Olympia Business Watch

Washington has work to do when it comes to its labor and employment regulatory policy

Last year, the Washington State Legislature passed workers comp reforms over the strong objections of labor unions and made some less divisive unemployment insurance changes. Those changes were critical to avoiding large increases to in workers' comp rates and UI taxes in 2012.

Because of the deep budget crisis in our state, the legislature is foregoing major employment law legislative changes this year. So how do we stack up nationally following those changes?

The U.S. Chamber of Commerce just released it annual 50-state review of each state's employment laws and regulations and assigns states to three categories: Good, Fair or Poor. More on that in a minute.

Lisa Rickard, president of the Chamber's Institute for Legal Reform and head of the Workforce Freedom Initiative, said the study examines each state to determine whether its labor and employment regulatory climate is conducive to job creation and new business formation. The most recent report was issued on Jan. 23.

If all states were to improve their regulatory climate to the levels discussed in the report, the effect would be a one-time boost of 746,462 jobs. Moreover, the rate of new business formation would increase by 12% resulting in the creation of 51,590 new firms each year across the country. In Washington State, the Chamber says 17,847 new jobs would be added and 12,167 new businesses.

However, Washington is ranked as a "POOR" state for labor and employment laws and regulations. There are 15 poorly rated states including California, Oregon, New York, Montana and Nevada. There are 15 states rates as "GOOD!" Included in the best category are South Carolina, Kansas, Oklahoma, Texas and Idaho---all direct competitors for Washington businesses and jobs.

Factors contributing to Washington's poor showing include:

• Numerous labor and employment mandates that exceed federal standards;
• Daily overtime rate on public construction contracts;
• Very high wage ceiling for income subject to unemployment insurance taxes;
• States minimum wage in excess of the federal minimum wage;
• Relatively high number of restrictions on employer inquiries into applicant and employee history; and,
• No right-to-work protections.

More than a decade ago, the Association of Washington Business, Washington Roundtable and Washington Research Council formed the Washington Alliance for a Competitive Economy (WashACE) to address the state's overly stringent regulatory climate.

As part of that effort, WashACE published comparative costs for all 50 states regarding nearly 60 key cost categories. The most glaring disadvantages for Washington are labor and environmental regulations which more than often exceed federal standards.

On the cost side, Washington has the nation's highest minimum wage and workers' compensation benefits paid as WashACE published in the 2012 Competitiveness Redbook. We also have the third highest unemployment insurance assessments on employers and fifth highest unemployment payments.

So while the 2011 Legislature started addressing the costs and impacts of the state's unemployment and workers' compensation, it was put on ice by this year's legislature as they struggle to close a $1.5 billion budget hole. Nevertheless, the problem remains for future legislatures and a new governor to address. Those costs and restrictions will force jobs and business opportunities out of state or offshore which is not what we want for our state's future.

In its conclusion, the U.S. Chamber warns: "While the recession is technically over, millions of Americans are still out of work and the rate of new job creation has remained at historically low levels compared with past periods of economic recovery. Any policies that can reverse this trend should be on the table for discussion"........and immediate ACTION!

Don C. Brunell, President (DonB@AWB.ORG)

Lawmakers say they can work on budget and chew gum

Sen. David Frockt and Rep. Larry Springer said Thursday that lawmakers are making progress toward balancing the state budget, despite charges from critics that they've been distracted by other issues such as abortion and same-sex marriage.

Most of the work is occurring behind closed doors at this stage of the 60-day session. But the legislators told AWB's weekly Lobby Lunch meeting that budget writers in both the House and Senate are hard at work.

"Not to be flip, but we actually work on a lot of things," said Springer, D-Kirkland. "We're all segmented. I think it's a misplaced concern to worry about that. Whether we are making significant progress on the budget sort of depends on who you ask, but I can tell you it's not for lack of trying."

Producing the budget will be especially hard this year because all the cutting in previous years leaves lawmakers with no easy choices, Springer said. Even so, the House is committed to producing a balanced budget that does not anticipate any new revenue, he said.

In other words, they won't make cuts with the expectation that programs will be restored later through a voter-approved sales tax hike, as Gov. Chris Gregoire has proposed, or some other plan that emerges from the Legislature.

"You have to assume that a revenue package will not pass," Springer said.

President's State of Union speech didn't address economic growth to create jobs or excessive regulations costing jobs

The fallout from Tuesday's State of the Union address continues. Tom Dononhue, president of the U.S. Chamber of Commerce, told the Fox Business channel it was a political speech "full of taxes and taxes, regulations and regulations, stimulus and stimulus. It doesn't address the two fundamental questions at hand and that is how do we drive growth into the United States to the extent that, number two, it creates jobs?"

