Olympia Business Watch

All-cuts budget will come first, then talk of new revenue

Partisan divide was clearly on display as AWB's annual Legislative Day began this morning in Olympia. Members of the first panel, Tax & Fiscal Policy, agreed that lawmakers in Olympia will produce a balanced budget that does not include new taxes.

But once they have done that, the talk will turn to taxes. And the disagreements will begin in earnest.

Sen. Joe Zarelli, R-Ridgefield, one of four panelists, began by noting that the recession isn't the only reason the state finds itself in a budget hole. Years of overspending also contributed to the problem, he said.

He also reminded the audience that despite the dire straits the state budget is in, there is actually more money than there was in the last biennium.

"It's very important that we balance the budget, as difficult as it may seem to some, within available revenue," Zarelli said.

Brunell: Thank goodness for farmers

With the holiday season nearly upon us, AWB President Don Brunell gives thanks to America's food producers, a group that leads one of the few bright spots in a persistently glum economy.

America's agricultural exports reached a record $127 billion this year and they are expected to grow another $2.3 billion in 2012, Brunell writes.

The sector got another shot in the arm last month, too, when Congress ratified new free trade agreements with South Korea, Columbia and Panama. Tariffs and trade barriers will fall as a result, and Washington state stands to be one of the biggest beneficiaries.

The trade agreement immediately wipes out a 24 percent tariff South Korea imposed on Washington cherries, reducing prices by 75 cents per pound.

It also phases out South Korea's 45 percent tariff on most apple varieties over the next 10 years and immediately eliminates that nation's 18 percent tariff on frozen potatoes.

"So while our nation and state struggle with record budget shortfalls and a skyrocketing federal deficit, it is good to start this year's holiday season with some good news," Brunell writes.

 

McKenna, fresh from campaign kickoff, shares his 'New Direction' with AWB

On Tuesday, Rob McKenna reportedly served up "some familiar Association of Washington Business-style bromides" regarding government regulation.

That's how the Seattle P-I.com described part of the attorney general's breakfast speech kicking off his 2012 gubernatorial campaign, anyway.

On Wednesday, McKenna stopped by AWB's office in Olympia for a lunchtime visit with some of the state's business leaders, and he took aim at the remark.

"I just have to point out that people who write things like that have never been in a position to deal with the regulations that we're talking about here, as all of you have, as I have been as private legal counsel to small businesses and large companies," McKenna said. "This is not an abstract or hypothetical or idealogical issue. It is real and it has to be addressed in a real fashion."

McKenna makes it clear how he would address the problem in one of three white papers that lay the foundation for his campaign. The first of the papers, A New Direction for Job Creation in Washington State, offers a detailed list of proposals aimed at reducing unemployment.

They include an examination of regulatory policy, as well as competitive tax reform, ending the state monopoly on workers' compensation and liability reform.

But just as he did Tueday in his kick-off speech, McKenna spent much of his time Wednesday talking about education issues.

Brunell: Are we near the tipping point on minimum wage?

With Washington's minimum wage set to go above $9 next year, AWB President Don Brunell wonders in his weekly column whether it's about to reach the tipping point where it does more to harm workers than help them.

Ensuring that people can support themselves is a laudable goal. But as economics professor Bradley Schiller wrote recently in The Wall Street Journal, there is overwhelming evidence that higher minimum wages reduce the availability of jobs at the lowest end of the job market.

Part of the debate over minimum wage is about its purpose, Brunell says. Should it be high enough to support a family? Or is it a floor -- a minimum -- for unskilled people entering the job market?

Research suggests it's the latter. Most adults work at minimum wage jobs only for a short time; more than 70 percent of workers Dr. Schiller studied had moved onto higher paying jobs within two years.

That's similar to Brunell's own experience. He recalls busing tables and scrubbing pots for $1 an hour in the summer of 1963.

It may not have been a lot of money, but the family that owned the restaurant struggled at times to pay him.

"Eventually, they hit a tipping point," Brunell writes. "When they could no longer absorb additional costs they lost their business."

US gov't runs $1.3 trillion budget deficit in 2011

According to the Associated Presss today, the government ran a $1.3 trillion for the budget year that ended last month.  It is the third straight year it has operated more than $1 trillion in the red bringing the nation's debt to $14.8 trillion.

The 2011 budget deficit was the second highest on record. It's slightly ahead of the previous budget year's $1.29 trillion deficit but below the $1.41 trillion imbalance record in 2009. Our record debt is making it difficult for the U.S. government to borrow.

A decade ago, the government was running surpluses and trillion-dollar deficits seemed unimaginable. But those deficits now loom over tense negotiations in Washington.

Congressional lawmakers, led by Washington's Sen. Patty Murray (D), are under pressure to agree by Thanksgiving on where they can cut $1.2 trillion over the next decade. If they cannot, automatic cuts to Medicare, defense spending and other critical areas of the budget would go into effect in Jan. 2013.

As of this very minute, according to the federal debt ceiling clock, each U.S. citizen owes $47,508.  Even more troubling is that each taxpayer owes a whopping $132,165.

 

Brunell: Will America still aspire to space greatness?

Given the country's $14 trillion budget deficit, coming up with the $18 billion needed to launch a test flight of NASA's new space launch system could be a challenge, AWB President Don Brunell writes in his weekly column.

And that's just the beginning. The total price tag for the rocket program that would eventually carry U.S. astronauts to Mars is currently estimated at $35 billion, and it could cost more than $60 billion for an accelerated program.

Why spend the money?

For starters, the U.S. space program has solidified America's leadership role in the world, fostered incredible advances in science and technology, produced thousands of innovations and products we use in our daily lives, and inspired millions of American youth to pursue careers in science and math, Brunell writes.

In addition, we have a clear lead in space. So as other nations emphasize innovation as they attempt to attract research and development, America already has the space technology and R&D here.

Finally, reaching beyond our planet to the stars has long been part of our greatness as a nation.

Our struggles with debt and China's ambitious space agenda are prompting Brunell to wonder, "Do we as a nation still aspire to greatness in space and beyond?"

Thinking BIG about manufacturing and the economy

Don't you wish you had one of these for the drive home on I-5?

 

The team at Lampson International was kind enough to let AWB's Gary Chandler, Kris Johnson and Amy Johnson kick the tires of this crawler for a 3,000-ton capacity crane this morning.

Staff from AWB are in the Tri-Cities today to meet with manufacturers like Lampson (featured here in the spring 2011 edition of Washington Business magazine), Areva and The Bogert Group to hear what they think are the biggest barriers to job growth, expansion and innovation in our state.

