Archive for October 2014

New Study: California Has Highest Workers’ Compensation Rates

October 25, 2014

Oct. 24, 2014: California businesses concerned about labor-related costs are learning that their state now has the most expensive workers’ unemployment rates in the nation. That finding is despite reforms that were designed to lower costs from when the state also had the worst ranking in the past. The high-cost states following behind California are Connecticut, New Jersey, New York and Alaska, in that order.

The least expensive states were North Dakota, Indiana, Arkansas, Virginia and Massachusetts.

Workers’ Compensation Premium Index Rates

2014 Workers' Compensation Premium Index Rates

The source of the rankings (and the map) is a study issued by the Oregon Department of Consumer and Business Services, which updates such work every two years and provides the findings to the Oregon legislature. The agency has been conducting such studies since 1986.

According to the Los Angeles Daily News, Jerry Azevedo, a spokesman for the California-based Workers’ Compensation Action Network, said:

“California’s workers’ compensation system is incredibly inefficient. It does not do a good job of achieving its goal. For as much as employers pay, they don’t get a lot out of it. … You would think that since California has the highest cost system that we’d also have the most generous benefits — but we don’t. We plow a lot of money into the system but too little of it ends up in the hands of injured workers.”

Much of the money goes to lawyers who dispute medical treatments, while other money goes to commissions paid to brokers and various administrative costs, Azevedo said. The Daily News reported that California’s system is experiencing more claims — particularly in the Los Angeles region. See more of the story at  California ranks highest for workers’ compensation costs.

The researchers provided a comparative column that shows at a glance how far up or down the scale a state has moved since the last report in 2012, which is shown below.

Workers’ Compensation Premium Rate Ranking
2014 2012   Index Percent of Effective
Ranking Ranking State Rate study median Date
1 3 California 3.48 188% 01/01/14
2 2 Connecticut 2.87 155% 01/01/14
3 7 New Jersey 2.82 152% 01/01/14
4 5 New York 2.75 148% 01/01/14
5 1 Alaska 2.68 145% 01/01/14
6 6 Oklahoma 2.55 137% (A)
7 4 Illinois 2.35 127% 01/01/14
8 14 Vermont 2.33 125% 04/01/13
9 30 Delaware 2.31 125% 12/01/13
10 15 Louisiana 2.23 120% 01/01/14
11 8 Montana 2.21 119% 07/01/13
12 9 New Hampshire 2.18 118% 01/01/14
13 10 Maine 2.15 116% 04/01/13
14 19 Idaho 2.01 109% 01/01/14
17 13 Washington 2.00 108% 01/01/14
17 16 South Carolina 2.00 108% 09/01/13
17 12 Pennsylvania 2.00 108% 04/01/13
20 27 New Mexico 1.99 108% 01/01/14
20 20 Rhode Island 1.99 107% 07/01/13
20 17 Minnesota 1.99 107% 01/01/14
21 36 Missouri 1.98 107% 01/01/14
22 19 Tennessee 1.95 105% 03/01/13
23 12 Wisconsin 1.92 104% 10/01/13
24 25 Iowa 1.88 101% 01/01/14
25 23 South Dakota 1.86 100% 07/01/13
27 35 Hawaii 1.85 100% 01/01/14
27 25 North Carolina 1.85 100% 04/01/13
28 29 Florida 1.82 98% 01/01/14
29 21 Alabama 1.81 97% 03/01/13
30 33 Nebraska 1.78 96% 02/01/13
31 31 Wyoming 1.76 95% 01/01/14
32 27 Georgia 1.75 95% 07/01/13
33 28 Ohio 1.74 94% 07/01/13
34 32 Michigan 1.68 91% 01/01/13
35 34 Maryland 1.64 88% 01/01/14
36 38 Texas 1.61 87% 06/01/13
37 37 Arizona 1.60 86% 01/01/14
38 42 Mississippi 1.59 85% 03/01/13
39 41 Kansas 1.55 83% 01/01/14
40 22 Kentucky 1.51 82% 10/01/13
41 43 Colorado 1.50 81% 01/01/14
43 40 West Virginia 1.37 74% 11/01/13
43 39 Oregon 1.37 74% 01/01/14
45 45 Utah 1.31 71% 12/01/13
45 47 Dist. of Columbia 1.31 70% 11/01/13
46 46 Nevada 1.26 68% 03/01/13
48 44 Massachusetts 1.17 63% 09/01/10
48 48 Virginia 1.17 63% 04/01/13
49 49 Arkansas 1.08 58% 07/01/13
50 50 Indiana 1.06 57% 01/01/14
51 51 North Dakota 0.88 47% 07/01/13
(A) In Oklahoma, the dates are 1/1/12 for the State Fund and 1/1/14 Private
Notes: Starting with the 2008 study, when two or more states’ Index Rate values are the same, they are assigned the same ranking. The index rates reflect adjustments for the characters of each individual state’s residual market. Rates vary by classification and insurer in each state. Actual cost to an employer can be adjusted by the employer’s experience rating, premium discount, retrospective rating, and dividends. Link to previous reports and summaries.
Employers can reduce their workers’ compensation rates through accident prevention, safety training, and by helping injured workers return to work quickly.
Source: Oregon Department of Consumer & Business Services, Information Technology and Research Section

