LEGISLATIVE ALERT

March 3, 2004

Seven Concerns about the Boeing Contract and Jobs

Bob Williams | President | Evergreen Freedom Foundation
EFF agrees with the governor and many legislators that it is important to keep Boeing and its jobs in our state if possible. However, the Boeing deal is not the answer. The bigger problems causing the loss of Boeing jobs are international economics, Airbus subsidies, top-level mismanagement, and the company's desire to outsource more manufacturing jobs.

The governor's deal with Boeing does not address any of these problems, and a closer look shows the numbers don't add up in claims that it will generate new jobs for Washington.

Concern #1: The Boeing 7E7 contract does not guarantee any net new Boeing jobs. Not one! In fact, Boeing continues to reduce jobs in Washington state in spite of the nearly $4 billion incentive package. {Source: Boeing}

The most optimistic estimate says we might get 1,200 new Boeing jobs in our state from this deal. But Boeing has already eliminated 3,549 jobs since legislators signed the $3.2 billion tax break in June. Of those, 645 have been eliminated since the Boeing contract was signed in December.

Concern #2: Despite Washington’s overwhelmingly large commitment to Boeing, other states and countries will get the bulk of the manufacturing jobs related to the 7E7. All that is left for Washington state is the assembly of parts made elsewhere; and the final assembly of the 7E7 is expected to require only three days per plane! Boeing will need at least 86 orders per year to keep the workforce employed year-round!

Leading to more anxiety among our state’s workers is that Boeing is even planning to reduce its property ("footprint") in Renton by 40 percent!

Concern #3: The state will be required to pay all fees and costs associated with building, operating, maintaining, repairing, replacing and equipping a multi-million-dollar, 40,000-square-foot, 24-hour employee training center [Herald 2/27/04]. The contract stipulates that Boeing “will have exclusive use of the ERC for at least five years” and will have first rights to use the facility in the years following if the company chooses.

One would assume that at least some of the 3,500 workers who have been laid off since last June – or at least some of the 44,000 who have been laid off since September 1997 – would be available to do the assembly required at the new facility, and would need little to no training. It is hard to understand why Boeing, intending to hire no more than 1,200 new employees, will need exclusive use of this facility for five years. Is Boeing planning to use this taxpayer-funded facility to train out-of-state and foreign contractors and subcontractors?

Concern #4: This facility is being built and equipped using federal unemployment insurance funds (Reed Act). Building a training facility for out-of-state – or worse, overseas – workers is not the best use of these limited resources. This is especially true when there are already 44,000 unemployed former Boeing workers in the state.

Concern #5: According to an article by Steve Wilhelm for The Business Journal, entitled “Boeing Sending IT work Overseas,” Boeing is “shifting more of its software programming work to India and other countries, a trend that worries union officials who've already seen the company off-loading to its partners large tasks of manufacturing and aircraft design.”

The article quotes Dave Fennell, Boeing Commercial Airlines vice president of information systems, as saying "There's no point in intellectual companies like Boeing trying to do things that are done as a commodity on the market today… So if it makes sense for them to do it (outsource), why wouldn't they?"

According to the piece which was featured on MSNBC.com: “Boeing's shedding of lower-rung programmers parallels the company's plan to shift much of the manufacturing work on its new 7E7 to outside partners. The trends have led some observers to question the $3.2 billion in tax incentives that kept the 7E7 program here.”

Concern #6: The Boeing agreement is a blank check. Section 10.4.1 of the Contract requires the state to exempt Boeing from any future changes in the law that may impact this agreement and also requires the state to replace any removed provision with one “having economic effect equivalent.” This is evident by the Governor’s 2/2/04 revision to the contract which stripped the Large Cargo Freighter provision but extended the 7E7 tax incentives to the 747-400 freighters.

Even though Boeing can walk away from the contract at any point without any penalties (and hasn’t even committed to actually build the 7E7), Section 12.21 of the contract binds Washington to its pricey commitments until Boeing decides to cease building 7E7s!

Concern #7: This is bad deal for Washington. We are providing nearly $4 billion in tax breaks, roads, dock facilities, unemployment insurance reforms, workers’ comp reforms, a $10 million (minimum) Boeing employee training center, and a state-funded Boeing Aerospace Futures Board. What we got in return was a hope and a prayer.

Bob Williams is president of the Evergreen Freedom Foundation, an Olympia-based policy research organization dedicated to individual liberty, free enterprise and limited government.

Contact: Marsha Richards | Communications Director | 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