Olympia Business Watch

Politics, Red Tape Doom Tri-Cities Project

Proving the press corps doesn't take the interim off, Chris Mulick has a nifty piece of investigative reporting in the Tri-City Herald on the loss of "a major economic development score for the state" -- 400 new jobs, and possibly 625 current jobs, to neighboring Idaho.  The PI also picked up a version of the piece. 

Focusing mostly on intriguing back and forth between project proponents and the Governor's office, the story says a lot about the sometimes chilling effect of our state's legendary permitting process and peculiar environmental politics on our economic competitiveness. 

Boeing Wins a Big One

Today's good news is very good: The Government Accountability Office sustained Boeing's protest of the Air Force's award of the tanker contract to Northrup Grumman.

“Our review of the record led us to conclude that the Air Force had made a number of significant errors that could have affected the outcome of what was a close competition between Boeing and Northrop Grumman.  We therefore sustained Boeing’s protest,” said Michael R. Golden, the GAO’s managing associate general counsel for procurement law.

It seems certain to guarantee Boeing another shot at the contract, with better information and good prospects. Coverage in The News Tribune, the Puget Sound Business Journal, the Seattle PI, and  practically every other NW media outlet. (cross posted at WashACE.com)

Mike Flynn Reports on WashACE

Mike Flynn, formerly publisher of the Puget Sound Business Journal, has launched a valuable new blog, Flynn's Harp. In today's post, Mike reports on the Washington Alliance for a Competitive Economy. He captures the concern of many of us with the current state of the Washington business climate.

Business interests are concerned that policymakers and elected officials may be basking in the glow of national media praise for Washington’s sunny economy and failing to focus on economic storm clouds looming. Foremost among those is the likelihood that the 2009 Legislature will have a $2 billion-plus budget shortfall to deal with.

Read the whole post to learn how we're planning to respond.

And for more on the budget gap, see my column in today's Herald.

Unionization of Colorado Public Employees Moves Ahead: The Minority Rules

In January we posted on the curious, nearly subterranean, ways in which public employees in Colorado gained collective bargaining rights. Odd that we always say it that way, as if all public employees in Colorado wanted collective bargaining. Although I'm not thrilled with the outcome, at least in our state, expanded collective bargaining came about by legislative action and a gubernatorial signature. In Denver, the governor slipped it through by executive order.

Now, we see that the unions continue to gain ground. Hard to tell if it's a move the average public employee supports.

About 6,900 state workers from a pool of 22,500 who were eligible participated in the election, which gave them a choice between Colorado WINS or no union representation. Of those, 5,481 supported the union.

The results were based only on the number of votes cast, but even those who did not vote will now be represented by the union — regardless of whether they pay the voluntary union dues.

Hardly an overwhelming endorsement.

Per Capita Economic Growth Not So Strong Here

Kriss Sjoblom, economics and VP for the Washington Research Council, recently took a look at our state's economic performance. After he saw to this post, he contacted me to say, in essence, not so fast. (So you don't have to click through, the earlier post referred to our state's 2007 economic growth of 4.3 percent, third best in the country.)

When he saw me at a meeting yesterday, Kriss handed me this. Using recent federal data, Kriss examined per capita growth in real (inflation-adjusted) GDP by state from 2000 to 2007. On that basis, we don't look so good, coming in 38th, and sliding from 9th in per capita GDP in 2000 to 11th in 2007. Essentially, our population grew faster than the economy.

Interesting data.

And congratulations to the WRC for a successful 76th Annual Meeting yesterday.

Columbian Look at "Costs" of Tax Exemptions

Today's Columbian offers an editorial evaluation of a tax incentive passed a few years ago (HB 3190). The editorial points out that analysts initially estimated that the state would lose $1.2 million under the deal. Further, they note, it was a very targeted proposal.

This particular bill ...offered the tax incentive to companies manufacturing 12-inch silicon wafers. In other words, the bill essentially screamed “SEH America,” a Vancouver-based manufacturer that does precisely that. But the tax breaks came with crucial requirements. To benefit, a company must first spend $350 million on construction, building improvements or equipment.

SEH America made the investment and got the break. It's paid off.

SEH employment has increased in two years by 43 percent, from 767 workers to 1,093 workers, three-fourths of whom earn more than $31,000 annually, and one-third of whom make more than $62,000 a year.

The Columbian thinks it was a good deal. And quarrels with the analysis that fails to count the economic benefits of the increased investment.

Granted, the state sacrificed, in a way, $1.2 million that would have been gathered without the tax break, if all things had stayed the same. But that’s the key; there’s no way of knowing if all things would have stayed the same. But here’s something we do know. Even with the lower tax rate, the state has collected 15 percent more from the affected businesses.

The problem with that kind of calculation is that, as they say, "there's no way of knowing" whether the incentive was necessary to secure the investment. These are not easy calls. The state does have a good system for evaluating such tax preferences, through the Citizen Commision for Performance Measurement of Tax Preferences, on which I served for a time. It's not easy stuff.

