Olympia Business Watch

Boeing Got It Right Going Green and the Airlines Are Buying It!

On our flight from Houston to Seattle today, I read Continental Airlines Chairman and CEO Larry Kellner's column in the April inflight magazine.  Kellner talks about his airlines going "Green" and reducing its carbon footprint--in other words reducing its CO2 emissions. Like other airlines, Continental is testing biofuels and electric ground equipment to reduce nitrogen oxides as well.

The airline industry has come in for a good deal of criticism of late about the greenhouse cases aircraft produce.  On Feb. 29, I wrote a column which appeared in many Washington newspapers talking about the heat Sir Richard Branson, owner of Virgin Atlantic Airlines, took for modifying a 747 engine to use biofuels on a test flight from London to Amsterdam.  Despite investing $3 billion in "green" iniatives, mainly alternative jet fuels, starting in 2006, some environmental activists are stinging and persistent in their criticism of Branson and other airlines.

Kellner writes:  "Our primary focus, and the area we can do the most to reduce greenhouse gas emissions, is the modernization of our fleet and streamlining of our aircraft operations. Aready we  have made great progress in this area, due in large part to an investment of more than $12 billion over the last decade to acquire 270 fuel-efficient aircraft...We have placed large orders for Boeing's most environmentally friendly aircraft like the 737-900ER and 787 Dreamliner...Since 1997, we have achieved approximately a 35 percent reduction in emissions per revenue passenger mile flown, creating 1.2 million fewer metric tons of emissions."

Modernizing air fleets is good for our environment, good for our state's economy, and good for local businesses and working families depending on Boeing and Boeing supplier jobs.  Those Boeing jets, Kellner writes about, roll out of assembly plants in Everett and Renton and many airlines, including Washington based Alaska Airlines are chosing Boeing's fuel efficient jets.

A few years ago when Boeing opted to build the 787 instead of the Sonic Cruiser, company leaders correctly identified "efficiency" rather than "faster travel" as what the airlines and flying public wanted.  They chose to go "green" and it is generating plenty of "greenbacks" for our state's economy and our state treasury.  Let's make sure we keep our state's competitive edge and build all of the future Boeing aircraft here too!

Don C. Brunell, President

Paid Family Leave Law Now a "Bet," "Uncertain"

Over the weekend and this morning, several papers ran interesting stories about the mounting troubles facing one of the most puzzling workplace regulations our state has enacted in recent years -- the paid family leave program.  The biggest puzzle is how to fund it, i.e., put the "paid" in paid family leave.

Rachel LaCorte's story for the AP included several notable quotables, including:

"It's going to be problematic," said House Majority Leader Lynn Kessler, D-Hoquiam. "I think there is still some difference of opinion of how it ought to be paid for."  ...

... They are back to the drawing board," Gregoire said. ...

... "We were all frustrated about that," said Rick Bender, president of the Washington State Labor Council, which was among the groups pushing for the paid family leave program. "We thought for sure they could come up with some kind of plan."

If a tax goes to voters, Bender also wants a vote on expanding the program to cover workers who need to take time off to care for a sick relative or deal with their own health problem.

"The only way the public will support it, according to our polling, is if it is a broad-based program," Bender said....

... Senate Majority Leader Lisa Brown, D-Spokane, said that she thinks a ballot measure is likely, and that realistically, benefits may be delayed.

"This is forward-thinking social policy where Washington state is on the cutting edge," Brown said. "It may take us a long time to get there, but I don't doubt that we will." ...

... Rep. Mary Lou Dickerson, D-Seattle, co-sponsor of the measure and co-chairwoman of the task force, said lawmakers are looking at a number of ways to pay for the program, but wasn't ready to disclose what they were yet.

"We all know what the timeline is and we are going to be working hard to make sure that we meet that timeline," she said. "This is a judicious route we are taking." ...

But of course there are other views:

"You don't make empty promises to citizens and create a new program in statute without knowing the most basic components _ how much it's going to cost, who's going to pay for it," said Sen. Janea Holmquist, R-Moses Lake.

Much to think about here:  different conclusions about the feasibility of moving ahead with the program being drawn by legislative leaders and co-sponsors of the program; union talk of a broader (and more expensive, controversial) ballot measure; and considered but undisclosed ideas to pay for the program.

The Olympian's Adam Wilson looked more specifically at the money in this year's budget to start the computer system for paid family leave.  But his story starts out " State agencies are preparing to launch two computer projects that might never be used."  Talk about a bridge to nowhere.

Finally, the AP's Dave Ammons simply puts the paid family leave program at the top of his list of 10 "very expensive big ticket items" the Legislature kicked ahead until after the elections. 

California Forms WashACE Like Coalition to Battle Hidden Taxes and Fees

The California Manufacturers and Technology Association (CMTA), the state manufacturing and technology association counterpart to the Association of Washington Business (AWB) formed a coalition to deal with new taxes and fees.

