POLICY HIGHLIGHTER

Volume 14, Number 7
April 8, 2004

Washington's "disadvantageous" business climate

In the quest to win Boeing's 7E7 final assembly project, state officials at the Department of Community Trade and Economic Development (CTED) contracted with Boeing's own consultant, Deloitte & Touche, to conduct a study of how Washington compared with other states in areas of concern to Boeing. While the details of CTED's contract with Deloitte raise many issues, the study's findings are revealing.

In a presentation titled "The 7E7 Imperative," prepared in June 2003, Deloitte made several observations about the state's overall business climate. Coming as no surprise to Washington's employers, these observations included:

Deloitte's report served as the impetus for the legislature's decision to offer Boeing an unprecedented $3.2 billion worth of tax incentives. This does not include other concessions offered separately by the governor in an agreement signed December 19, 2003.

Although legislators took action in June 2003 to reform the state's unemployment insurance system, Boeing's vice president of government and community relations, Bob Watt, recently stated that Washington's poor business climate has not been resolved. This comment is especially relevant for the rest of the state's businesses, which did not receive the same considerations bestowed on Boeing.

Benjamin Romano of the Yakima-Herald Republic made the following observation about Bob Watt's recent speech to the Greater Yakima Chamber of Commerce: ". . . Watt's point was made: Boeing is still concerned about the business climate in Washington. And despite billions of dollars in state incentives to land assembly of Boeing's next generation 7E7 commercial airplane, Washington is, in many respects, business unfriendly . . ."

Romano's article went on to state that Watt and Boeing still have the following concerns (in part):

• The state has some of the highest business-tax burdens in the country, mostly because of the business and occupation tax.

• While unemployment insurance costs will rise less because of last year's reforms, Washington's program is still very expensive relative to other states.

• Workers' compensation premiums are ‘rapidly' increasing. ‘Unless we get reform,' Watt said, ‘our system will get more and more expensive.'

While the state has provided Boeing the lifeline it claims was necessary to host final assembly of the 7E7 in Washington (regardless of the agreement's merits or demerits), the rest of the state's employers continue to suffer in the state's "disadvantageous" business climate.

Though the Senate this year made great strides toward resolving the obstacles in the way of business competitiveness in Washington (and the potential for increased state revenue as a result of expanded business operations), the House failed to follow suit and the measures died.

Those measures included:

• minimum wage reform (ESSB 5697),

• delaying the effect of regulatory rules until the following legislative session (ESB 5052),

• preventing state regulations from exceeding federal standards without legislative approval (SSB 5053),

• requiring the governor to sign agency rules before they take effect (ESB 5257),

• various workers' compensation reforms (2SSB 5378; ESSB 6395; ESB 6317) and

• reforms to the Department of Labor and Industries (SSB 6414; SSB 6391), which recently was issued seven findings by the state auditor for various violations.

EFF recommendations
While serious issues have yet to be addressed concerning the state's agreement with Boeing, legitimate statewide reforms that benefit all Washington employers must be the priority of state officials. Meaningful business reform should serve as the focal point for this year's gubernatorial campaign. Washington will continue to suffer budget shortfalls and economic uncertainty until the state's business climate can be transformed from a "disadvantage" to one that fosters competitiveness and economic expansion. Businesses need a climate that allows them to create jobs, rather than one that forces them to close their doors.

Prepared by: Jason Mercier | Budget Research Analyst | 360-956-3482

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org