The study is based on methods that put states’ workers’ compensation rates on a comparable basis, using a constant set of risk classifications for each state. The study used classification codes from the National Council on Compensation Insurance (NCCI) with a focus on 50 classification codes. Certain weightings were assigned to control for differences in industry distributions among the states.

The full report will be published later this year, but a summary is available here.

Information about how the study was done can be found here.

One focus of this blog has been to address California’s perennially difficult business environment. Joseph Vranich is known as The Business Relocation Coach while the formal name of his business is Spectrum Location Solutions. Joe helps companies find great locations in which to grow. Also, Joe has been a Keynote Speaker for more than 20 years – see A Speaker Throughout the U.S. and in Europe and Asia.



Special ‘California Alert’ to the U.S. Site Selection Community

October 21, 2014

California, long known to be unfriendly to business, is now inhospitable to site selection consultants. Gov. Jerry Brown’s Office of Business and Economic Development has banned commissions that have long been a tradition in the business in the United States and internationally. Or perhaps it’s better to say the state is limiting commissions.

According to the Sacramento Business Journal, the agency, known as GO-Biz, has placed on ban on commissions to consultants for aiding companies in securing a tax credit should they decide to move to or expand in the state.(1)

Since the story appeared, one consultant clarified that commissions are still permissible under some circumstances, but the state limits the ability for consultants to earn more than what the state deems reasonable.

Regardless of whether it should be called a ban or a limitation, a tax consultancy firm has filed suit against what it calls “regulatory overreach that impacts the ability of taxpayers to obtain representation to pursue their right to a tax credit for driving economic growth and job creation.”

In all candor, the GO-Biz restriction doesn’t affect my business.

My projects are done on a flat-fee basis, so no commissions are involved. Moreover, a good part of my client work involves companies seeking out-of-California locations with friendlier business environments.

When I’ve had companies interested in establishing a presence in California, I “ran the numbers” on a completely objective basis. The data on taxes, workers’ compensation, unemployment insurance, cap-and-trade fees to reduce global warming – and more and more – caused them to do what I call a “U-Turn” and head off to other states.

Said one client, “We knew California was going to be more expensive, but we thought we could afford to move there anyway so we began the planning.” After reviewing the cost comparisons with its current community, the company will stay put in its Mountain Time Zone location.

California’s voters seem determined to reelect politicians who could be called “California’s Wrecking Crew” – people who are hostile to business, love hiking taxes again and again, and waste tax dollars on boondoggles – with Gov. Jerry Brown but one example.

The state’s business environment is sure to worsen in 2015, 2016, and who knows for how long after that. Doubters should consider Gov. Brown’s plan to toughen carbon regulations to an unprecedented degree, thus increasing costs (again) on all businesses in every part of the state.

When that happens, Sacramento will once more demonstrate that it’s the “marketing department” for the site selection consulting profession.

(1) See: Allen Young, “Dallas company sues GO-Biz over tax credit,” Sacramento Business Journal, Oct. 3, 2014

One focus of this blog has been to address California’s perennially difficult business environment. Joseph Vranich is known as The Business Relocation Coach while the formal name of his business is Spectrum Location Solutions. Joe helps companies find great locations in which to grow. Also, Joe has been a Keynote Speaker for more than 20 years – see A Speaker Throughout the U.S. and in Europe and Asia.