Capital Goods - November 2011

Reworking it out
By Scott Mooneyham

Republicans and Democrats in the General Assembly were at each other’s throats most of the past session. Republicans were intent on rewriting years of public policy in just a few months. Democrats chafed at no longer being in charge, but their irritation didn’t matter much: Major changes to laws affecting medical malpractice, abortion and municipal annexation rolled through the legislature over their loud objection.

The Democratic governor and Republican legislature have been going at it over unemployment. When joblessness in the state again edged above 10% in August, Gov. Beverly Perdue and GOP legislative leaders flung blame each other’s way. She attributed the rising numbers to Republican budget cuts, noting that private-sector jobs increased during the month. “The severe cuts to education, including teacher positions, inflicted by the Republican legislature are taking their toll on our classrooms and our workforce,” she said. Senate leader Phil Berger, an Eden Republican, said Perdue offered up more of the same thing that put the state “into a financial ditch.”

Reworking state workers’ compensation laws — which require employers to pay or provide insurance for lost wages and medical expenses of employees injured on the job — seemed certain to follow the same script. Earlier attempts to retool them had not gotten far. As the latest effort began, trial lawyers and other opponents trying to derail the legislation bused an army of injured workers to Raleigh. They packed hearings. They protested outside. But by the time the legislation reached the House and Senate floors, both parties lined up behind it. Maybe that’s why the most significant changes to workers’ comp laws in decades received little press by the time lawmakers packed up to go home.

Several factors had turned a contentious issue into a consensus bill. Democratic Gov. Beverly Perdue let legislators and interest groups know she wanted to see a compromise bill pass, and her staff got involved in negotiations early on. The primary sponsor, Republican Rep. Dale Folwell of Winston-Salem, didn’t ram a one-sided, business-only bill down throats of the opposition; he allowed trial lawyers and organized labor to have a say. Finally, opponents were willing to negotiate because they knew a bill, in one shape or another, was going to pass: The Republican leadership was committed and had the votes.

“The opposition knew that if folks didn’t engage in some good-faith negotiations, they ran the risk of not having a role,” says Sen. Doug Berger, a Franklin County Democrat who for a decade had resolved workers’ comp disputes as a member of the state Industrial Commission. The resulting legislation changes the duration of benefits. Going forward, an injured worker found to be temporarily but totally disabled can receive benefits for 500 weeks, slightly less than 10 years. Under the old law, benefits could continue indefinitely. The changes also mean that someone who is partially disabled can receive less money for working in a less-demanding job.

Labor won concessions on death and partial-disability benefits. Death benefits increase, and the duration of partial-disability benefits has been extended to match the 500-week benefit limit for total-disability benefits. Folwell says not putting limits on temporary-disability payments worked against the state when manufacturers contemplated expansion. “The workers’ compensation system was broken. It’s one of the invisible costs of doing business in North Carolina. It all goes back to making workers’ compensation what it was intended to be.”

Folwell may have convinced his legislative colleagues that the system required change and received good marks from Democrats and Republicans for an inclusive process in what is often a roiling sea of petty partisanship. But that didn’t mean it was a love feast. Greensboro lawyer Dan Deuterman spent more than $100,000 on TV and radio ads, fliers and billboards to try to thwart the legislation. Berger, part of a Senate that voted unanimously for it, says not everyone was certain the legislation was needed. Workers’ comp claims are lower than in surrounding states, and overall cost is about on par with them. Opponents contended that the real beneficiaries will be insurers.

Folwell’s response: Many of the largest employers are self-insured. The biggest, the state of North Carolina and its taxpayers, may reap the greatest savings, which financial analysts at the General Assembly estimate might eventually reach $2 million a year. “Eventually” is the key word, though. The benefits of the legislation won’t be known for another decade. The changes don’t affect anyone with a claim before the law went into effect Oct. 1. Analysts speculate that they might lead to quicker, less costly settlements when workers file claims, but that’s speculation. Significant savings won’t be seen until that 10-year limit on benefits kicks in a decade from now.

Folwell predicts another benefit, one that may prove even harder to quantify: job growth. No longer can economic developers in other states wield North Carolina’s open-ended benefits as a weapon in the battle to land new industry. There’s another possible benefit: The process by which legislators worked out workers’ comp reform, opting for effectiveness over partisan advantage, might serve as a model for how divided government in this state should work..

Scott Mooneyham is the editor of The Insider, www.ncinsider.com.