For the economy of Clark County, however, it's nice to see that this one worked out.

90 Percent Meet Reading and Writing Standards ...

Yesterday the Superintendent of Public Instruction announced that 90 percent of this year's high school seniors passed the state's reading and writing standards. That clearly good news, properly celebrated by Terry Bergeson, parents and teachers. Here's Bergeson from the OSPI press release.

"This is a moment we’ve been waiting to celebrate for more than a decade," she said. "Washington’s educators have spent so much time making sure every student is well prepared for college, careers and citizenship, and these results show that hard work has paid off.

And she underscores the key point.

"For the first time ever, we know that the students leaving our high schools have the reading and writing skills they need to succeed in their lives, no matter what paths they choose."

Nothing up yet on the WEA website, but the Seattle PI suggests union critics of the WASL aren't happy.

"There are a huge number of kids who are missing," said Shannon Rasmussen, president of the Federal Way Education Association and the head of a task force that studies education reform. "The presentation today hasn't eased our concerns."

Her gripe is with the exclusion of students who dropped out or were reclassified in other grades. Well, the test is designed to assure that those who graduate have the appropriate skill set. Students who've dropped out (I guess that makes them former students) or are still in school because they've fallen behind would seem to be appropriately excluded.

The Spokesman-Review quotes Bergeson-challenger Randy Dorn, who makes a different point.

"When you have one out of 10 kids not passing, I don't see that as something to celebrate," said Randy Dorn, a former principal and state legislator and current director of the Public School Employees of Washington, who is running against Bergeson.

Sure, you'd like to see everyone met the standards. I'm guessing that unless there are consequences for failure, the motivation to succeed just won't be there for everyone. The students who didn't pass have options (scroll down).

Other stories in the Seattle Times, along with a good editorial, and The News Tribune carries the AP story.

Update Bruce Ramsey provides the graduation rate details in his Seattle Times blog.

2008 AWB Session Review and Voting Record

We've just posted the 2008 Legislative Review and Voting Record to our website. AWB members will soon receive them with the May/June issue of Washington Business, which is in the mail now. Take a minute to review how your legislators voted on business issues in 2007 and 2008.

In the Senate, Republican Senators Jim Honeyford and Linda Parlette scored 100 percent in 2008.

Top ranking House members with 2008 scores of 96 percent were Republican Representatives Larry Crouse, Joel Kretz and Lynn Schindler.

Gov. Chris Gregoire received a 2008 score of 29 percent.

USA Still No. 1 in Global Competitiveness

That's according to the 20th edition of the IMD World Competitiveness Yearbook. Since eclipsing Japan in 1994, the US has enjoyed a long run at the top. But we may be vulnerable. This year, we narrowly escaped displacement by Singapore. More interesting is the analysis of how our current situation resembles and, more important, differs from that of Japan 20 years ago. Professor Stéphane Garelli, Director  and Suzanne Rosselet-McCauley, Deputy Director of IMD's World Competitiveness Center look at the parallels.

Japan’s competitiveness seemed unassailable, with a strong domination in economic dynamism, industrial efficiency and innovation. Then things went very wrong: the stock market went into reverse in 1989, land prices collapsed in 1992, credit cooperatives and regional banks came under attack in 1994, large banks teetered on the edge of bankruptcy in 1997 and a major credit crunch occurred in 1998. Does this ring a bell?

We're in a relatively stronger position.

On the other hand, the differences between the two economic societies are quite large. Apart from a few notable successes (Canon, Toyota, etc.), by the 1990s, much of Japanese industry was in a paralyzed state. The Japanese never practiced “creative destruction.” The US, because of its openness, resilience and entrepreneurship, always seems to find the means to reinvent itself in ways that Japan (and much of Europe) often lacks.

Here's the Business Week report on the study.

Extended Life for the Boeing 767

Like many in the state, we believed that when Boeing lost the tanker contract it meant the end of the line for the 767. Yesterday, the Herald of Everett brought word of silver linings.

... analyst Scott Hamilton, with Leeham Co., believes Boeing's defense loss is the company's commercial gain as Boeing tries to appease airlines waiting for its delayed 787 Dreamliner jet.

"I think, in many respects, Boeing is in a better position having lost the tanker contract because it frees up a lot of capacity," Hamilton said.

That's the kind of line that can sometimes provoke a bit of eye-rolling, but the numbers back him up.

Although Boeing hasn't seen a 767 order for more than a year, as recently as last month, company officials have said they continue to see interest in the jet.

... Hamilton says it will take Boeing until 2010 to get its 767 supplier base in line to increase production. That's still two years before the company will be up to speed on the 787, if Boeing hits no additional delays.

"We are seeing a lot of demand, including for the 767, where we can't in all cases meet our customers' desired positions," said Boeing's spokeswoman, Leslie Hazzard, in an e-mailed statement. "In many areas, including the 767, we may look at increasing rates to support our customers.

And today the Herald carries an editorial reminding readers of the positive effects of the controversial aerospace incentive package.