Attendees also discussed workforce development and training issues, regulatory concerns and of course, the current state of the economy. The group met at the Port of Pasco's new Osprey Pointe Business Park.

As we've previously noted in this blog, manufacturing is still one of the better paying industries in the state and nation, though it has not been immune to the Great Recession and other economic fluctuations. Still, as Jay Timmons, president and CEO of the National Association of Manufacturers, pointed out this summer,  "manufacturers want to create jobs."

Today's meeting is a continuation of a manufacturing listening tour started in August with a stop in Moses Lake. Tomorrow, we'll be meeting with other manufacturing businesses in Vancouver. Future meetings are also set for Everett and Mount Vernon. 

 

 

 

 

 

 

Brunell: The reality of world competition for America's factory owners

The story of FormFactor, a one-time California company that moved to Singapore in order to survive, illustrates the challenges facing businesses in today's cut-throat global competition.

The company founder didn't want to move his operation out of America, where he made his fortune, but he found himself competing with a Korean company that copied his device and started making it cheaper, AWB President Don Brunell writes in his weekly column.

When Singapore's Economic Development Board offered tax holidays, free property for a plant and headquarters and substantial grants for equipment and materials, he had little choice but to accept the deal.

His company was rapidly headed toward extinction and U.S. officials brushed him off his request for assistance.

As U.S. officials look for ways to restore jobs, they need to consider the reality of today's global economy, Brunell writes. And they need to make decisions carefully, based on economics not politics.

 

Brunell: Withdrawing new EPA rule is a good start, but there's a bigger problem

President Obama's decision to order the EPA to delay implementing new industrial ozone emission standards is a temporary reprieve that will save U.S. businesses as much as $90 billion per year, AWB President Don Brunell writes in his weekly column.

The price tag is that high because, as the EPA admits, the technology to comply with its proposed rules doesn't exist yet. Industry would have been forced to invent it within the next few years, or shut down.

But critics charge that the EPA has shown a pattern of inflating the projected environmental and economic benefits of its proposed regulations, and failing to back up the claims with scientific evidence.

"Federal regulations add hundreds of billions of dollars each year to the cost of doing business," Brunell writes. "Federal law says agencies can add to that burden only when they clearly justify the need and show there is no workable alternative. There is a disturbing pattern that the EPA is ignoring that requirement."

 

R&D moving offshore too

I've been reading Andrew Liveris' book: Make it in America." Liveris is the Australian-born CEO of Dow Chemical Company who believes America is not only losing manufacturing jobs, but the innovation is moving offshore as well because of several factors---costs, proximity to manufacturing facilities, R&D incentives and necessity.

Liveris, a chemical engineer, uses the case of Amazon partnering with E-Ink to develop the Kindle based on a new electronic ink that was developed in the MIT Media Lab in Boston.  But because of costs and LCD technology shifted to countries like Taiwan, the manufacturing of Kindle and Barnes and Noble's Nook, is located in foreign countries such as Taiwan. 

So while it was some solace that even though the manufacturing was occurring elsewhere, R&D was still in America.  Then my bubble burst when Liveris makes the point that China and India are making a strong bid to become the "innovation superpowers" as well.

To back it up, the first e-mail I opened this morning came from the National U.S. India Chamber of Commerce located in Denver citing a Deloitte report outlining the steps India is taking to become the innovation superpower.  And, it is just not India as Deloitte's report states:

"Countries, world over, attract R & D investments by providing benefits in the form of tax credits, super deductions, tax exemptions, grants, etc. Certain countries provide wage bill credits as well."

So while some prominent U.S. politicians and activists distort the real issues and rail about "corporate greed, or tax loopholes and government give aways," China and India are content to let us wallow in uncertainty and carve one another up.

In 2006, the Chinese government launched a 15-year plan to make China into an "innovation-oriented society."  To achieve that goal it needs to increase R&D investments by 85% by 2020. So it is offering incentives to U.S. companies to not only move their production, but R&D there too.  Meanwhile, our Congress and state legislature are toying with the idea of letting the modest R&D incentives simple slip off the books by not acting to reauthorize.

As Liveris states: "where the manufacturing goes, the ideas follow!"  Considering how important manufacturing is to Washington State, we ought to be thinking about what we can do to keep it here and enhancing its ability to compete.

Don C. Brunell, President (DonB@awb.org)

 

 

 

Richland's PNNL is a big advantage for business

More efficient diesel engines. Scanners that check cars at the U.S.-Canada border for nuclear material.  And eventually, a smarter electric grid.

Those are a few of the ways that research from Richland-based Pacific Northwest National Laboratory is contributing to the community, Mike Kluse, the lab director, told AWB members Wednesday during the annual Policy Summit.

The lab, one of just 10 national labs in the country, is working on groundbreaking research on everything from national security to energy. It's important for the business community to work with researchers to make sure their discoveries make it into the marketplace, Kluse said.

"Having a national lab in your backyard is a rare and valuable advantage," he said. "We want to help you."

The lab is a unique public-private partnership. It's been run by Columbus, Ohio-based Battelle since 1965 under a contract from the federal government. It employs more than, 4,900 people, and it's been growing fast in recent years, adding staff and buildings to its Richland campus.

Kluse offered AWB members a glimpse into the kind of research being done at the lab to develop a smarter electric grid and better batteries for electric vehicles. The goal, he said, is to develop game-changing science that is linked to the marketplace.

"Partner with us," he implored the audience. "Help commercialize our technology. Bring jobs to all corners of Washington. We clearly are a resource for every one of you."

Like other speakers at the Policy Summit, Kluse was bullish about Washington.

"This state is well-positioned for the future," he said. "The question is whether we have the collective will to make it happen."

Rosensweig: Exports will be economy's locomotive

There is about a one-third chance that the economy will enter a "double dip" recession, so business leaders should prepare for that possibility, Jeffrey Rosensweig told AWB members Wednesday at the start of the 22nd annual Policy Summit.

But Rosensweig, director of the Global Perspectives Program at Emory University in Atlanta, said economists believe it's more likely that it will grow at about a 2 percent or 2.5 percent annual rate.

And he added that all of the grim economic news misses some fundamental strengths going forward, including America's growing population and predictions that the nation's debt-to-GDP ratio will stabilize or decline in the next few years.

Rosensweig noted that America's population is growing about 2.5 million per year and it's the only wealthy country in the world with a growing population. That makes it harder to lower the unemployment rate. Even if the economy grows 2 percent per year, it's just absorbing new workers -- and not bringing the unemployment rate down.