"I heard a lot about how we were going to regulate things, how we were going to constrain things, how we were going to tax issues. But I didn't hear anybody say 'and here's what we're going to do to move forward, to liberate the free enterprise system in this country to put people back to work.' It was all about what government was going to do and what the president was going to do with the arm of government to see what he could do to put people back to work. But that's not gonna help," Donohue concluded.

Jay Timmons, president of the National Association of Manufacturers, responded: "The President deserves credit for highlighting manufacturing on a national stage, but presidential leadership requires more than speeches. President Obama had a chance to set a bold manufacturing agenda in motion, and he missed it."

"On regulations, for example, the President touted his Administration’s efforts to rein in some regulatory excesses and costs—$10 billion in savings over the next five years. But, Boiler MACT, Utility MACT, Cement MACT and the Cross-State Air Pollution Rule, to name just a few of this Administration’s rules, would impose costs that dwarf the savings highlighted by the President.

"And on labor, the President never mentioned the aggressive actions that the National Labor Relations Board took in the past year. If President Obama wants manufacturing to lead the economy, federal agencies cannot swoop in and tell manufacturers where they can do business."

Timmons concluded: "It’s 20 percent more expensive to manufacture in the United States than it is among our major trading partners — even after excluding the cost of labor. The best way to create an environment to increase manufacturing employment in America is to lower the cost of doing business through pro-growth tax rates, sensible legal policy, reasonable regulations and affordable and secure energy supplies."

The Association of Washington Business is Washington's state chamber of commerce and manufacturing and technology association as recognized by the U.S. Chamber of Commerce and National Association of Manufacturers, respectively.

Mandatory paid sick leave bill would hurt business and workers

Representatives from businesses large and small spoke out Tuesday against a proposal that would make Washington just the second state in the country to require employers to provide workers with paid sick leave.

For small employers with narrow profit margins, Senate Bill 6229 would add signficantly to the cost of doing business, forcing some to eliminate other worker benefits -- such as health insurance -- to make up the difference.

For large businesses, even those that already provide workers with paid sick leave, the bill would be an administrative burden and could conflict with existing labor contracts.

For example, Boeing's recent landmark agreement with the Machinist's union does not include an include a waiver for the proposed state law, meaning the contract and the state law would be at odds, Carolyn Ladd, a Boeing attorney, told members of the Senate Labor, Commerce & Consumer Protection Committee.

Proponents of the bill said it's needed to make sure that sick people don't report for work at restaurants and elsewhere, spreading disease.

But business owners said there are already ways to accommodate sick workers and protect public health without adding an expensive state mandate.

Gregoire's staff lays out governor's final session agenda

Snow and ice did not deter the governor -- or rather, the governor's fiscal and policy leaders -- from kicking off AWB's 2012 Lobby Lunch series last week. 

Joining AWB members for lunch in Olympia last Thursday were Gov. Chris Gregoire's budget director, Marty Brown, and her legislative director, Jim Justin.

Brown, a longtime fixture in Olympia politics, did not mince words about the gravity of the challenge before lawmakers this session. While Brown believes the next revenue forecast will likely not be significantly different, caseload numbers are likely to shuffle the internal workings of putting together the supplemental budget. (State caseload figures are due out Feb. 10; the revenue forecast follows on Feb. 16.)

"This is tough. There is not an easy path to get this stuff done," said Brown. "There's a lot of uncertainty -- not so much in Washington state but...in the world economy. And our economy is not necessarily dependent on those things, but the consumer confidence that occurs with changes in Europe, activities of Congress, really is a key to our recovery."

Businesses are not back to full speed yet, Brown said, and any economic gains made through private sector hires are being offset by cuts in state and local governments.

"I don't see a real turn around, I don't see a real quick decision-making process here," Brown said, "but I also don't think [lawmakers] are going to stay long, either."

Given the legislative landscape, Justin characterized Gregoire's final policy agenda as a "fairly aggressive, broad" list of proposals for a 60-day session, offering thumbnail sketches of the governor's priority legislationn. The package includes 17 bills, though three of the six aerospace bills, Justin noted, were passed during the December 2011 special session.

President's manufacturing agenda needs action behind it.