During the last California budget crisis CMTA and CalTAX, that state’s counterpart to the Washington Research Council, came together to fight the imposition of new taxes on businesses disguised as fees to fill the budget gap. The "Stop Hidden Taxes" coalition consists of a diverse group of businesses and played a key role in thwarting tax-like fees.Under California law as laid out by the Supreme Court in the "Sinclair Paint" case, a simple majority vote fee can be imposed where there is a reasonable nexus connecting the fee payer and the purpose for which the fee is dedicated. If there is no nexus, the fee is actually a tax and must have two-thirds vote of the legislature to pass. 

In tough budget times legislators tend to pass fees to replace declining tax revenues.  We saw that happen in 1993 when business taxes and fees increased by over a billion dollars.  Those tax and fee hikes led to the passage of I-601 which tied state spending growth to population and growth in personal income.

With I-601 rendered impotent over the last few years, voters passed I-960 which reassert I-601’s provision requiring that state tax increases be adopted with a two-thirds vote in the Legislature, require legislative approval for all fee increases and non-binding public advisory votes on tax increases not approved by voters, and provide voters with a detailed cost analysis of all proposed tax and fee increases.

Sen. Lisa Brown (D-Spokane) has asked Washington’s Supreme Court to toss out I-960.If the court strikes down I-960 legislators only need a simply majority vote to raise taxes and fees and taxpayers fear that with a slumping economy, lawmakers may raise both to balance the 2009-11 budget next year.

Finally, in Washington, AWB, the Washington Roundtable and the Washington Research Council formed the Washington Alliance for a Competitive Economy (WashACE) to keep our state competitive and because of Washington’s high dependency on businesses for taxes and fees, fiscal responsibility, taxes and fees are high WashACE priorities.

Don C. Brunell, AWB President

Business Week--A Golden Opportunity for Business Leaders to Connect with Students

Over 30 years ago, the idea of connecting high school students with business leaders to learn about our free enterprise system hatched at the Association of Washington Business (AWB).  The idea was to bring high school juniors to a college campus, at that time Central Washington State University in Ellensburg, and connect them with volunteers from the business community to learn about our market-based system. It was successful from the start.

Business Week has expanded to several states and foreign countries and thousands of young people are Business Week graduates.  Today, it has even expanded into some high schools during the winter months.  Thanks in large part goes to the pioneering work by former AWB chair and Yelm grocer Hal Wolf and the ongoing leadership of Steve Hyer, Business Week's current president and CEO.

AWB is still the founding sponsor of Business Week. Today,it has expanded and now the Foundation for Free Enterprise, a 501(c)(3), sponsors the program and to other university campus sites in our state.   Many companies look at Business Week as an excellent career development opportunity for their people and companies.  For high school students, it is an excellent way to learn about what has made America the success story it is and participate hands on-----and have some fun.

Contact Business Week at 800-686-6442 and if you are a high school student, check the program out. Make it part of your summer plans.  If you are a business leader, go for it.  As president of AWB and a former Business Week adviser, we value the AWB logo on Business Week materials because it is a sign of excellence.

Harris Survey Shows Americans Know Little About Energy---Lots of Misperceptions

Some describe America's energy policy as "lack of!"  Part of the problem is a lack of understanding of the underlying situation we face today which has a huge impact on the availability and price of energy tomorrow.

A Harris Interactive Survey on Energy shows a big gap between what American's perceive about energy supplies and reality.  Harris interviewed 1,333 adult citizens and found that Americans know very little about where their energy comes from, what it takes to get it to market, and the challenges the energy industry faces to meet growing demand.

The survey uncovered four major themes:

• They overestimate the amount of oil the United States imports from the Middle East. When asked which country was the largest U.S. supplier of oil, almost 60 percent chose Saudi Arabia which is actually the fifth largest supplier after Canada, Mexico, Nigeria and Venezuela.  Only one in 10 people correctly identified Canada and only eight percent noted that less than 15 percent of the oil the United States consumes comes from Persian Gulf countries.
• When it comes to the world's largest oil companies, only two percent knew the world's top 10 of the biggest oil companies are owned and operated by foreign govenments.  More than one in three people thought Exxon Mobil, the 14th largest, was among the world's "Big Three."
• When the International Energy Agency projects that 81 percent of the global energy demand in 2030 will be met by fossil fuels like oil, natural gas and coal, only 14 percent chose this answer and 61 percent said less. When the U.S. Energy Information Administration projects less than 10 percent of the U.S. energy use will be supplied by renewables like wind, solar and hydro in 2030, only five percent of the respondents chose the right answer.
• On oil company profits, 42 percent guessed that the industry earned between 16 and 20 cents on every dollar of gasoline sales in 2006.  The right answer is less than a dime.  On investments in new energy sources and research, only seven percent correctly estimated U.S. oil and natural gas companies invested almost $100 billion in emerging technologies in North America alone between 2000 and 2005.  More than one third guessed the industry invested less the $25 billion, the lowest possible survey choice.

