March 1, 2021, © Leeham News: Two bills before the Washington State Legislature intend to create long-term strategic plans to grow the state’s advanced manufacturing sector in general – and the space industry in particular.
To this we say yes, hell yes and amen.
North America’s largest aerospace cluster has lurched from crisis to crisis over the past 20 years, with elected officials scrambling to meet Boeing’s demands for tax, workforce and labor concessions.
And – much to our dismay – for most of the past two decades, leadership in the state Capitol of Olympia has been content to cobble together ad hoc responses with only the faintest lip service toward any kind of long-range strategic planning for future industry needs.
These bills – Substitute House Bill 1170 and Substitute House Bill 1190 – have the potential to change all of that.
As of last week, both bills were in kind of a Legislative limbo, according to Jerry Cornfield of Sound Publishing, who is the dean of the Washington state capitol press corps.
SHB 1170 has passed out of committee and is awaiting action in the House of Representatives. It calls for a wide-ranging study of steps Washington state government could take to bolster aerospace and other advanced manufacturing sectors. It’s got strong bipartisan support, but if it isn’t approved in a vote by the full House by March 9, it’s effectively dead for the session.
The companion bill, SHB 1190, seems stalled, Cornfield said. It’s a narrower bill that calls for studies aimed specifically at Washington’s growing space industry. But bills that call for studies can and do get inserted into budget bills later in the session, he said, “because it’s easier that way.”
It’s our hope that the House of Representatives approves both measures and moves them to the state Senate.
We should point out that neither bill specifically targets Boeing and its commercial aerospace supply chain in Washington state.
But both contain the kinds of elements this blog has been advocating for at least a decade. Both establish 10-year planning periods, contain provisions for addressing industry-specific workforce training needs and call for specific recommendations to both retain existing employers and attract new ones into the state.
The timing of both is very good. Boeing reportedly is weighing its options for a new mid-size passenger jet and Jeff Bezos is pivoting away from Amazon to spend more time at Blue Origin. Washington should expect to see a lot of activity and first steps toward growth in the next 18 to 36 months.
And both came out of the Committee on Community and Economic Development in the House of Representatives, where they had enthusiastic bipartisan support.
“In the immortal words of the famous Buzz Lightyear, join me to go into infinity and beyond,” quipped Rep. Matt Boehnke (R-Kennewick), during a recent public hearing on the space bill. (Boehnke is the prime sponsor of both bills.)
“I wanted,” said Committee Chairwoman Cindy Ryu (D-Shoreline), holding up her fingers in a Vulcan salute, “to say ‘Live long and prosper’ the whole time.”
SHB 1170 seeks to double overall employment in Washington’s manufacturing and R&D sectors over the next 10 years, and directs the state’s Commerce Department to take specific steps to make that happen.
It mandates that the department make regularly scheduled reports to the Legislature – with recommendations for action — on employment trends in manufacturing and R&D, opportunities to grow the number of businesses and the number of people they employ, workforce training requirements and site-selection criteria companies are using to make relocation decisions.
All these are things Washington should be monitoring now.
The bill also directs the Commerce Department to establish thee high-level leads for key industry sectors. Aerospace is one; clean energy and innovation are the others. We’ve argued in the past that Washington very much needs a top-level “aerospace czar” reporting directly to the Governor, instead of the current arrangement of an aerospace director reporting to the head of the Commerce Department.
The bill also calls for a new state fund to support the growth of regional industry clusters. In aerospace, we see this provision helping to grow the clusters in Moses Lake and Spokane where land, labor and energy costs are lower than in Seattle and its suburbs.
The text of SHB 1190 notes that “the current space economy is valued at hundreds of billions of dollars and market analyst advice that a trillion-dollar space economy is imminent.” With this legislation, the bill continues, “the Legislature declares its objective (to be) that Washington state pursue as much of this economic opportunity as possible.”
If approved, the bill would direct the state’s Commerce Department to develop both “short-term and long-term actions plans for the Legislature to support and sustain a bold vision for economic growth in the new space sector.” Those plans would need to be referred to the relevant committees in the state House and Senate by Oct. 31, 2022.
The bill directs the department to:
And again – yes, yes and yes.
The bills don’t specifically address the question of tax incentives. In recent public hearings before the Legislature, whenever the subject came up, it was in the context of recognizing that much of the tax package Washington had created for Boeing and the rest of the industry had run afoul of global trade rules. This led to its repeal last year.
Soaking billionaires aside, there is broad dissatisfaction on both the left and the right with the way Washington raises state revenues. Progressives hate the current tax system, which relies on sales taxes, because it results in poor families paying a much higher percentage of their income to the state than billionaires. Pro-business interests hate the state’s Business and Occupations tax because it’s a gross receipts tax that taxes companies struggling to make a profit at the same rate as Amazon.
A bipartisan group is working on ideas for a comprehensive tax reform that could address both those issues. Our hope would be that competitive, industry-specific tax structures would be part of any package that this group produces.
We’ve often criticized Washington state leaders for not actually leading when it comes to supporting the aerospace industry. These bills, however, show foresight and a willingness to take action to create an environment for growth. It is our hope that the Legislature advances both these bills for Gov. Jay Inslee’s signature.