In a 34-15 vote in the Senate, it was a win for the business lobby, which has been trying to move the state away from prolonged payment benefits and pensions for injured workers. It now goes to the House of Representatives for consideration.

This year, so far, workers compensation has played a major role in the legislative session because the system is bleeding money.

Organized labor has steadfastly opposed settlements and will take their fight to the House, where support for business may not be as heavily rooted as in the Senate.  The usual fights along the usual and customary lines are predicted to take place in the House. 

Rebecca Johnson, of the Washington Labor Council, said labor is against a settlement option "because it turns a reliable safety net into a lottery" where access to lawyers plays a key role.  

Most bills recently approved by the House were approved with Republican support, including a Senate bill creating a network of medical providers for injured workers. That bill heads to the Governor Chris Gregoire's desk.  House lawmakers also recently approved a proposal that subsidizes 50 percent of a recovering worker's wages for more than two months to encourage a return to the job - a similar proposal was a provision in the Senate bill.

Other bills approved by the House included stricter accident prevention rules and new oversight measures for employers.  The House also approved a bill that would allow certain business groups to manage their own claims - a bill opposed by labor groups.

"None of these pieces reduce benefits," said Rep. Cary Condotta, R-East Wenatchee. "They simply improve efficiency of system. What we're trying to do is get people back to work."

Washington Governor Gregoire, the head of the state Department of Labor and Industries, and the state auditor have said the system was headed toward bankruptcy. The auditor's office said in December 2010 that Washington's fund for workers compensation had a 95 percent chance of becoming insolvent in the next five years.

The system had about $499 million in reserves as of Dec. 31st. That figure represents the medical fund of the system, which stands at nearly $709 million; the liability fund that is in the red for $275 million; and the pension fund that currently stands at $65 million.

In the state of Washington, workers’ comp is funded by business payroll taxes and the investments of those monies which are handled by the state. The system tanked, the auditor's report stated, because of less money coming from businesses due to the recession and the drop in returns from investments, also because of the economic downturn.

Opponents of the Senate bill argued that as the stock market rebounds, so will the reserves of the system.

But, "We have no projections. No predictions of savings," said Senator Karen Keiser, D-Kent. "We need to slow down. There's no solvency crisis. We need to consider what we're turning on its head."

The major expenses of the system came from only 8 percent of all claims, which involve prolonged temporary disability or lifetime pensions. That section of workers represents 85 percent of the compensation costs, according to the state labor department that manages workers compensation.

Businesses have long argued that the premiums they pay to the system are too high.

"We need to take this step to bring sustainability to our workers’ comp system," said Janea Holmquist Newbry of Moses Lake, Washington, one of the Senate GOP's key negotiators.

The measure approved today was a deal worked out between Senate Republicans and Democrats, amending the governor's bill to include the option of a voluntary settlement. Supporters said most states have such an option.  Gregoire's proposal initially had a settlement option that would only apply for workers over 55 years of age.

Under the proposal, an injured worker who chooses a settlement can do so with a lawyer, or be consulted by a state settlement officer. There's a 30-day period after settlement negotiation when workers can change their decisions.

"This is a balanced bill that is good for workers and employers alike," said Association of Washington Business President, Don Brunell, in a statement. "Costs continue to go up, yet injured worker claims are actually down, and our workers' compensation system is on the verge of collapse."