Oregon voters face a smorgasbord of ballot measures

By DON McINTOSH, Associate Editor

It’s that time again. Voters registered in Oregon should receive mail-in ballots in the next week, with a long list of choices of candidates and ballot measures.

Faced with this ballot box bonanza, the Oregon AFL-CIO researches candidates and issues to help union members and their families know where working families’ interests lie. Candidate endorsements are listed elsewhere in this issue.

As for ballot measures, of the eight statewide initiatives and referendums on the ballot, the state labor federation’s Committee on Political Education (COPE), made up of representatives from every affiliated union, is making recommendations on four. It recommends a “no” vote on:

• Measure 34, which would limit logging in the Tillamook and Clatsop state forests;

• Measure 35, which would cap the non-economic damages portion of jury awards in medical malpractice lawsuits;

• Measure 37, which would force governments to either pay certain property owners or forgo enforcement of land-use restrictions; and

• Measure 38, which would abolish the State Accident Insurance Fund, which provides workers’ compensation insurance to Oregon employers.

These last two are ballot measures that are only on the ballot because they were backed by businesses that stand to gain financially if voters buy their pitches.

Timber barons propose to turn back clock on land use

The proposal sounds so reasonable: It would require that governments either pay owners or forgo enforcement if land-use restrictions reduce property value after it’s purchased.

So why are unions, numerous county farm bureaus, conservation groups, and nearly every newspaper editorial board opposed to it?

Because, its critics say, Measure 37 has the potential to bury state and local government under a mound of litigation, and undo something that makes Oregon unique — a land-use planning system that protects some of the country’s best farmland, as well as large stands of productive timberland.

Not only that, but unions have noted that its passage would mean that citizens could lose one of the few defenses against anti-union “big box” retailers like Wal-Mart.

And the measure could leave a $344 million crater in public funding, according to a financial impact statement prepared by the State of Oregon. That’s just the cost to administer the law, before any claim has been paid.

The Oregon AFL-CIO argues that such a potential budget-buster should be of concern to union members, especially those working in schools, public safety and corrections.

No citizen groundswell put Measure 37 on the ballot. Rather, the initiative made it thanks to a small group of donors, notably a handful of timber industry donors that ponied up an average of $43,000 each.

“This is your typical ‘money in politics’ story,” said Tim Raphael, director of the “Take a Closer Look Committee,” which is campaigning against Measure 37.

Several donors led the way: Aaron Jones of Eugene-based Seneca Jones Timber; Greg Demers, a Veneta timberland dealer; Wes Lematta of Columbia Helicopters who lives in Washington; and non-union Jeld-Wen, owned by Klamath Falls multi-millionaire Dick Wendt.

The timber companies stand to benefit financially if the measure passes — not from logging, but from the sale of timberland to residential housing developers.

Notably, timber giant Weyerhaeuser, which presumably intends to stay in the forest products business, is staying neutral, as is the Oregon Forest Industries Council.

A similar initiative, Measure 7, passed in 2000 with the support of 53 percent of voters, but was struck down on a technicality by the Oregon Supreme Court. The measure was a constitutional amendment, and the court ruled that it amended too many sections of the Constitution for it to have been voted on as a single amendment.

This time, the measure is statutory.

The U.S. and Oregon constitutions already require compensation to landowners if governments condemn or take property to the extent that it “deprives a property owner of all substantial beneficial or economically viable use.”

Measure 37 goes further, requiring government to either compensate for any new regulation that reduces the potential value of the land or else waive enforcement of the regulation. The measure spells out several exceptions — such as state laws intended to comply with federal law, and laws against public nuisances. But otherwise, the measure would affect a very wide range of laws, from zoning restrictions to scenic waterway protections, from building height limits to density requirements.

And the measure is retroactive, meaning it would apply to any regulation added since the property was purchased by its current owner OR A FAMILY MEMBER. Family member is defined broadly enough to include parents, grandparents, step-parents, siblings, aunts, uncles, even in-laws.

Here’s an example of how it might work: The City of Portland adopted its first zoning laws in 1924. So if a piece of residential-zoned property in Portland was purchased before 1924 by the grandfather of the current owner, the current owner could demand payment from the city for restricting commercial development on the parcel. The city would either have to pay the owner for hypothetical lost value or waive enforcement of the zoning law, allowing the owner to build whatever they like on the property, despite the possibility that such a development could harm the property values of others nearby.

Nothing like it has passed anywhere else in the country.

Lawyers for the City of Portland and other government entities say it’s not clear how claims would be processed, and that much of the measure’s language is vague or contradictory. It’s likely many details would be resolved in court.

Steven Janik of the law firm Ball, Janik predicts enormous uncertainty and expense if the measure passes.

The law works to roll back time for particular pieces of property — to whatever laws were in force when the property was purchased. The trouble is, critics argue, that would mean unequal treatment for different property owners. Plots right next to each other that are otherwise identical would be treated differently, depending on when the property was purchased.

Each claim filed would require significant research into real estate records and a detailed legal history, plus appraisals and legal review. Oregon has something like 300 city, county, regional and state governments. Each one would need to create administrative structures to process claims. And each claim would divert resources away from other priorities.