State revenue outlook nosedives again - down $1.4 billion

Washington's state budget picture took another turn for the worse Thursday when chief economist Arun Raha announced a new revenue projection $1.4 billion lower than the previous forecast.

The bad news, which comes despite strong aerospace, software and agriculture sectors, had been telegraphed well in advance. But that doesn't mean it will be any easier for lawmakers to address, either later this year in a special session or in January when they are scheduled to convene.

A special session seems likely. Marty Brown, the governor's budget director, said Gov. Chris Gregoire held conference calls with legislative leaders, adding that she was "very uncomfortable" waiting until January.

Whenever they meet, AWB President Don Brunell said lawmakers must put aside partisan differences and concentrate on actions that will spur small- and medium-sized employers to start hiring again.

Despite strong employment growth at Boeing, which has more than seven years of commercial orders on its books, and a rebound in software publishing employment, Thursday's report showed that Washington's job market added just 8,300 jobs in June, rather than 13,600 that had been forecast.

Nationwide, there are still more than 6 million fewer jobs than at the start of the Great Recession, Raha said.

Brunell: Boeing's prospects are bright ... for now

Amid all the bad economic news of late, Boeing has supplied some welcome good news, AWB President Don Brunell writes in his weekly column.

The company has completed flights tests of its long-delayed 787 Dreamliner, and despite the delays the 787 remains in strong demand. Boeing Commercial Airplanes Chief Jim Albaugh says there are 830 orders for the 787 from 52 customers, and the plane is sold out through 2019.

Boeing is adding workers and Arun Raha, the state's chief economist, expects hiring to continue for the next couple of years.

So, thing are looking up -- but all that could change, Brunell says.

He cites the National Labor Relations Board claims against Boeing over its decision to build a second production line right-to-work South Carolina, and competition from manufacturers in China, Brazil and Canada -- in addition to rival Airbus -- as notable challenges facing Boeing.

"To survive in this aggressive global marketplace, Boeing needs certainty and stability at home, with its workforce and with government regulators," Brunell writes. "Without it, Boeing's future prospects are uncertain."

 

Timmons: 'Manufacturers want to create jobs'

Manufacturing in the United States continues to offer some of the best-paying jobs, but increasing regulatory burdens and skyrocketing business costs are rapidly threatening to erode the industry and our nation's competitiveness according to Jay Timmons, president and CEO of the National Association of Manufacturers.

Timmons was at Suncadia in Cle Elum Sunday to address members of the Conference of State Manufacturing Associations. AWB, the state chamber of commerce and manufacturing association, hosted the event; AWB President Don Brunell is the current chair of COSMA.

In an interview, Timmons shared his optimism about the industry, but was pragmatic about the challenges facing manufacturing and the country's businesses as a whole. While keeping one eye on the other Washington and the debt crisis ("it's a perfect example of the mess in Washington [D.C.]"), Timmons was frank about the vulnerability of our country's manufacturing industry.

"Other countries are salivating at the prospect of taking away our mantle of economic leadership, so they’re offering incentives, they’re making the regulatory regimes in their countries less burdensome, they’re lowering taxes –- they’re doing everything right while we’re doing everything wrong."

Both Democrats and Republicans in current and previous administrations and sessions of Congress share in the blame, in Timmons' eyes, for the state of the nation's competitiveness climate. Continued increases in corporate taxes, energy and regulatory costs have made it 18 percent more expensive to do business in the United States than in other parts of the world, and that's after you take out the costs of labor, he added.

"But those other costs that we can impact from Washington [D.C.] and the states are the things that are driving up costs of doing business and making manufacturers make decisions they don’t want to make.They’re patriotic Americans. They want to create jobs here in this country, they want to manufacture products here in this country, but unfortunately, they’re being forced by our own federal government to look elsewhere in order to be competitive."

I-1053 legal challenge could make voters ask 'What's the use in voting?'

Voters could not have been more clear last fall on Initiative 1053, The Columbian editorial board wrote yesterday in response to the legal challenge brought this week against the measure.

In Clark County, home of Rep. Jim Moeller -- one of the dozen Democratic lawmakers who signed on as plaintiffs -- the initiative passed with a 71.3 percent approval, the paper writes.

The Columbian brings up the statistic after noting that Moeller's Web page includes this statement: "A big part of my job -- by the far most important part -- is listening to what Vancouver and othe Clark County folks have to say regarding the issues before us."

On I-1053, the people have spoken. Loud and clear. And with respect to a supermajority vote of legislators to raise taxes, they have spoken several times.

Is Moeller listening selectively, the paper asks?

Every time lawmakers overturn the will of the people, they risk alienating them -- possibly to the point that voters give up.

The paper concludes with this warning: "Legislators who disagree certainly have their right to pursue a legal remedy, but that doesn't make them right. And they do so at their own peril, as voters justifiably ask: 'What's the use in voting, if our voice will just be ignored?'"

 

How best to save Puget Sound?

Everyone agrees that Puget Sound is worth saving. The economy depends on it. Recreation depends on it. It's what makes the region unique.

But figuring out how to imrpove the health of Puget Sound is fraught with challenges and tension, points that were underscored Tuesday by a four-member panel that discussed work underway to update the Puget Sound Partnership's original action agenda. The document was developed in 2008.

The panel consisted of Martha Konsgaard, chairwoman of the Puget Sound Partnership's Leadership Council; Gerry O'Keefe, the partnership's executive director; Sam Anderson, executive officer of the Master Builders Association of King and Snohomish Counties; and Sandy Mackie, a land use attorney at Perkins Coie and chairman of AWB's Land Use Committee.

Part of the problem, Konsgaard said, is raising awareness of the issue. "People want to save Puget Sound," she said. "But the challenge is they say, 'Is there a problem?' Many people don't know there is a problem."

The source of the problem isn't what it used to be, either. "The era of the bad guy and one chimney stack is over," she said. "It's really how we're living on the land."

Raha: Don't panic, economy will improve by year's end

When you see bad news from the second quarter economic reports, don't panic, Arun Raha, Washington's chief economist, told AWB members this morning.

Things will improve by the third quarter and especially by the fourth quarter of the  year, he said. That is provided there isn't another high-impact, low-probability shock to the system along the lines of this spring's Middle East unrest and the earthquake, tsunami and nuclear crisis in Japan.

"Right now, we're still recovering but at a slowing pace," he said.

