OLYMPIA- More than three-quarters of respondents in a survey of Association of Washington Business members believe Washington state is generally going in the wrong direction, and more than half don't see things improving in the next 12 months.

Employers surveyed said the biggest issue facing their businesses is complying with government regulations (25 percent), a lack of customers or clients (24 percent) and the cost of health care (21 percent).

The survey results illustrate the fragile state of Washington's economy, and underscore the need for lawmakers to be mindful of their decisions on the state's private employers as they attempt to close a $1.5 billion budget shortfall during the 2012 legislative session.

"Although we have seen some positive economic signs in recent months, it is clear based on this feedback from our members that Washington state has a long way to go before its economy is truly thriving again," AWB President Don Brunell said. "Many businesses are still hunkered down, doing whatever they can to survive the combined impacts of a terrible recession, a growing thicket of government regulation and spiraling health care costs."

The online survey, conducted between Dec. 19 and Jan. 6 by Moore Information, Inc., asked AWB members to share information about the health of their businesses, their opinion about the economy and their outlook for the next year. AWB invited its 5,823 members with e-mail addresses to participate in the online survey; 787 responded giving the survey a 13.5 percent response rate.

A majority of respondents described their company as either "fairly healthy" or "very healthy," but a disconcerting one-third said their business is "not very healthy" or "not healthy at all." Nearly 70 percent said they do not expect to add employees in the next 12 months.

Looking ahead, Washington business leaders don't see things improving soon. More than half of respondents said they expect business conditions to be about the same a year from now. Only one-third believe conditions will improve over the next year, and 14 percent say they will be worse in a year.

Some additional findings:

Most AWB members (78 percent) believe government regulations on their businesses increased during the past five years. In an April 2006 survey, 73 percent said government regulations had increased.

Most AWB members (86 percent) provide health insurance to their employees, and most of them (77 percent) have seen health insurance premiums increase by more than 10 percent in the past year.

Almost half (46 percent) of respondents said their company absorbed the additional health care cost, and nearly as many (41 percent) either reduced health care coverage and/or passed along costs to employees.

"Our state's political leaders are facing a big challenge again this session," Brunell continued. "Solving a $1.5 billion budget shortfall is an unenviable task, and it will require making many hard choices. As they go about their work, it's important that lawmakers keep in mind the challenges that continue to face our state's employers, as well, particularly the small and medium-sized businesses that will fuel our recovery.

"Passing the tax simplification proposal put forward by Gov. Gregoire is one way they can reduce the layers of bureaucracy that weigh down employers," Brunell said. "But they can't stop there. Lawmakers must look for other ways to eliminate outdated or conflicting regulations, and they must resist doing things that will add costs to employers at a time when so many are clearly afraid to bring on new workers. If they can do these things, maybe the next survey will find the state is back on the right track."