OLYMPIA - Business groups are guardedly praising Gov. Chris Gregoire's announcement of no overall increase in workers' compensation insurance premiums next year.

The Department of Labor & Industries (L&I) proposed a 2.5 percent increase in September, but decided to postpone the action after public testimony about the impact of the recession, according to L&I Director Judy Schurke.

"At public hearings this fall business owners told us they are struggling to keep doors open and workers employed, and that they can't afford even a small increase in rates in this economy," stated Schurke. "Their feedback and the latest positive trends influenced this decision."

Pat McGarry, President of the Associated General Contractors of Washington, expressed gratitude the government listened to their concerns.

"Construction employment has decreased 35 percent over the last few years," he said. "Holding the line on workers' comp rates will help get the construction industry back on track, allowing contractors to save jobs and assuring that workers won't see even larger paycheck deductions."

Other business groups were also positive, albeit less enthusiastic, about the decision.

"I feel a bit like Cindy Lou Hoo when the Grinch returns Whoville's Christmas gifts - glad to see the present, but disappointed the Grinch is just giving us our own stuff back," stated Patrick Connor, Washington state director for the National Federation of Independent Business, which bills itself as a non-profit, non-partisan business association.

Workers' compensation insurance, a mandatory requirement for every employer, is one of the costliest barriers to running a solvent business, Connor said; adding Washington has the second-highest workers' compensation cost per employee and provides the third-highest benefit package in the country.

But Washington is the only state where workers contribute a substantial portion of the premiums, according to Schurke, who said next year their share will be about 24 percent.

"This is a welcome surprise for employers," stated Kris Tefft with the Association of Washington Business. "Today's announcement reflects the value of the reform measures passed in 2011, without which employers would surely have seen rate increases next year."

The Legislature passed two bills last session providing temporary relief and permanent restructuring of the unemployment insurance system. Janéa Holmquist Newbry, R-Moses Lake, said the tax restructuring in both new laws is based upon her 2010 "unemployment insurance smoothing" proposal.

"My primary concern as a senator has been jobs - removing the barriers to job creation and helping our employers, workers and unemployed survive this recession," she stated. "That is why I am so pleased the governor was able to build upon my UI-smoothing bill from the 2010 session, and provide employers with the tax relief that we are seeing today."

Lowering payroll taxes for employers reduces their hiring costs and is a major step toward getting Washingtonians back to work, stated Holmquist Newbry, who is her party's leader on the Senate Labor, Commerce and Consumer Protection Committee.

"This is the great news our workers, employers and those looking for jobs in our state have been waiting for," she stated Thursday.

Schurke agreed holding rates flat next year will help rate payers, but warned it could mean higher rates in 2013 if the financial situation worsens.

"I considered this carefully and made the decision that helping businesses and keeping jobs for workers was the right thing to do," she stated.

While there will be no overall rate increase, individual employers may see their rates go up or down depending on recent claims history and changes in the frequency and cost of claims in their industry, Schurke said.

Eighty-eight percent of Washington's businesses will pay a lower unemployment tax rate in 2012 than they pay today, according to Gregoire's office. The decrease is estimated to save businesses $207 million in 2012 - in addition to $300 million in 2011 savings. The lack of increase in overall workers' compensation insurance rates will save businesses an estimated $150 million in 2012.

The new rates will take effect next month.