rebate money should go back to the individual employers who pay the premiums in the first place."
The numbers suggest Moore may have a point. Last year, the BIAW group received an overall rebate of 31 percent of its premiums—considerably less than what other large construction groups received. This indicates that the BIAW companies had more costly injury claims. However, it's also the case that BIAW members tend to be small businesses, for whom workers' comp claims are often more expensive as a rule.
BIAW executive vice president Tom McCabe did not return calls seeking comment. But Sam Anderson, head of the Master Builders Association of King and Snohomish Counties, says he doesn't think Moore has any right to decide what the builders—who run their program through a for-profit subsidiary—should charge their retro participants. "It's beyond me why the state has bothered to stick their nose in the middle of this issue," Anderson says. "If they want to talk about safety factors, things like that, that's in their purview. But if an employer chooses to give a percentage of that rebate to the association, where does L&I get in this?"
It may be legitimate to wonder just how aware participating employers are of the 20 percent retention: It is not mentioned in BIAW marketing materials—which say "It's time YOU kept the cash" and mention only the 1.5 percent enrollment fee—but is disclosed in the program contract. "Believe me, these people read contracts," said the BIAW's McCabe in a 1997 interview on the subject. The growing number of participants in BIAW's program would seem to suggest that employers are satisfied.
The public comment period on Moore's proposal ends this week, and Moore says he will make a decision on the rule change by the end of this month. The BIAW has mobilized its members, who have sent letters of opposition to both L&I and state legislators. Indeed it seems likely that the people who will be most relieved if the proposal goes through are not plumbers and tree toppers, but the state legislators who have felt the force of BIAW's political wrath in the past.