Some positive signs:

• For the second month in a row, home prices rose in Seattle. (Raha quipped that he doesn't care about home prices in Seattle, just New York -- where he still has a house for sale.)
• Auto sales, which were recovering before the supply chain interruption in Japan led to a drop, should bounce back when the supply recovers. Americans are driving older cars on average than they have in years, and there is growing pent-up demand. "We are driving around in old cars," Raha said. "That, historically, has always corrected itself as us going out and buying new cars."
• Employment is poised to pick up as labor productivity growth begins to decline. "We've squeezed everything we can out of our existing workforce," Raha said.

Even though the economy is at a point where it ready to break free, it's being held back by weak consumer confidence. "Demand has come back really slowly," Raha said.

Brunell: Poland's rise as a bastion of free enterprise offers a July 4th lesson

Plenty has changed since 1975, in Poland and America, AWB President Don Brunell writes in his weekly column.

The same year that Business Week began at Central Washington University saw the Polish people impoverished with no right to free speech. Lech Walesa, the founder of the Solidarity movement, was in prison, Karol Jozef Wojtla was archbishop of Krakow and Ronald Reagan was governor of California.

A few years later, Archbishop Wojtyla became Pope John Paul II and Walesa went on to win the Nobel Peace Prize and in 1987, President Reagan challenged Soviet leadership to tear down the Berlin Wall.

Since the fall of communism, Poland has embraced the free enterprise system and three years ago, they brought the Business Week program to a high school in Gdynia, Seattle's sister city.

Ironically, the United States is going in the opposite direction, Brunell writes. An increasing number of regulations are stifling innovation and  forcing jobs and operations offshore.

"As we celebrate our independence on July 4, we should remember what the Polish people know all too well," Brunell writes. "The key to a better life for all citizens is to protect the people's freedom to innovate and create."

Brunell: Under siege from the unchecked federal bureaucracy

Partisan wrangling has brought gridlock to Congress, but federal bureaucrats are finding ways to implement President Obama's programs without congressional approval, AWB President Don Brunell writes in his weekly column.

One example is the National Labor Relations Board, which is carrying out organized labor's agenda after Congress failed to approve union-backed "card check legislation.

Another example is the Environmental Protection Agency, which is systematically implementing its own version of cap-and-trade after the Senate rejected the president's plan.

The end-run around Congress by federal bureaucrats is costing taxpayers and employers trillions of dollars and adding to the national debt, which now stands at $14.3 trillion.

Congress needs to wake up, and regardless of party affiliation, take back control of the legislative branch of government, Brunell writes. "Congress sets policy and federal agencies enforce it -- at least that's how our separation of powers is supposed to work."

Brunell: Jobs for college grads growing at a snail's pace

The nation's ongoing struggle with high unemployment is hitting recent college graduates particularly hard, AWB President Don Brunell writes in his weekly column.

He notes a recent New York Times report that just over 55 percent of 2009 graduates younger than 25 are working in a field requiring a college degree, and nearly a quarter of them are not working at all.

At the same time, there is evidence that America's unemployment rate may not be cyclical, but rather a sign of a new "structural joblessness," Brunell writes. In other words, the number of people unemployed indefinitely is up irrespective of economic times.

One answer to the problem is for government to unshackle the private sector and let it create new jobs. Brunell quotes Martin Regalia, the chief economist for the the U.S. Chamber of Commerce, who says that new government regulations and mandates are stifling job growth.

 "Regalia is correct," Brunell writes. "Unless America empowers the private sector to invest and create new products and jobs, our nation will continue to deal with an anemic job market."

Brunell: Texas leads the nation in tort reform -- and jobs

Reckless lawsuits sometimes make headlines -- a woman is awarded $2.7 million after spilling coffee in her lap, a judge sues a dry cleaner for $54 million for losing his pants.

But each year tens of thousands of anonymous lawsuits choke our court systems, AWB President Don Brunell writes in his weekly column.

And they're not all harmless cases that are quickly dismissed.

Even dismissed lawsuits are expensive and all of us pay the price for this abuse whether we realize it or not, Brunell writes.

In Texas, where officials are pursuing an aggressive -- and successful -- pro-growth, pro-jobs agenda, Gov. Rick Perry recently signed a tort reform law includes a provision requiring the loser to pay court costs and attorney fees of the other party, similar to what's done in some courts in Europe, Australia and Canada.

"The United States is one of the few industrial nations where that doesn't happen," Brunell writes. "But that may be changing."

 

Workers' comp round-up

At long last, the Legislature has passed legislation aimed at fixing some of the problems with the state's workers' compensation system. But what exactly did they approve and what does it mean for your business?

AWB's Kris Tefft has prepared a detailed report of the various bills that made it out of the Legislature this year, including House Bill 2123, the 11th-hour compromise that cleared the way for lawmakers to pass a budget and get out of town.

The bill will, among other things:

• Create a claim resolution option beginning Jan. 1 for injured workers age 55 and over. In 2015, the age limit drops to 53, and it drops to age 50 a year later in 2016. The option allows for the settlement of all aspects of an allowed claim excluding medical benefits.
• Require that settlements must be approved by the Board of Industrial Insurance Appeals.
• Provide a wage subsidy up to 50 percent of wages for up to 66 days to employers who bring injured workers back to light duty or transitional work.
• Call for a study of the frequency and severity of occupational disease claims with a report due by Dec. 1, 2012.

A break in the logjam on workers' comp - vote coming today

It's not perfect. It's less than what employers wanted.

But it's progress, at long last.

Gov. Chris Gregoire and the leaders of the four legislative caucuses struck a deal Sunday that is expected to bring significant savings to the state's troubled workers' compensation system.

Details of the agreement, including the exact bill language, were unclear late Sunday, but the deal was expected to stave off double-digit workers' comp premium hikes next year for the vast majority of Washington employers.

"It's not the full reform we were seeking," said Kris Tefft, AWB's general counsel and government affairs director for workers' compensation. "This package is much less than what we wanted, but it's more than what we have now. It's a true compromise."

Organized labor, which has fought workers' comp reform for years, denounced the deal as "atrocious" and "absolutely astounding." But House Speaker Frank Chopp, who had been standing firm with labor, called the agreement a "fair deal for everyone," including injured workers.

When asked about labor's opposition, Gregoire said it's normal for some groups to express concern whenever there is change. "This is a fair package," she said. "Their interests were discussed."

McKenna: A choice between economic competiveness or high unemployment

It's your choice, Washington: High unemployment or economic competitiveness.

That was the gist of Washington State Attorney General Rob McKenna's message today at AWB's Spring Meeting in Spokane.

While the state's unemployment rate is officially 9 percent, if those who have given up looking for work and part-time workers who have lost full-time jobs were counted, the unemployment rate would be 19 percent, McKenna said.

