A ten-part series on resolving Washington's anti-business climate
"We will do everything in our power to guarantee a thriving, environmentally-sustainable business climate." – Governor Gary Locke –
INTRO: How is Washington Anti-Business?
No one should have been surprised by Boeing’s recent corporate exodus. Company officials were waving a red flag as early as October 1999 when Boeing Chief Financial Officer Debbie Hopkins warned: "Compared to everywhere else we do business, Washington is below average. To remain a global leader for aerospace – and a global leader for other industries – Washington has to rank a whole lot higher than that."
Hopkins was specifically referring to Washington’s onerous unemployment insurance (UI) tax. Boeing was paying the fourth-highest UI liability in the nation. "If Washington wants to attract and keep business, this problem needs to be fixed," she said.
But it wasn’t.
After Boeing announced its decision to leave, a March 2001 editorial in The News Tribune reiterated that "Boeing’s executives have been expressing concern about the state’s business climate for many years now. It would be foolish to assume this week’s announcement had nothing to do with that climate – and even more foolish to assume that other companies don’t view Washington as an often frustrating place in which to operate."
Now that the problems can no longer be denied, and other state businesses are rumbling about leaving the area and taking their jobs with them, Governor Gary Locke has appointed a Business Competitiveness Council to "do everything in our power to guarantee a thriving, environmentally-sustainable business climate."
We can help him out. There are ten major factors contributing to our state’s anti-business climate and they need to be resolved immediately.
Energy policy – Washington is facing the threat of an energy shortage. Already, businesses and individuals spend about $10 billion each year on energy related expenses. Despite this staggering sum, our state has no coherent energy policy. The only policy to speak of is aimed at installing price controls, and will do nothing to address our projected energy needs in the future.
With our state’s dependence on natural gas increasing by 50 percent, David Warren, Assistant Director of the Washington State Office of Trade and Economic Development, warns that "the only sure way to reduce our fuel price and supply vulnerability in the long run is to develop and maintain a diverse energy supply including conservation and alternative energy resources." Immediate steps need to be taken to permit the construction of new power plants while pursuing conservation and the development of renewable energy. We should be following Oregon’s lead, where three power plants are under construction that will provide 1300 megawatts of electricity. Oregon is also reviewing applications for an additional 2700 megawatts.
Water policy – State officials knew well in advance that water supplies would be low this summer, but did little to prepare for the shortage, which is inflating costs for businesses. Little has been done to speed up the approval process for water permits, some of which have been on hold for years. Cities have also failed to increase their water storage capacity over the last several years. Senate Bill 5203 – which would have accelerated the decision-making process for water transfers by granting more authority to conservancy boards, and would have been a step in the right direction – failed to pass the legislature.
Transportation policy – Governor Locke aptly warned, "If we don’t fix our transportation problems now, our businesses won’t grow...they’ll leave our state. If we don’t have businesses, we won’t have jobs. It’s that simple."
Well said. It comes as no surprise to I-5 commuters that the Seattle area ranks 2nd in the nation (behind only Los Angeles) in time lost due to traffic congestion. While increased spending on transportation may be part of the solution, we first need accountability for the money state officials already have. The Governor needs to allow the State Auditor to do his job and conduct performance audits, and we need performance-based budgeting for transportation. Locke recently vetoed both.
Tax policy – Washington state imposes one of the heaviest business tax burdens in the nation. Our onerous Business and Occupation (B&O) tax discourages the formation of new jobs, and may even be the cause of losing them. Consider the fact that Washington is the only state among the 26 where Boeing has facilities that taxes the labor and material used in construction. This fact could find us losing not only Boeing’s corporate headquarters, but the rest of the company’s operations as well. We need to restructure our corporate tax policy to accommodate businesses rather than punish them.