No wonder we can't solve our energy problems.  If we don't know the facts, how can we reach a solution.  Remember the outputs are only as good as the inputs. Knowledge should be power, but doesn't seem to be the case in Congress or with the American public today.

Tax Freedom Day Arrives Nationally on April 23

Yeah, it's a gimmick. And a good one. The Tax Foundation's Annual Tax Freedom Day calculation always generates some interesting discussion. In Washington, it comes later, April 29, but that included the federal tax burden. Washington, home to some very rich folks, always shows up on the top on this measure. I think  it's bogus to  include the federal taxes. The comparison of interstate burdens makes more sense when you focus only on things under the control of state and local policymakers.

I've called the TF media guy to see when the state and local tax breakouts will be available.When I find out, I'll let you know.

Britain's Royal Air Force Orders 14 Airbus Refuelers in an Interesting Deal

London's Financial Times reports that AirTanker Ltd., a consortium including "EADS, Rolls-Royce, Cobham,...Thales and VT Group," has been "contracted by the British government to provide 14 air-to-air Airbus A330-200 aircraft to replace the RAF's ageing fleet of "TriStar and VC-10 aircraft."  The refuelers appear to be very similar to the ones the U.S. Air Force decided to procure to replace our aging KC135 fleet.

According to the National Association of Manufacturers (NAM), which is the Association of Washington Business (AWB) national affliate and which recognizes AWB as Washington's state manufacturing association, the AP (3/28, Panja) explains, "Under the terms of the British deal, the planes will be owned by AirTanker, but will fly in RAF (Royal Air Force) colors, providing air-to-air refueling and passenger air transport tasks. The consortium will also have the rights to commercially lease five of the aircraft, which can carry 290 passengers and freight." According to one source, the deal is structured so "that the amount of money the consortium will receive will be directly linked to the amount of air miles flown by the new planes." The consortium is therefore "taking significant risk" that the RAF will "us[e] the aircraft a lot."

Many articles note that the U.K.'s decision follows a similar procurement initiative in the U.S., where "Boeing lost out in the race to land an initial $1.5 billion re-fueling contract for the U.S. Air Force" against Airbus, as Forbes (3/28, Laurent) points out. However, the British "situation...was rather different," in part because "the EADS consortium won the status of 'preferred bidder' back in 2005, with the financing of the bid proving the main sticking point until now." The International Herald Tribune (3/28, Clark), Bloomberg (3/28, Rothwell, Rothman), and the U.K.'s Guardian (3/28, Milner) also cover the story.

AWB supports Boeing's appeal of the U.S. Air Force decision to award the $35 billion 179 replacement refuelers to the Northrop, Grumman and EADS consortium.  "We are hopeful the Air Force will reconsider and award all or at least a large part of the contract to Boeing which would build the replacements at Everett's Paine Field on the 767 airframe," AWB President Don C. Brunell said.

The Japanese and Italian governments already purchased the 767 aircraft.

Don C. Brunell, AWB President

Wal-Mart Takes the Starch Out of Unions---Now Insuring 93 Percent of Associates

Remember a couple of years ago when the unions put Wal-Mart directly in their cross-hairs as the poster child for what is wrong with our health care. They went state-by-state attempting to pass legislation directly targeting Wal-Mart with new costs.  The allegations that Wal-Mart, long hated by the unions because they could never organize their workers, was "the corporate bad guy" because it was skirting covering its workers with health insurance. 

Wal-Mart steadily has taken the starch out of the unions over the last couple of years.  More evidence came to light earlier this year according to Neil Trautwein, health care expert at the National Retail Federation (NRF). He reports Wal-Mart made a concerted effort to cover more of its associates with health insurance and saw a 20 percent jump in coverage this year.

Trautwein says:  "Wal-Mart Stores never get as much credit as they actually deserve on the health care front.  This year's open enrollment data shows that 92.7 percent of their associates have health cover.  Slightly more than half get it through the Wal-Mart plan." 

"I recently saw a demo of their on-line enrollment platform that allows their 1.4 million employees to customize their health benefits in 77 different ways -- by answering 4 very simple questions. It was a truly impressive...and private employers could learn much from Wal-Mart and the retail industry generally," Trautwein reports.

Linda Dillman, executive vice president of benefits and risk management for Wal-Mart Stores, Inc., said: “Just as in the last few years, we are pleased to see an increase in enrollment numbers. With 690,970 associates – and more than 1.1 million associates and dependants in total – now covered by Wal-Mart’s plans, we can see that the improvements we’ve made are being embraced by our associates and their families.”