"If you don't have a job, everything else is almost immaterial," said McKenna. "The effects of unemployment are devastating."

McKenna called for a six-point plan to make Washington more competitive and bring down unemployment rates. For McKenna, the key issues are predictability in the state's regulatory environment, tax and fiscal policy, putting more money into job creation instead of regulation, good infrastructure, a world-class education system and immigration policy reform.

"We need a Hippocratic Oath for government," said McKenna. "First, do no harm."

McKenna faults state government for not taking the needs of business in account by creating a confusing and highly regulated environment. He lauded voters for acting defensively and rejecting Initiative 1098 -- the ballot measure that would have created a state income tax, thus removing one of Washington's strongest advantages in attracting and maintaining businesses. McKenna, however, did stress that raising the B&O tax threshold so most small businesses could avoid paying it, as proposed in I-1098, was worth revisiting in the future. 

"Avoidance of taxes is the second strongest human impulse," said McKenna, who stressed that business will go to the states that offer the most attractive tax structure. "When you start a small business, it seems to me that the second emplyee should not have to be a tax accountant."

McKenna expressed frustration with the state's penchant for studying transportation infrastructure projects to death instead of acting decisively. In contrast, Hong Kong was able to build an entire new international airport during the time it took for all the process surrounding Sea-Tac's third runway to run its course and allow construction to begin on that important project.

"The state has to lead on transportation," said McKenna, who complimented Gov. Chris Gregoire on her commitment to seeing the 520 bridge and Alaskan Way Viaduct replacement projects through to their completion.

Additionally, McKenna would like to see the state take advantage of its high tech expertise and electrify its transportation system -- a measure that would reduce dependence on oil and bring down greenhouse gas production.

Canadian diplomat tells Wash. business leaders to look north

Denis Stevens, consul general of Canada in Seattle, made it clear Tuesday that Canada is ready and willing to partner with Washington businesses.

Stevens touted a long list of Canada's economic selling points during his address at AWB's Spring Meeting, including everything from low business taxes and a tech-savvy workforce to numerous free-trade agreements and an economy that weathered the recession relatively well.

"We've emerged in better shape than nearly every other economy around the world," Stevens said.

His message was aimed at strengthening what are already strong business ties between Canada and Washington state. Some statistics:

• In 2009, Washington exports to Canada totaled $5.3 billion, and imports from Canada totaled $11.8 billion.
• Canada was the state's second-largest export market after China, purchasing 13 percent of Washington's worldwide shipments. (Watch for the next issue of Washington Business for more on this topic -- due out next week.)
• Some 174,000 Washington jobs depend on trade between the two countries.

Stevens highlighted three points during his speech at Spokane's Davenport Hotel: Canada's business investment potential, the work that Canada and the U.S. are undertaking to improve perimeter security without hampering the flow of legitimate travelers and North America energy partnerships.

Layoffs, then closure for iconic Tacoma food processor

After 93 years, a Tacoma food processing company is closing its doors. 

Pinnacle Foods Group LLC announced this week it will stop production of the Nalley's South Tacoma facility by June 25. According to published reports, 139 of the plant's 160 workers will be laid off. Production is being transferred to a Pinnacle-owned Armour Canned Meats plant in Fort Madison, Iowa.

While several factors may have contributed to the plant's closure -- including a decision to move production closer to the source of their famous chili ingredients -- certainly last year's move by the Legislature to nix a tax exemption didn't help matters.

Years ago, the Legislature approved a B&O tax exemption for processors of perishable meats, including Nalley's. The exemption was challenged and brought before the state Supreme Court in 2005, and again Nalley's -- and about 125 other companies -- retained its standing under the exemption.

Last year, the cash-strapped Legislature rescinded the exemption in an effort to collect more revenue. (In this case, about $18.8 million over five years.) That, in turn, raised the tax rates for some of the exempted companies, including Pinnacle. 

Was it the only factor in Pinnacle's decision to close the Tacoma Nalley's? No.

Was it another consideration for a company operating in an already difficult economy? Research on competitiveness would say yes: When you take away those exemptions, you increase taxes, which means less money for re-investment, expansion and jobs. In the case of Nalley's and most every other business, that's a big consideration for many employers barely keeping the doors open these days. 

For a company already on the edge, losing a tax exemption may be the final straw.

Nalley's should serve as reminder to lawmakers that attempts to raise revenue by closing exemptions could have the unintended consequence of reducing jobs -- and lowering state revenue.

Senate budget banks on workers' comp bill

The Washington State Wire reported Tuesday that Senate Republicans were insisting that Engrossed Senate Bill 5566 be included in the Senate's budget proposal and, sure enough, here it is.

The bipartisan Senate spending plan assumes passage of the bill, meaning it is now officially NTIB -- Necessary to Implement the Budget.

It's an important designation because it means the bill did not die in yesterday's cutoff, despite organized labor's campaign to stall it in the House.

The bill achieved the status thanks to the Senate's recognition that voluntary settlements -- which have drawn the most heat from opponents despite clear evidence that they work -- would actually save the state something like $16 million in reduced workers' comp premiums over the next two years. That's in addition to the estimated $1.2 billion savings the bill would bring to the overall workers' comp system during the first two years.

"This makes it more difficult to walk away from," Senate Republican Leader Mike Hewitt, R-Walla Walla, told reporter Erik Smith.

AWB's Kris Tefft called it "a nice chunk of change in a tough budget climate."

It shouldn't come as a surprise that the Senate budget writers included ESB 5566 in their proposal. After all, the chamber already passed the bill with a strong bipartisan vote.

Still, it's getting harder by the day for the House to keep pretending the issue will just go away.

Ore. labor leaders hailed lump-sum option. Why not here?

Why, exactly, are Washington labor leaders so inflamed over the prospect of voluntary settlement agreements?

Giving injured workers the option to take a lump-sum settlement rather than a lifetime pension from the state Department of Labor & Industries is a key element of Engrossed Senate Bill 5566, the workers' comp reform bill passed by the Senate in a bipartisan vote. It's one way to lower the cost of the system over time (a whopping $1.2 billion the first two years, according to the fiscal note) without reducing worker benefit levels.

But judging by the uproar from Washington's labor union leaders, who are working hard to prevent the bill from getting an up or down vote in the House, you might think it was an idea universally loathed by labor officials everywhere.

That's not the case.

In 1990, Oregon became the most recent of the 44 states to allow voluntary settlement agreements in workers' comp claims as part of a celebrated reform package. The report from the advisory committee that negotiated the landmark bill shows that labor leaders there viewed lump-sum settlements not as a threat, but rather as a benefit.