Unemployment Insurance - We have already read about Boeing’s frustration with the state’s unemployment insurance (UI) program. Washington levies UI taxes four times greater than Colorado, three times greater than Texas, and double those in Illinois (the three states Boeing was considered relocating to). The structure of our program inflates costs for businesses. For instance, the insurance rates are based on the average wage in the state, not on the rate of unemployment. Because the average wage includes stock options, it is highly inflated. Washington has the highest unemployment rate in the country (5.7%), which could well be a result of the lucrative UI benefits. It is high time state officials demonstrate some leadership by reforming or eliminating this burdensome program.
Regulations – Washington businesses are among the most highly regulated in the country. As State Representative Kirk Pearson said: "Washington has nearly 16,000 pages of agency-created rules and regulations. It’s difficult for businesses to know and comply with every rule on the books, especially when there are so many. It used to be that agencies would come in to a business and automatically begin issuing fines for those out of compliance. A few years ago, the Legislature required agencies to develop technical assistance programs to help businesses comply. But some agencies still lean toward fining businesses first and asking questions later." State agencies should treat businesses as allies, not criminals.
Growth management regulations – Today, Washington ranks 40th in home ownership (only ten states are lower). The National Association of Home Builders has ranked Washington’s I-5 corridor among the nation’s least affordable housing areas. The average price for a 4-bedroom, 2.5 bath, 2 garage home in Seattle is a staggering $303,633. By comparison, in Dallas-Fort Worth’s thriving business area, the 2000 median price for a similar home was $169,500. This burdensome disparity can be directly traced to Washington’s growth management policies, which artificially inflate the cost of real estate by heavily restricting land usage. Current land management policies make it nearly impossible for many employees to afford a home in Washington.
Mitigation fees – When Boeing attempted to increase productivity by renovating its Everett plant, the state nonchalantly issued a $50 million bill for roads and infrastructure. The permit process alone for this project took 2 ½ years. The state needs to stop punishing businesses for desiring to grow. Growing businesses provide more jobs for Washington citizens. Special favors are never in order, but neither are undue fees and unnecessarily long permit processes.
Health care – Rather than list the horror stories resulting from our state’s destruction of the individual health insurance market in 1993, perhaps it is best to hear what doctors have to say about the availability of quality health care in Washington. In a Washington CEO article, Kathleen O’Connor relates the frustration of doctors: "They complain they do not often have the say in the type of medications they can readily prescribe and they have to call insurers to get approval for prescriptions, length of stay in hospitals, and what they consider to be other care decisions." Rather than improving health care, our state’s attempt to take over the health care system has handcuffed physicians’ ability to make treatment decisions. Recent efforts to attract health insurers back to the state are a good first step, but more must be done to make Washington’s health care system friendly to workers and their families.
Labor unrest – Many of our state officials reward labor unrest with policies like Project Labor Agreements (contracts guaranteeing union-control over a project). While unions have a legitimate role in protecting against unfair labor practices, the state tends to favor labor organizations at the expense of business. The needs of both parties must be balanced. When businesses do well, the quality of life improves for all workers. Care should be taken not to punish businesses to garner the favor of unions.
It is time for state legislators and Governor Locke to let the business community know they are serious about improving the state’s business climate. Thriving businesses are crucial to the economy and the well-being of Washington citizens. Locke’s new Council should give focused consideration to finding solutions for the identified problems in our state before other businesses follow Boeing to greener pastures.
This is the beginning of a ten-part series in which EFF will address each of these problems and their solutions in more detail.
At a March 23, 2005, House Appropriations hearing on a bill to gut the voter-approved I-601 spending limit, Rep. Jim McIntire (D) asked a supporter of I-601’s two-third supermajority requirement for the legislature to raise taxes the following question:
"Can you name a time when we [legislators] have actually not just set it [supermajority requirement] aside by majority vote? I mean, this is in many respects a procedural motion that has no bearing. It’s a statutory constraint that cannot constrain any legislature that chooses as a majority to set it aside . . . have we ever used a supermajority [to raise taxes]?"
Receive Updates · 