According to data collected in a survey during the fall 2007 open enrollment period, more than 30,000 associates who chose Wal-Mart’s coverage for the first time reported being previously uninsured. During the past year, the percentage of Wal-Mart associates who reported having no coverage declined from 9.6 percent to 7.3 percent – a figure significantly lower than the 17.7 percent uninsured rate nationwide for U.S. employed workers that was recently reported by the U.S. Census Bureau.

Dillman pointed to the recent changes in Wal-Mart’s benefit plans as being a key factor in increasing enrollment rates. The company added more personalized choices, lower deductibles, pre-deductible health care credits and a $4 co-pay for more than 2,000 covered generic prescriptions, among other changes. As in previous years, children of every associate – both full-time and part time – qualify for health insurance when the parent qualifies.

Wal-Mart also took extra steps to get associates health coverage and enrollment information, including an “Enrollment Made Easy” DVD mailed to every associate’s home. Associates could also go online to access materials and enrollment forms, and use a specially designed web-based tool that helped them evaluate the coverage that best meets their needs.

Don C. Brunell, AWB President

Governor, Make the Right Choice on Toy Regulations--Veto the Bill

As grandparents with 11 grandchildren, four of which are toddlers, we DO NOT want to put unsafe toys in any child's hand whether they live in Seattle, New York, Hong Kong or Dublin. Safety is paramount.

The problem is nearly anything we are exposed to can potentially be unsafe. For example, ingest too much salt and it is hazardous. That does not excuse the fact that in some cases, some products, not just toys, have been unsafe for humans and had higher levels of toxic substances which can be poisonous. So rigorous inspection procedures are necessary for all products.

The underlying problem with Washington's toy safety legislation which the Governor is considering goes too far and puts our state in a precarious position. It really won't prevent toys which some people are concerned about from reaching children's hands, it simply takes the toys off Washington retailer shelves.  People can still buy the toys on line and cross the border to Portland, Couer d' Alene and Lewiston to purchase them and put them under the Christmas Tree. So the question remains:  What good has it accomplished if it only puts Washington retailers in jeopardy?

A couple of days ago, we blogged on the Wall Sreet Journal (WSJ) editorial about the Washington legislation. That editorial is worth another look as the Governor contemplates her actions.  In case you don't have time to log on to the WSJ website, here are the pertinent points.

From the WSJ:

Some small toy makers say they are planning to stop selling in the state if, as they expect, Democratic Gov. Chris Gregoire signs the bill in coming days. The cost of certifying their products as safe under the law, they say, would be prohibitive. The state accounts for about 2% of total U.S. toy sales, which last year equaled $23.5 billion in annual revenues.

Obviously, no one wants unsafe toys in the hands of children. The legitimate questions have to do with the standards imposed. Following the recall of dangerous toys imported from China last year, toy safety has captured the attention of lawmakers responding to public concern. A common national standard makes sense. Lacking that, manufacturers face a plethora of competing, inconsistent regulations.

As the WSJ reports,

Of the laws under consideration at the state level, 24 regulate lead, 18 cover phthalates, 10 set limits on mercury, and 17 address a variety of other potential toxins. With more state laws possible, makers of toys and other children's products are afraid that regulatory compliance will turn into a manufacturing nightmare.

"Having different standards for different states is just going to create complete chaos," says Carter Keithley, the TIA's president.

For Seattle residents, an iconic retailer is at risk.

Don C. Brunell, AWB President

Tolls Are Here to Stay in Many Parts of the U.S.

In many parts of the country, highway and bridge tolls are a way of life. If you want to use the interstate to drive from Baltimore to Philadelphia, you pay $20 in tolls. In Houston, if you use the new multi-lane beltway around the city and the new freeway to Dallas, you pay a toll. Basically, if you want to go faster without the customary delays that we experience in the Puget Sound area, you desposit a couple of bucks.

In the Bay Area, there are six major bridges linking San Francisco and surrounding cities. Regardless of what bridge you take, you pay the same toll. Tolls are used to maintain, replace and build roads and bridges for commuters. In the Bay Area, drivers still have the same congestion we experience in Seattle-Tacoma-Everett, but building highways and bridges around large bodies of water is much more costly, so the state's funding choices are limited. Unlike Houston, where the ground is flat and the city is spread out.

So what is the lesson for Washington?

Consider making tolls permanent. In the 1950s when Washington voters finally approved the SR520 bridge across Lake Washington, the Hood Canal Floating Bridge and the five-mile structure over the Columbia connecting Astoria and the Washington shore, tolls were levied only to disappear when the construction bonds were retired in the late 1990s. Voters made no provisions for expansion and reconstruction. Therefore, tolls on the Lake Washington floating bridge connecting the University of Washington with Kirkland disappeared in the 1980s and now finding the funds to replace it are as difficult as finding a needle in a haystack.

Don C. Brunell, President