Wash. rates poorly in new report on state labor markets

Washington ranks among the worst states in the country in a new report that summarizes the overall level of state labor and employment regulations.

Relatively high labor costs -- including the nation's highest minimum wage, and very high unemployment and workers' compensation costs -- are partly responsible for the state's Tier III ranking in the new report from the U.S. Chamber of Commerce.

Other factors cited in the report, titled The Impact of State Employment Policies on Job Growth (pdf), include numerous labor and employment mandates that exceed federal standards, and one of the highest rates of private-sector unionization in the country.

Only Hawaii, New York and Nevada have a higher percentage of private-sector union members, according to the report. Washington's private-sector unionization rate is 12.6 percent; the state's public-sector unionization rate is 56.8 percent.

Seattle Times: House deserves to vote on workers' comp reform

The Seattle Times called on House leaders this weekend to unstick the one bill that will bring true reform to Washington's ailing workers' comp system.

"The members of the House should be allowed to vote on it," the paper said.

The controversial element of Engrossed Senate Bill 5566 - giving injured workers the option to negotiate a lump settlement rather than take a lifetime pension - is not an attack on workers, the paper said, and is in fact a better answer to the system's problems than the one offered by labor unions and trial lawyers, which is to raise taxes on employers.

"The problem is that is a tax on jobs, and the required increase in the tax is very large, and jobs are in short supply," the editorial correctly observed.

The Columbian also weighed in on workers' comp this weekend with an article that examined some of the reasons for Washington's troubles, including fraud and abnormally high pension awards.

"If you're going to be hurt on the job, Washington is the place to do it," reporter Courtney Sherwood writes in a piece that explores the subject in more detail than most news reports.

Brunell: There's no money

Rather than stand at the barricades fending off change, as they have been in Wisconsin, public-sector unions should be using their experience and talents to make government more affordable, AWB President Don Brunell writes in his weekly column.

The confrontation between Wisconsin Gov. Scott Walker and state employees focused the nation's attention on government unions. Unlike the unions that formed in the 1920s and '30s to fight for better working conditions and wages, today's public-sector unions are largely suburban and white collar.

Studies show that public employees earn higher pay and benefits than private workers in 41 of 50 states. What's more, they are major funders of the "bosses" they end up negotiating contracts with.

The problem now, Brunell says, is that there is no more money. Business as usual is not an option. It's time to work for a solution that works for both the private and public employees.

Brunell: It's time to quick kicking the can down the road

Two years ago in a speech to U.S. House Democrats, Microsoft CEO Steve Ballmer predicted that America was headed toward a fundamental economic reset, AWB President Don Brunell writes in his weekly column.

According to Ballmer, the nation's economy was fueled by unrealistically cheap debt.

Since then, our national debt has continued to grow and now surpasses $14 trillion, Brunell writes. Gov. Chris Gregoire has repeatedly told state lawmakers we must make fundamental changes. We have to quit kicking the can down the road in the hope that our problems will magically disappear.

Doing that means reducing spending, refraining from adding new programs we can't afford, sharing in the sacrifice and using our resources to create jobs, reduce our trade deficit and become less dependent on foreign oil.

For decades, local, state and federal politicians have kicked the can down the road, approving programs with little thought of how to pay for them, Brunell writes.

That must stop. Now.

Lt. Gov. Brad Owen wants more diverse economy - and fewer NIMBYs

Lt. Gov. Brad Owen told AWB that Washington needs to diversify its economy in light of emerging Boeing competitors in places diverse as Brazil and China.

Owen, who spoke shortly before the announcement that Boeing won its bid to build the next generation Air Force tanker, noted the growth of Brazil's Embraer, which just opened a manufacturing facility in Florida, as well as China's development of the C919, a competitor for Boeing's 737.

Boeing realizes who its competitors are, Owen said. "The point is, we have to know this," he said Thursday at AWB's weekly Lobby Lunch meeting. "I don't think we can sit here and rely on The Boeing Company to continue to support the state of Washington for the next 30, 40 years down the road. They will continue to be incredibly important, but we need to find ways to diversify."

Owen, who was actually acting governor at the time of his visit, noted that he's now in his 35th year of public service in Olympia, counting his time in the House and Senate. As lieutenant governor, he has traveled on several trade missions, including eight or nine visits to China.

Boeing gets Pentagon nod

It's the decision the state has been anticipating for months, and at about 2 p.m. today, the word finally came down from the other Washington: It's Boeing.   

Representatives from the U.S. Department of Defense today announced they've awarded The Boeing Company a $35 billion contract to produce 179 aerial refueling tankers. The tanker will be built primarily in Everett and Wichita, Kan., and will mean 50,000 jobs. Boeing's bid won out over a competing bid by the European Aeronautic Defence and Space Company, or EADS, parent company of Airbus.

Recent analyst speculation indicated the bid tilting in EADS' favor. Lt. Gov. Brad Owen, speaking at noon today before AWB's Lobby Lunch guests, indicated he and the governor were anxious about today's decision. But in the end, Boeing got the nod.

AWB continues to support Boeing’s NewGen Tanker effort. EADS could still block the Boeing contract in Congress. So the battle is not over as yet, but as AWB President Don Brunell said today, "this is a giant step forward."

Congratulations to one of AWB's longtime member companies on this important decision for the company, its employees, their families and the state of Washington.

Read more about local reaction to the decision here: 

• Statement by Gov. Gregoire: "a great day for The Boeing Company"
• Washingon Aerospace Partnership: "a victory for the aerospace industry in Washington state"

 

Brunell: Facts, not hysteria, needed in coal debate

The debate in Olympia over whether to speed up the closure of TransAlta's coal-fired electricity plant near Centralia reveals an anti-coal hysteria that ignores key facts about our economy, families, factories, hospitals and schools, AWB President Don Brunell writes in his weekly column.

1. Even if we reach our energy conservation and renewable energy goals for 2035, we will still need to generate the same percentage of electricity from coal.
2. Activists ignore the fact that not all coal is the same. The coal that TransAlta uses its Centralia plant is the kind of low-sulfur coal that China covets.
3. President Obama supports investments in clean coal technology.

While America fights over the future of coal-fired plants, China is investing heavily in clean coal technology. It makes sense. Wind and solar are going to be important energy sources, but it will be hard to get them beyond 10 percent of the total power supply.

So until nuclear power is the world's main energy source, the question is not whether to use coal, Brunell says, but how to use it better.

