AFTER weeks of wrangling, Gov. Mary Fallin and legislative leaders have reached agreement on major agenda items. An overhaul of Oklahoma's workers' compensation system will occur this year; an income tax cut will not. The tax proposal will be delayed to 2015, when a quarter-point rate cut will occur with a subsequent, smaller rate-shaving possible in 2016. The tax cut's delay will largely allow lawmakers to instead spend money on state Capitol repair.
Those disappointed in the tax cut's delay should note The State Chamber estimates that this workers' comp reform has the potential to save Oklahoma businesses $260 million annually. The quarter-point tax cut would save Oklahomans $136 million. Clearly, workers' comp reform will inject far more money into the private economy than the proposed tax cut, and it will put that money in the hands of employers. In this case, work comp reform provides greater pro-growth, pro-free market impact.
Most notably, the workers' compensation bill will change Oklahoma's adversarial court-based system to an administrative system similar to other states. That alone will reduce costs, but the legislation also addresses other glaring flaws in the current system.
Temporary total disability (TTD) payments will now be capped at 70 percent of the average weekly wage, putting Oklahoma in line with other states. Under current law, an employee can get 100 percent of the average weekly wage. However, since the injured worker doesn't have to pay taxes on TTD payments, the current system effectively gives workers a raise for being injured. That's an incentive for fraud, one reduced by the 70 percent cap. Because that 70 percent payment is also tax-free, workers' take-home pay will typically be equivalent to their pre-injury income.
Under the bill, permanent partial disability (PPD) awards may be deferred if the employee can return to work at the same (or equivalent) job at the same pay. For each week the employee remains on the job, the amount of the deferred PPD award will be gradually reduced until nothing is owed. This will protect workers from retaliatory firings by ensuring they can return to work without losing a PPD award, yet also protect honest employers from the financial harm created by a large and unnecessary award payment.
Under current law, there are individuals who have received multiple PPD awards that, combined, indicate the worker is more than 100 percent disabled. This may sound like an injured worker is more dead than alive, but in reality many have returned to work doing the same job at the same salary — while also getting large workers' comp payments. The proposed reforms simply impose common sense on the system.
House opposition to bond payments led lawmakers to temporarily preserve current income tax rates to allow “pay as you go” spending on Capitol repair. This still leaves other pressing infrastructure needs unaddressed, and the “higher taxes in lieu of bond debt” trade-off may prove less popular than House Republicans expect.
Still, the overall agreement is a good deal for one simple reason: Lawmakers will finally enact major workers' compensation reform. If that's sidelined or watered down, this session will be a failure — no matter what else is accomplished. Workers' comp overhaul has been a pressing need in Oklahoma for years.
Fallin and legislative leaders are to be commended.