The measure doesn’t create some new pot of money to pay claims, so in all likelihood, claims would result most often in non-enforcement of land-use law.

For critics of Wal-Mart, that would mean unilateral disarmament.

Jeff Anderson, organizer for United Food and Commercial Workers Local 555, says land-use rules have been critical to the union’s efforts to resist “Wal-Martization.” UFCW’s core membership is in grocery, and the union is engaged in a fight for its life against Wal-Mart, which is so anti-union that not a single store in the U.S. has ever succeeded in unionizing.

Wal-Mart prefers to locate on inexpensive, often marginal land on the edges of communities. But Oregon’s land-use laws make it difficult for Wal-Mart to build on farm or forest land, as it does in other states.

Plus, Wal-Mart’s massive windowless squares and super-sized parking lots often run afoul of local land-use rules. And its retail impact creates traffic headaches that transportation planners prefer to avoid.

Citizens who don’t want that kind of development have been able to prevail at local land-use boards.

“Currently there’s a balance on local land-use boards,” Anderson said, “where they’re able to look at what’s in the greater interest of the community.” Measure 37, if it passes, would deprive communities of a say in how development occurs.

Insurance company hopes to get voters to eliminate its competition

SAIF Corp. handles 42,000 workers’ compensation injury claims a year, and paid $208 million to injured workers in 2003. Measure 38 would abolish it.

Measure 38 is on the ballot because Liberty Northwest — the state’s largest private workers’ comp insurance provider — spent nearly $2 million to get it there using paid petitioners. Now the company, a subsidiary of Boston-based insurance giant Liberty Mutual, must sell its measure to the voters. The basic purpose of the measure is to eliminate Liberty Northwest’s most effective competitor in order to increase its profits.

But because that cause won’t sell well, Liberty has launched one of the most misleading ad campaigns ever, union officials said.

If Measure 38 passes, it would be the latest twist in a long, slow distortion of one of labor’s early victories.

In 1913, the Oregon Legislature passed the Workmen’s Compensation Act, which created the State Industrial Accident Commission, a state agency to provide for workers hurt in industrial accidents. Set up with $10 million in taxpayer seed money, the agency paid the medical and living expenses of injured workers, regardless of who was at fault in the accident. The fund was replenished by premiums paid by employers. Employers who participated were granted immunity from lawsuits over unsafe conditions. Premiums would be priced according to the number and amount of claims paid, meaning employers had economic incentives to make workplaces more safe. Workplaces became safer and injured workers were provided care. The system benefitted all parties.

In 1965, the Oregon Legislature changed the law. Now, all employers would be required to participate, not just those in dangerous industries. But employers would also be allowed to self-insure, or insure through a private insurance company. And the state agency was renamed SAIF.

In 1979, at the suggestion of SAIF administrators, the Legislature spun off SAIF as a quasi-public entity. It would no longer be a state agency like other agencies, but instead be a non-profit corporation directed by a five-member board appointed by the governor.

Soon after the partial privatization took place, SAIF administrators gave themselves a sizable salary increase. A few years later, several top SAIF administrators left to form their own company — Liberty Northwest — and used their inside knowledge of SAIF to cherry-pick the largest, most profitable accounts.

Unlike SAIF, Liberty Northwest had no obligation to insure every employer.

By the late 1980s, SAIF was in danger of becoming insolvent, (and its position wasn’t helped by the fact that the Legislature had raided its reserves in 1982 to the tune of $81 million). So, then-Governor Neil Goldschmidt called all interested parties together to the governor’s mansion, Mahonia Hall, and hammered out another change to workers’ comp law, which passed in a special session of the Legislature in 1990. In response to the perception that SAIF was approving too many claims, some frivolous, the new law made it somewhat harder for workers to prove their claims. And benefits were improved.

In the 1990s, SAIF recovered, becoming more efficient, shrinking its payroll, consolidating its offices, and focusing more on workplace safety and returning injured workers to work. Meanwhile, SAIF’s reserves, which it was required by law to keep in order to pay out future claims, earned considerable money invested in the stock market and elsewhere. Because SAIF is a non-profit, those investment earnings enabled it to lower its rates to employers, making it a formidable competitor to companies like Liberty Northwest.

That brings us to the present era. Liberty Northwest is finding it increasingly difficult to compete with an efficient, state-affiliated competitor that is exempt from federal taxes and returns its “profits” to premium-payers instead of stockholders.

So the company has turned to the political system to gain competitive advantage.

It created a front group, Oregonians for Sound Economic Policy, and reportedly put $700,000 into it over six years. It hired John DiLorenzo, a well-known Republican lobbyist, to work Salem. The group spent years lobbying the Legislature, giving first to Republicans, then to Democrats, and pushing proposals that would weaken SAIF, like a plan to divert part of SAIF’s reserves into a rainy-day fund for the state.

Liberty succeeded in winning one victory: for-profit workers’ comp insurers now don’t have to pay local payroll taxes, but SAIF still does.