Private sector steps up to promote Washington tourism

Washington state is poised to get out of the tourism promotion business, but the private sector is stepping up to fill the void.

It's only fair, AWB President Don Brunell writes in his weekly column. After all, employers have often called on government to change the way it works, to think outside the box.

Washington's budget shortfall is driving the change.The governor's proposed 2011-13 budget calls for the elimination of the Washington State Tourism office by June 30, and House Ways & Means Chair Rep. Ross Hunter, D-Medina, released a supplemental budget that would end funding for tourism promotion three months earlier.

That's why George Schweitzer, chief operating officer of Red Lion Hotels, is working with others to create an alliance of industries that directly benefit from tourism to pay to promote Washington.

They understand that tourism is too important to our state's economy to allow its promotion to wither because of budget cuts.

 

Gov. Gregoire's Keynote Remarks at AWB's 2011 Legislative Day

(Recorded: Feb. 03, 2011) Gov. Chris Gregoire’s keynote remarks at AWB's annual Legislative Day luncheon. Topics include unemployment insurance, workers' compensation, state employee pensions and education.

Tax incentives boost state economy, drive innovation lawmakers are told

Eliminating state tax incentives for manufacturing businesses will hurt companies, and ultimately hurt the state’s economy.

That was the message delivered Wednesday to members of the state House Committee on Community Development & Housing by representatives from Greater Spokane, Inc. and the Association of Washington Business.

Tax incentives, sometimes referred to as “loopholes” by critics, are coming under intense scrutiny this year as lawmakers attempt to deal with a huge budget shortfall.

Before they make any decisions about them, however, lawmakers received an overview of Washington’s tax current incentives, including a look at the different types and how they help boost the state’s manufacturing sector in particular.

Amber Carter, AWB’s government affairs director for tax policy, noted two of the most successful tax incentives: The manufacturing and equipment sales and use tax exemption, which AWB helped establish in 1995, and the research and development incentive.

A recent study of the M&E exemption found it led to the creation of 58,000 new jobs in Washington, an additional $27.5 billion to the state's economy, and additional revenue to local governments, Carter said. “All of these things happened earlier that what was initially predicted,” she said.

Brunell: California is bleeding manufacturing jobs. Are we next?

State lawmakers will be looking for new money under every pebble when they convene in Olympia on Monday, but it would be a mistake for them to repeal so-called "tax loopholes," AWB President Don Brunell writes in his weekly column.

When money is tight, it's easy to presume that businesses will simply cough up the extra cash, but there are two problems with that line of thinking, Brunell writes. "First, the extra tax burden will cause some businesses to stop hiring or close altogether. Second, eliminating tax incentives tells prospective new employers, 'Go away, we don't want you here.'"

As evidence that tax incentives work, Brunell points to Washington's experience with them over the years, as well as California's. California's combined state and local sales tax is the highest in the nation, yet lawmakers there have consistently rejected proposals to reduce the sales tax for manufacturers, Brunell writes.

"Tax incentives work," he says. "So when someone starts bellyaching about lost revenues and 'tax loopholes,' tell them to look at what is happening in California."

Brunell: U.S. innovation is the answer to safer oil production

President Obama's recent drilling moratorium along the East Coast and parts of the Gulf of Mexico may have helped Washington state's crude oil supplies in the short term, but the long-term fate of energy development in Alaska is uncertain, AWB President Don Brunell writes in his weekly column.

Interior Sec. Ken Salazar has said the department will honor existing leases, but he is undecided about future ones.

That's significant for Washington because Alaska is the primary supplier for our state's refineries, which account for 30,000 Washington jobs, $1.7 billion in personal income and nearly $160 million in state and local sales and business and B&O taxes.

American families need affordable energy from reliable and predictable sources, Brunell writes. Accidents like the Deepwater Horizon blowout are not a reason to stop exploring for oil. Historically, America has a history of learning from our mistakes, innovating new technology and expertise in the process.

"Accidents and tragedies in energy production are not reasons to give up," Brunell writes. "Instead, they should spur us to use our expertise, technology and innovation to make energy production safer and more efficient here and around the world."

 

Research paper shows contracting out for services could save state hundreds of millions

Washingon state could save as much as $700 million per biennium by contracting out some public services, according to a new report from Thrive Washington, the research series from the Washington Roundtable and Washington Research Council.

That's the best-case scenario, but even under a worst-case situation the state could save $80 million, according to the report "The Case for Contracting Out." A middle-range scenario predicts savings of $320 million per biennium.

The ongoing series offers lawmakers a set of policy recommendations for transforming state government in light of the multi-billion budget deficit.

Some areas the report claims are ripe for contarcting out include maintenance of public buildings and grounds, human services, bus services, parks, recreation and campgrounds, prisons, state motor pool maintenance and information technology services.

"Contracting out is not a fad in government reform," the report states. "Since the 1970s, contracting out has increased across all levels of government."

9 steps to budget sustainability in Washington state

Thrive Washington, the new research series from the Washington Roundtable and the Washington Research Council, released its second report today entitled "Nine Steps to Budget Sustainability in Washington State."

The series is intended to give lawmakers a set of policy recommendations for transforming state government in light of the $4.8 billion 2011-13 budget deficit.

Here's a quick look at the nine steps - the details are found in the full report.

1. Manage the size and compensation of the state workforce to improve efficiency.
2. Improve budget transparency.
3. Reinstate a firm expenditure limit.
4. Implement sound pension reforms.
5. Expand use of the State Efficiency and Restructuring Account.
6. Examine inventory of real property assets for possible sale.
7. Leverage the rainy day fund to protect against future downturns.
8. Better manage debt service.
9. Integrate priority-based budgeting with performance reviews.

Brunell: How Washington can avoid becoming like France

Eventually the bill comes due. That's the problem with generous European-style government entitlements, AWB President Don Brunell writes in his weekly column.

Over the last month, France has been wracked by protests over the government's decision to raise the retirement age from 60 to 62. Yet the reform is only the start of what's needed for Europe's debt-ridden countries.

America could find itself in the same position - more mandates than it can afford- if we don't change our ways, Brunell writes.

Rather than move toward European-style entitlements, President Obama must look at the disastrous consequences of those policies. Here in Washington state, the governor and legislators must make changes, as well. Already, the state and local governments have pension funding problems.

"Our leaders need to identify which services government must provide, shed the rest, and find new and more innovative ways to deliver vital services," Brunell writes.

"Voters are not in the mood to raise taxes. They sent that message loud and clear on Nov. 2."

Thrive Washington offers road map for state government re-set

The Washington Roundtable and Washington Research Council launched a new research and communication series today aimed at helping Washington scale back government spending while still preserving essential services.

