Pontifications: Legislature weighs overdue actions for aerospace

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.

By Bryan Corliss

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.

  • Bills contain a lot of what we’ve long advocated
  • Manufacturing bill sets ambitious goals for state
  • Space bill seeks to boost – and capture – fast-growing sector
  • Taxes aren’t on the table — yet
Status of bills

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.

Bills don’t specifically address Boeing

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.”

Manufacturing bill seeks to put state on top

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.

Space 2.0 race

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:

  • Establish a 10-year strategy for “a bold expansion” of the workforce needed by space-industry companies;
  • Assess the industry’s infrastructure needs;
  • Evaluate the state’s ability to provide technical assistance and mentoring to any space industry start-ups, particularly those competing for government defense contracts;
  • Evaluate whether the state is adequately staffed for lobbying federal agencies to get more government space contracts and appropriations, both in defense and civilian realms;
  • Evaluate whether Washington has the capacity to train the cybersecurity personnel that would be needed for companies here to win space defense contracts, and whether state aid would be needed; and
  • Assess whether agencies and non-profits around the state have what they need to foster growth in the space industry.

And again – yes, yes and yes.

Taxes

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.

However, tax reform is a major topic of discussion in Olympia this year. The state Senate is considering a capital gains tax. The state has no income tax.

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.

6 Comments on “Pontifications: Legislature weighs overdue actions for aerospace

  1. Boeing and Airbus 20 year forecast has 40% of commercial aircraft being delivered to Southeast Asia Take note that Boeing just moved production of the Boeing 737 tail assembly from Xian China to Tata in India. Don’t be surprised in next 10-15 years Tata will become the “Spirit Aero” of Southeast Asia and will be a major airframe partner for the next single aisle aircraft program.

    • Contrary to that view is how Embraer works, which isn’t what most think from being based in Brasil. They do the Eseries with very little made in low cost Brasil but use major T1 suppliers in mostly Western countries plus Korea and Japan. The ultimate coals to Newcastle is the sub assemblies made in Everett and sent to Brasil for the final assembly line.
      I’m sure the smartest Indian aerospace students don’t want to work for Tata in India but for Airbus in Europe or Boeing et all in the US.

      • There are a few companies in India involved in at least small aircraft production.

        Besides Tata there is Mahindra, Hindustani, and NAL.

        Mahindra took over Gipsland of Australia, known for its G8 utility airplane, but in the current panicdemic has ceased production of it.

        HInustani is the successor to CAMCO started in China but over-ran by Imperial Shinto forces, quite active, some license-built production over the years as well as major modification work.

        NAL seems to be an R&D operation of the Indian government that also develops airplanes.

        There are various schemes for projects, including regional airliners like the ones produced by ATR.

        At various times India has purchased Soviet/Russian military aircraft and American military aircraft.

        India is nationalistic and quite socialist, variable government – current quite centralistic including increasing role of the main religion to the discomfort of others such as Sikhs (who are a key factor in protests against a new agricultural policy). Of course WA state is becoming even more socialistic with meddling in aerospace.

        India has a reputation for good scientific education, and use of English (a common language there because their are so many native dialects). Ability to integrate – see the bigger picture, has been questioned.

        Software companies have big operations there, Microsoft and the like may get the best and brightest, some of who will eventually immigrate, others may get the dregs (certainly some troubled software development and remote support operations there).

        Some semi-free countries like India are seeing expats return after success in countries like the US. Of course India traditionally has strong ties to Britain.

        • Hindustani has abandoned the regional airliner project: https://www.tribuneindia.com/news/archive/business/hal-abandons-regional-transport-aircraft-project-175060

          This article chronicles some of the problems facing development of aircraft of Indian design, though it could easily cover some American projects like the Eclipse 500: https://web.archive.org/web/20071013162713/http://www.hinduonnet.com/fline/fl2113/stories/20040702002408900.htm

          Note “The successful flight of PT-1, coming after the successes of LCRA and Hansa, has certainly demonstrated the basic scientific and technical skills of India’s scientists. But what it has also perhaps shown is poor technology management, which is a crucial element when the attempt is to make a mark in the marketplace ultimately.”

          (The VLJ fad, of which the Eclipse 500 and Cessna Mustang actually went into service, was a bit of a circus of various projects. One in Iowa actually flew but that flying showed aerodynamic refinement was needed thus more development investment plus money for production – no one ponied up so the project dies. I don’t know the situation with the project in Florida.

          Cost of the Eclipse 500 was far higher than the computer whiz from Microsoft had predicted, the Mustang was in the same price ballpark though IIRC a bit larger airplane.

  2. Missing from your pitch is:
    – whether government meddling actually works (I say history shows it does not, it skews decision making and attracts less careful business people)
    – whether or not government can do things correctly (you point to its legal botch on the tax benefit type of subsidy, I point to it recently getting scammed on unemployment insurance
    – whether or not the government of WA will deal with unions
    – whether or not businesses are worth propping up (some of you seem to think Boeing is not, I think Bezos is not)
    – whether or not WA government is honest (I say not as it has not sorted the city of Seattle out to protect individuals against initiation of force, protection that is important to businesses)
    – whether the Seattle area is a good place for workers and their loved ones to live, Seattle’s violence and high costs suggest not (note that what poor people need is protection since they have the least financial resilience, and freedom from the red tape that impedes earning)

  3. “: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.”

    Someone hates every tax, most of them want to pick someone else’s pocket to pay for things.

    The people you refer to would be much better off in the long run if they supported law and order, including worrying about Amazon reducing staff in downtown Seattle because it has become a dangerous place. Who wants to be at higher risk of assault just going to and from work than they would elsewhere?

    Amazon succeeded by being semi-innovative, doing what the snobs inherent in the book selling industry refused to do – get books people wanted, and ultimately revive an old retailing practice – catalogues for mail order, but using the Internet. (It is already declining – poor customer service and excessive costs under Jeff Bezos who is apparently still board chair even though he no longer owns stock, largest shareholder post-divorce may not be interested in shaping the company she cof-founded (McKenzie Scott).

    And get government out of most things, so people can build and earn for honest people, instead of trying to get special advantage.

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