But that didn’t tilt the playing field enough for Liberty Northwest.

Now it is going directly to the people with an appeal to abolish SAIF.

The first step to the campaign was to investigate and publicize scandals at SAIF.

It found a few: SAIF refused to release documents requested by Liberty Northwest’s front group until ordered by a court to do so, and destroyed some documents in violation of the court’s wishes. It employed as lobbyists and consultants former Republican House Speaker Larry Campbell and former Governor Goldschmidt the latter at as much as $40,000 a month, for a total of $1.4 million. And it under-reported lobbying expenses.

But the “scandals” can’t be understood out of context: It was in SAIF’s attempts to defend itself against attack by Liberty that it ran afoul of state regulations.

• The reason SAIF was required to hand over documents in the first place is that it’s a public entity, subject to public records laws. Those laws don’t apply to Liberty. SAIF argued in court that the records were “trade secrets” and thus exempt from those laws, but it lost and was ordered to hand over the records. That’s when some of them were destroyed, in violation of the court’s order. Subsequently, Katherine Keene resigned as SAIF CEO and Governor Ted Kulongoski later appointed Brenda Rocklin, former lead attorney in SAIF’s Industrial Accident Section, as interim CEO.

• The consulting fees paid to Goldschmidt were embarrassing but not illegal. The State Ethics Commission found insufficient evidence that SAIF had failed to adequately report Goldschmidt’s retainer as a lobby expense. But it did find that Keene had lobbied legislators without having registered as a lobbyist, and had failed to report $224.59 in meals as a lobbying expense. For the latter offense, SAIF was fined $2,000.

If there are problems of accountability at SAIF, the Oregon AFL-CIO says it has a better fix, which it has been advocating in Salem for over 10 years — return SAIF to state agency status. The labor movement has long held that no one should profit from workplace injuries and diseases and that government, rather than private insurance companies, should administer the workers’ compensation system. Instead, Liberty Northwest is attempting to use the scandals to argue that SAIF should be abolished.

Its measure would bar SAIF from selling new policies after Jan. 1, 2005, and bar it from renewing policies after Jan. 1, 2006. Employers would have a year to find a new workers’ comp carrier. In 2007, SAIF would be abolished completely and all its property sold.

The measure also seizes SAIF’s “excess surplus” funds to be used to support education, prescription medications, local law enforcement and workforce training. The measure’s critics say there isn’t likely to be an “excess surplus, ” because any reserves above a certain legally-determined formula are already returned to employers as dividends or in lower premiums.

And if there are such excess funds, their seizure would not likely survive a court challenge, since the earlier seizure was overturned by the Oregon Supreme Court.

Measure 38’s passage would mean a bonanza for Liberty Mutual, which has backed national efforts to get rid of state-owned insurers. Michigan and Nevada abolished their public workers’ comp agencies.

In Oregon it will come down to whether voters are taken in by a deceptive ad campaign.

In addition to playing up “corruption” at SAIF, the ads say:

• SAIF “cancelled workers’ competition protection and denied claims.” The cancellations referred to took place 15 years ago, before the Mahonia Hall changes, when SAIF was losing money on some small business accounts and dropped coverage to 10,000 of them, leaving them the option of joining the state’s “assigned risk pool” which charged higher rates. Most of the dropped businesses aggregated in a group set up by Associated Oregon Industries and purchased workers’ comp insurance from SAIF, collectively. As for denied claims, all carriers — public and private — deny claims they determine are without merit, and claimants have a process to appeal that’s the same for all carriers.

• SAIF “paid its executives millions.” Actually, SAIF’s top-paid official, Katherine Keene was making $295,000 a year before she resigned. Liberty Northwest paid its CEO Tony Ferronato $697,000 last year.

• SAIF is “a virtual insurance monopoly, with no guarantee of competition or choice.” Actually, SAIF has about 42 percent of Oregon’s state workers’ compensation insurance market. Liberty Northwest has about 16 percent. While there may be no “guarantee” that private companies compete, they are free to do so and do compete with SAIF. In essence, the complaint is that SAIF doesn’t charge employers enough, making it hard for for-profit insurers to compete.

• “It no longer makes sense to use vital government resources to sell insurance, while shortchanging traditional government responsibilities.” SAIF gets its money from employer premiums — no taxpayer dollars are being used to “sell insurance.”

• SAIF has “taken half a billion from Oregon’s economy, leaving us one of the highest unemployment rates in the nation.” The half a billion appears to refer to SAIF’s reserves, which it’s required by law to maintain in order to be able to pay for future medical and disability expenses on injuries that have already occurred. The Oregon State Treasurer keeps those reserves in a fund that’s invested, some of it in Oregon. What Liberty does with its reserves on the other hand is determined by its parent corporation in Boston. As for Oregon’s high unemployment, it’s true, but low workers’ comp premiums are hardly to blame. In fact, Oregon’s workers’ comp costs — lower than 35 other states — are one of the things the state’s economic development office pitches to out-of-state companies thinking of locating in Oregon.

© Oregon Labor Press Publishing Co. Inc.