Organizers says the series, called Thrive Washington, will provide lawmakers with state policy recommendations that, if enacted, will allow the state to transform the way government provides services in a responsible fashion - one that not only preserves services but also lays a foundation for economic growth.

According to a press release, the series will:

• Examine key budget issues
• Highlight best practices from other states
• Unveil opportunities for reform, efficiency and improved service delivery in Washington state
• Evaluate economic and fiscal impacts of current state policies
• Assess how Washington is positioned against competitors
• Explore how the state can leverage lessons learned
• Put forth solutions

The first paper, Charting a New Course, is available online. It lays out some of the history behind the state's current budget predicament, and it also provides a sense of optimism by noting that everyone - from Gov. Chris Gregoire to the leaders of both houses of the Legislature to the general public - is ready for a re-set.

The second paper, Ten Steps to Budget Sustainability in Washington State, is due out later this month.

For more detail, check it out online and follow the series on Twitter (@ThriveWA).

 

NW Cable News examines I-1082, promptly shreds foes' key talking point

 



Northwest Cable News aired a segment yesterday on Initiative 1082 that featured an interview with AWB's Kris Tefft speaking on behalf of the measure, and state Rep. Brendan Williams, D-Olympia,  speaking against it.

Tefft succinctly summarized some of the arguments in favor of I-1082, which would end Washington's monopoly on workers' compenation insurance by allowing private carriers to come into the market:

• Washington's mandatory state-run workers' compensation insurance is expensive and is getting more expensive with every year.
• Looking across the country, where 46 states allow private insurance carriers into the system, rates are going down or holding steady. Competition drives efficiency.
• I-1082 would offer some immediate tax relief to employees who often pay a portion of their workers' comp insurance premium at the moment but would no longer do so if I-1082 is approved.

When it was his turn, Williams made sure to mention the three letters that have become a mainstay of the anti-1082 camp: AIG. The unpopular insurance firm has nothing to do with I-1082, and yet opponents of the initiative bring up the company's name at every opportunity in hopes that its bad connotation will spill over to the initiative.

"Let's consider one of the groups that supports I-1082," Williams said, "AIG."

Only thing is, they don't, which the segment makes abundantly clear.

KPLU covers I-1082: In the end, it's a choice between troubled government system vs. free market

KPLU radio reporter Bellamy Pailthorp examined Initiative 1082 this morning, and concluded with this line:

"In the end, it's a question of what you trust: a government-run system that no one denies urgently needs reform, or free market forces and the changes private competition would bring."

That's a good summary of an issue that can seem complicated and even dry, as AP reporter Curt Woodward noted in his article yesterday.

Pailthorp's segment captured the business community's growing frustration with the Legislature's unwillingness to buck the labor union and trial attorney lobby by fixing problems with the state's workers' compensation system that have been growing for years.

"The business community finally said enough is enough, we're going to take our case to the people," said Patrick Connor, Washingtons state director for the National Federation of Independent Business.

Brunell: A state income tax would be economic suicide

The question voters should ask themselves before voting on Initiative 1098 is, "Will we be better off with an income tax?"

The answer, AWB President Don Brunell writes in his weekly column, is "No."

The idea has multiple strikes against it:

• Economists agree that it's never a good idea to raise taxes in a recession. Increasing the tax burden on small employers - many of whom file taxes as individuals - makes it harder for them to add or retain employees.
• Experiences shows there is is always bracket creep. When the federal income tax was introduced in 1913, less than 1 percent of the population paid the tax, which ranged from 1 percent to 7 percent. Within five years, the marginal rate had skyrocketed to 77 percent.
• Gov. Chris Gregoire has indicated she will vote for the tax, but her own Department of Commerce touts Washington's lack of an income tax as an incentive to draw employers to the state.

Bringing a state income to Washington likely won't solve the state's revenue problems, but it will create a host of new problems. Brunell quotes Arthur Laffer, the famed economist, who said I-1098 would, in one fell swoop move Washington from "one of the lowest-tax states in the nation to being one of the highest. It's economic suicide."

Read the full column, and check out the Defeat 1098 website.

Brunell: Government by regulation is paralyzing our nation

In the last few years, America seems to have forgotten about Lincoln's famous words "that government of the people, by the people, for the people shall not perish from the earth," AWB President Don Brunell writes in his weekly column.

Instead, we have government by regulation - and it's paralyzing our nation, he writes.

The growing mountain of costly, overlapping and often conflicting government regulation has stymied growth and led investors to sit on the sidelines. A provision of the federal health-care reform law requiring employers to fill out an IRS 1099 form for every transaction that exceeds $600 is one example.

The Environmental Protection Agency's imposition of cap-and-trade legislation -- which essentially circumvented Congress -- is another.

It's not only harmful, but it's also unecessary, Brunell writes. The free market responds to consumer demand for products like biodiesel fuel and concentrated laundry detergent, which requires less packaging.

"That's solving a problem the old-fashion way through the law of supply and demand, not a 2x4 across the head from a bureaucrat," he writes.

Partnerships with business key to progress in education

Washington state should take the opportunity to develop a long-term strategic plan for K-12 educations -- with input from the business community -- in the wake of its failure to earn a spot in the federal Race to the Top funding program.

That's just one of several lessons learned mentioned during today's conversation with K-12 leaders at AWB's Policy Summit in Blaine. Today's panelists, including State Superintendent of Public Instruction Randy Dorn, Renton Schools Superintendent Mary Alice Heuschel and the U.W. Center on Reinventing Public Education's Dr. Marguerite Roza, all acknowledged the state's shortcomings with respect to the state's Race to the Top applications. In hindsight, though, the state's poor performance could serve as a catalyst for change that will revamp the state's K-12 system.

"Winning states have clear vision as to where state's education system is going," said Roza. "These same groups have, with heavy business presence, created a strategic plan. That’s what’s missing here in Washington." 

One bright spot in the state's application was its STEM -- science, technology, engineering and math -- program. Washington's STEM Initiative is designed to improve student achievement in these core subject areas in a way that increases effective teaching and learning while also meeting the needs of employers and the economy. Heuschel's district includes more than 15,000 students who speak 92 different languages. Classroom learning today looks very different from even 10 years ago, she said, and trying to address students' diverse learning needs is a significant challenge.

"Washington STEM gives us an opportunity to pool resources in a new and targeted way, to look at our students and make sure they have the skills necessary to succeed in the business world, and get some agreement on what those skills are," said Heuschel, who also serves on the Washington STEM board.