Legality of Referendum 53 argued before state court

By Luke Timmerman
Seattle Times business reporter

12/11/02

OLYMPIA, WAŚ The state Supreme Court heard arguments yesterday in the latest chapter of the unemployment-tax feud, again focusing on whether the question should have been put before statewide voters.

The arguments came nearly three months after the court decided it didn't have enough time to decide whether Referendum 53 was in line with the state constitution and eligible for a spot on the November statewide ballot.

If the court now chooses to rule the referendum was legal, it would let the state's traditional method of collecting unemployment taxes stand. If it rules the referendum was unconstitutional, it could pave the way for changes enacted by the Legislature last March.

Lawyers on both sides said the court may rule within a couple of weeks. The matter has been in legal limbo since the Nov. 5 election, when voters rejected the Legislature-approved changes described in Referendum 53. The outcome was a victory for builders and small businesses, who said the new law was crafted to raise their taxes while cutting taxes for big business and Boeing.

After losing the statewide vote, a coalition of labor groups, Gov. Gary Locke, banks, retailers and other employers brought the issue back to court. They argued yesterday that the Legislature changed the unemployment-tax system because it was necessary to support state government.

The group also says the changes the Legislature enacted ironed out a historical unfairness in which builders don't pay in as much as their laid-off workers take out.

Under the constitution, said Michael King, attorney for the labor and business coalition, taxes involving support for state government are not supposed to be brought to referendum unless the Legislature specifically allows it. The state Supreme Court was the right venue for the case, he said, adding that if the issue isn't settled by later next month, it could be disruptive to the unemployment system and confusing for businesses.

"This measure was intended to reinforce the solvency of the fund," King said. "The opposition wants to save $20 million to $30 million, but the money is needed. We have an unemployment problem in this state, and the economy isn't getting better."

But Kris Tefft, an attorney for builders and small-business interests, said the Legislature had its chance to inoculate the unemployment law from a referendum challenge but chose not to. He told the judges that voters can vote on an unconstitutional measure, just as legislators can pass unconstitutional laws. But, procedurally, the court should not examine the law until after the vote has been certified, he said.

Tefft maintains Referendum 53 was constitutional all along.

The state's unemployment-tax fund is supported by quarterly collections from the state's 195,000 businesses. It had $1.4 billion at the end of September and was used to pay benefits to 127,000 people out of work that month, according to the Employment Security Department.

 

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