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Originally published September 7, 2010 at 9:19 PM | Page modified September 10, 2010 at 1:47 PM

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Economy, lawsuits hammer at BIAW

The Building Association of Washington, a generous contributor to conservative candidates and causes, has hit a rough patch. The group has lost millions in revenue in recent years largely due to the recession. It's embroiled in a lawsuit with the state attorney general, and is in the middle of a fight with its largest local association, which has also sued the BIAW.

Seattle Times Olympia bureau

Initiative 1082

I-1082 would allow private companies to provide workers' compensation insurance in competition with the state. The state now runs the system.

Supporters: The measure is backed by a coalition of business groups, including the Building Industry Association of Washington, the National Federation of Independent Business and the Association of Washington Business. Supporters have raised more than $1.1 million, including $500,000 from the BIAW. Website: www.saveourjobswa.com.

Opponents: Two political-action committees — No on I-1082 and Stop Insurance Industry Takeover — have formed to oppose the measure. They have raised more than $1.6 million combined, including money from labor and attorneys. Website: www.voteno1082.com.

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OLYMPIA — There's no outward sign of problems at the Building Industry Association of Washington, ensconced in an 85-year-old mansion within walking distance of the state Capitol.

The trade association says it's still the state's largest and remains among the state's most outspoken critics of the Democratic Party and allies. Historically, it's been a generous supporter of conservative candidates and causes.

But the BIAW has hit a rough patch. The group has lost millions in revenue in recent years, largely because of the recession. It's embroiled in a lawsuit with the state attorney general and is in a fight with its largest local association, which also has sued the BIAW.

Tom McCabe, the BIAW's outspoken leader, brushes the troubles aside.

"We're still powerful enough and good enough and smart enough to get an initiative on the ballot that the entire business community is going to rally around," he said, referring to Initiative 1082. "A group that was neutered ... couldn't do that."

The association has plowed $500,000 into I-1082, which would allow private insurers to compete with the state to provide workers' compensation insurance. The initiative also would let the BIAW, and groups like it, partner with private insurers to provide coverage. A coalition of business groups, including the Association of Washington Business, backs the change.

Opponents argue that it's a way for the BIAW to refill its coffers. Refunds the BIAW receives from a worker-safety program it administers — the group's largest source of income — have dropped nearly 90 percent since 2007, largely because of the recession that's gutted the home-building industry.

McCabe flatly rejects that argument, as do other groups backing the measure. In fact, McCabe says that, while the recession and legal bills have taken a toll, the BIAW still has plenty of money to spend on politics.

It has been a major donor to GOP candidates and conservative causes for years, pouring more than $10 million into political campaigns in the past decade. Much of the money went to support Republican Dino Rossi's bid for governor in 2008, and to help create a more conservative state Supreme Court.

The group also has been involved with several ballot measures, including a voter-approved 2003 initiative that repealed a sweeping state ergonomics rule. The group also has been a major player in Olympia, fighting laws affecting homebuilders.

McCabe contends nothing has really changed. His group plans to spend more than $1 million this election year. And he said the BIAW could pull off another year like 2008 if it wanted to, when it spent more than $6 million on political campaigns.

"I'm a conservative," he said. "I save."

Candidates who've been major beneficiaries of BIAW contributions in the past have received little or no money this year.

In 2004, the group gave more than $135,000 to Jim Johnson's successful state Supreme Court campaign. This year it donated only $1,600, the current limit on contributions, to his re-election effort. However, McCabe said Johnson, who was re-elected in the August primary, did not need help.

The BIAW also hasn't donated to Rossi's current campaign against incumbent U.S. Sen. Patty Murray, a Democrat, but McCabe said the association does not get involved in federal races.

State records show the recession has hit the BIAW's largest source of income, a "retrospective rating program" — known as Retro — that rewards participants for preventing on-the-job injuries and keeping workers' compensation costs down.

The state Department of Labor and Industries runs the workers' compensation system. The BIAW has a for-profit subsidiary, BIAW Member Services Corp., that administers the largest Retro program in the state, according to state reports.

Under the program, if workers' compensation claims are less than the insurance premiums paid to the state, the surplus goes back to BIAW and its members.

In 2007, a peak year, the state refund totaled more than $51 million. This year's refund: $4.9 million. The BIAW keeps 10 percent, and the rest goes to companies it represents and to local homebuilder associations.

The BIAW says most of its share goes to things other than politics, such as administering the program. Tom Kwieciak, its insurance-programs administrator, said the share is based on three years of refunds. It expects to receive around $600,000 this year, down from roughly $5 million in 2007, he said.

State officials say the economic meltdown is largely to blame for the plunge in refunds. Builders are constructing fewer homes, which means a drop in insurance premiums being paid for workers, as well as a drop in refunds.

According to McCabe, the state attorney general's lawsuit against the BIAW "is costing us a lot of money."

In 2004, the BIAW helped elect Attorney General Rob McKenna, now one of the state's most prominent Republicans and a likely candidate for governor in 2012.

But McKenna's office filed separate lawsuits against the BIAW and the Master Builders Association of King and Snohomish counties in 2008, alleging they failed to properly report political spending that year.

Both have said they did nothing wrong.

McKenna's office said the BIAW case is in limbo. BIAW officials said they've offered to settle the case but have been rejected.

Meanwhile, the group's relationship with the Master Builders Association of King and Snohomish counties has soured.

Sam Anderson, executive officer of the two-county association, said his group decided a couple of years ago to hire a lobbyist with Democratic contacts because it felt the BIAW had alienated state leaders.

The BIAW spent millions trying to unseat Gov. Chris Gregoire in 2008 and failed.

"So my members weren't confident that with a Democratic governor and a Democratic House and Senate that they (the BIAW) were going to be able to accomplish much," Anderson said.

The Master Builders later decided to start a competing worker-safety program, which they say took away several hundred clients from BIAW's business.

And the group in July filed a lawsuit alleging that BIAW retaliated, in part by not paying workers' compensation refunds the Master Builders says it's owed.

McCabe said the refunds were not withheld out of retaliation and that the Master Builders will receive the money. He also said the business taken away by the group had no impact on BIAW.

He declined to talk in detail about the spat, calling it "an internal family dispute."

Critics of Initiative 1082, including state Insurance Commissioner Mike Kreidler, maintain the initiative is a way for the BIAW to shore up its finances.

It would allow private insurers to compete with the state to provide workers' compensation coverage, which supporters say would reduce costs.

Only the Department of Labor and Industries can provide the insurance, although about 300 self-insured employers manage and pay for their claims.

Kreidler said the initiative would allow groups like the BIAW to charge insurance companies a fee in exchange for the chance to provide insurance to its members.

"This initiative essentially allows them to go back to the good old days. That's the principal driver behind this," said Kreidler, a Democrat.

Kreidler said, however, the can't prove his assertion. "It's one of those things where you connect the dots and it's pretty clear," he said.

Kristopher Tefft, government affairs director for the state Association of Washington Business, said Kreidler's argument ignores the broad array of businesses supporting I-1082, including the AWB.

To buy Kreidler's claim, Tefft said, "you almost have to accept that our friendly evil genius, Tom McCabe, duped an unwitting business community into sort of obsequiously following this ploy to fill up the coffers of BIAW from ill-gotten gains from workers. It's goofy."

For his part, McCabe said the initiative is not a way for the BIAW to make more money. "We're doing this on behalf of our members and specifically helping our members ... through a tough economy," he said.

And in a typical McCabe fashion, he dismissed Kreidler's criticism. "He's a pawn of the labor unions," he said.

Andrew Garber: 360-236-8266 or agarber@seattletimes.com

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