Nov. 11, 2015, © Leeham Co. Boeing’s two leading unions, the IAM District 751 and SPEEA, are girding for a second try in the Washington State Legislature to retroactivity tie job retention to $8.7bn in tax breaks given by the state in 2013 in exchange for the 777X final assembly line and the airplane’s wing production factory being located in Everett (WA).
IAM 751 is Boeing’s “touch labor” union that assembles all the 7 Series airplanes in Washington State. The District also represents some Boeing employees outside Washington. SPEEA is the engineers union that represents all in-state engineers and technicians under contract to Boeing.
The 787 assembly site in Charleston (SC) is not represented at this time by any union.
Leaders of 751 and SPEEA Monday said they will renew their efforts to tie jobs-for-tax breaks when the next session of the state Legislature convenes in January. Efforts in last January’s session came up short, largely overshadowed by the bi-annual budget session that required special sessions extending into the summer recess because no agreements could be reached.
Other states do it, why not Washington?
HB2147, the jobs/tax bill, never made it out of the House Committee to the floor for a vote, where 751’s political director Larry Brown thought there was a good chance of passage in the closely divided, but Democratically controlled chamber. If it passed the House, the bill’s chances in the Republican-controlled State Senate were less certain.
But Brown and Jon Holden, president of 751, said polling across the state indicated broad support for job guarantees tied to tax incentives. Eastern Washington (east
of the Cascade Mountains divide) and Southwestern Washington trend Republican and conservative. The Puget Sound area, where Boeing’s 737 and wide-body factories are located, and Northwestern Washington, trend Democrat and liberal. Because King and Snohomish counties are homes to Seattle, the two factory complexes and large blue-collar labor forces, politics in the state trends Democratic, though in recent years the state has become more closely divided.
This presents a dilemma for Gov. Jay Inslee, a Democrat who has to appease unions but who spent a lot of political capital supporting Boeing in the 777X contract give-back the company required of the IAM as part two of the two part prerequisite to site the 777X in Everett. Part 1 was the tax package, the largest in US history.
But there were no job guarantees tied to the package, claim the unions, and Boeing immediately announced engineering jobs would be moved out of state. There are 3,600 fewer Boeing jobs in Washington in 2015 than in 2013, when the tax package was approved, and this is what has 751 and SPEEA up in arms.
In a press conference Monday at 751 headquarters in South Seattle, Holden, SPEEA president Ryan Rule and State Rep. June Robinson (D-Everett), sponsor of HB2147, said that other states that have given Boeing tax incentives require new jobs in exchange. These states include South Carolina, Oklahoma, Missouri and Alabama, among others.
Not so in Washington, they said. Robinson said her bill would require a jobs guarantee, retroactive to 2013’s job levels. This provision is called a claw-back.
The officials claimed Boeing is moving jobs from Washington to these other states to meet the new, local job requirements. In effect, this permits Boeing to double-dip on tax breaks, they say: first, in Washington, where there is no new-job requirement, then with jobs taken from Washington, these are put in the states where there are job requirements.
One 751 official privately marvels at Boeing’s ingenuity.
Not surprisingly, Boeing has a different view. The company successfully kept the bill in committee last session. The company continues to oppose the new effort.
“[The] 777X will employ 10 percent more factory employees in Everett than today’s 777,” a spokesman wrote Leeham News. (Emphasis is the spokesman’s.) Boeing declined to be specific about job numbers.
The increased number of employees will be despite automation and robotics on the new wing production and final assembly line that does not exist today on the 777 Classic line, the spokesman wrote.
“As for advanced manufacturing, it will improve efficiency and quality while at the same time improve employee safety. Employees currently building the fuselage sections will either transition to working with FAUB or move to other positions on the 777 program– or to other programs where there is demand for their skill set.”
The Boeing spokesman rejected union demands for a jobs-for-tax break requirement.
“Washington state’s aerospace tax incentives already have the strictest accountability standards of any Washington tax incentives,” he wrote. “They are performance-based—the incentives require Boeing to build the 777X, including its all-new composite wing, exclusively in the state. Furthermore, since the 2003 incentives were enacted, Boeing has added nearly 30,000 employees locally. And the 2013 incentives will result in additional aerospace job growth, as 777X planning and production gets underway over the coming years. Indeed, significant expansion of Boeing’s Everett plant, where Washington employees will build the world’s most advanced wing, is already well underway.
“Second, while we can’t speak on behalf other states’ tax policies, what I can tell you is that each Boeing location operates with different business conditions, talent pools and capabilities. Our view is that in Washington state, linking already accountable and effective tax incentives to arbitrary job creation numbers is unnecessary and harmful to the competitiveness of the local aerospace industry.”
Indeed, during the previous Legislative session, Boeing lined up several businesses and at least one trade association to oppose the jobs bill–though most of their opposition was truly focused on a companion bill, HB1786, that requires a minimum $15/hr wage, a hot issue in the state. Seattle voters approved a $15 wage last year, as did voters in the suburb of Sea-Tac, where the commercial airport in located.
“Due the global nature of our business, when it comes to employment, there will be occasional fluctuations as Boeing assesses risk and responds to marketplace imperatives,” the spokesman wrote. “The important thing is the big picture, which shows a strong commitment by Boeing to Washington state which it further confirmed by committing to build the 777X, including its all-new composite wing, in the state. We expect successful and long production runs of the 777X and firmly believe the tax incentives have the strictest accountability standards of any incentives in the state. Claw backs are unnecessary and harmful because they undermine the ability of aerospace companies to respond nimbly to competitive threats. Claw back provisions added to incentives after Washington companies have already relied on them are particularly harmful, as they cast doubt on the state’s willingness to stand behind bills that have been signed into law. Such uncertainty would make Washington a less attractive place to do business.
“Additionally, while the 2013 tax incentives are tied directly to the 777X, Boeing continues to invest in numerous other airplane programs in Washington state, including the 737 MAX, 747-8, 767, 787, P-8, and Tanker. Imposing arbitrary job number requirements on Boeing could impair its ability to respond to economic and business realities by optimizing resources across these programs.”