In his state of the union address, President Obama outlined his manufacturing blueprint for America. In a follow-up press release today, the National Association of Manufacturers (NAM) said:  "A True Manufacturing Renaissance Goes Beyond Words."   NAM has released its own road map for restoring American manufacturing.

The Association of Washington Business (AWB) has been our state's manufacturing association for over 100 years and affiliates directly with NAM.  AWB's Institute conducted a series of manufacturing focus groups around Washington and conducted manufacturing research in 2011. AWB recently released its findings.

AWB found that Washington manufacturing has an annual economic impact of $132.2 billion and exports $52.4 billion each year.  The average annual compensation for workers in manufacturing is $77,460 based on 2009 data and it supports 285,300 other jobs.

In order to enhance manufacturing in our state, elected officals and legislators need to focus on:

• Competitive power rates to attract new manufacturers and retain existing companies.
• Changes to Initiative 937 in order for manufacturers to remain competitive with other states.
• Eliminating the lack of a skilled workforce to meet demand.
• Protecting tax incentives for the growth of the manufacturing industry
• Regulatory issues with several state and federal regulatory agencies that must be streamlined.

There are 7,158 manufacturers across Washington.  Manufacturers range in size from Boeing with nearly 80,000 workers to Nelson Irrigation in Walla Walla with almost 200 workers.  Manufacturing jobs are high skilled and pay family wages with benefits.  They have been and are extremely important to our state's future. 

As NAM says, actions, not glowing words, are needed at the state and national level is we are going to bring back manufacturing in America.

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

Brunell: Buying American products creates American jobs

With continued high unemployment, growing deficits and a sluggish economy, it's easy to think that a solution is out of reach.

But that's not the case, AWB President Don Brunell writes in his weekly column. By choosing to "Buy American," individual consumers can make a real difference.

Buying American is not anti-trade, but rather about consumer choice, Brunell says. He notes the case of Anders Lewendal, a Bozeman, Mont. contractor profiled by ABC News for building a home using only American-made materials.

Lewendal says that using just 5 percent more American products in construction projects would create 220,000 jobs. And yet the cost of his "all American" home was just 1 percent higher than homes built with materials manufactured offshore.

Former Cheers actor John Ratzenberger has become the face of the Buy American movement, and he's sounding the alarm about the shortage of skilled American laborers and craft workers that results from buying products from overseas.

It's not too late to turn things around. The Buy American movement shows that opportunities abound, Brunell writes. Even in the most dire situations.

Washington connection to Keystone XL pipeline

Even though President Barack Obama said no last week, at least for now to Canadian energy company's proposal to build and operate the $7 billion, 1,700-mile Keystone XL pipeline, which would carry oil sands crude from Alberta to Texas, Congress may have the final say.

Meanwhile, Bloomberg reports that Canada may look west to find ways to export its crude to China. That could mean an all-Canadian oil pipeline to a British Columbia port.

According to a new legal analysis by the nonpartisan Congressional Research Service, Congress could trump the President. Congressional pipeline supporters are drafting legislation to overturn his decision to put the $7 billion Alberta-to-Texas project on ice.

Historically, U.S. presidents have made executive decisions on pipelines that cross borders. But Congress has the power to weigh in on the permits, four CRS legislative attorneys have concluded.

What does that all mean to Washington state beside the possibility of a new crude pipeline and oil export facility just North of our border? Maybe a new source of crude for our state's oil refineries which also get their crude from Canada via pipeline and Alaska by ocean-going tankers.

But the Midwest and Gulf states leaders say Keystone XL is too important to the U.S. economy and our national interest. The project remains the best option to supply crude oil to U.S. Gulf Coast refineries and getting crude from our Canadian friends makes us far less vulnerable to suppliers in hostile nations.

The U.S. consumes 15 million barrels of oil each day and imports 10 to 11 million barrels during a 24-hour period. Industry forecasts predict oil consumption will continue at these levels for the next two to three decades, so a secure supply of crude oil is critical to U.S. energy security.

A second important point for Washingtonians and all Americans is President Obama and other key elected and appointed officials need to look realistically are our nation's energy needs. Electricity, natural gas and transportation fuels impact every American family, hospital, factory, school, fire department and business. In the last decade there are so many key energy projects which have been canceled, delayed or litigated that we are all starting to feel the pinch in our wallets.

Regarding energy facilities deferred or canceled, the U.S. Chamber of Commerce finds that successful construction of the 351 projects identified in the Project No Project inventory could produce a $1.1 trillion short-term boost to the economy and create 1.9 million jobs annually. Moreover, these facilities, once constructed, continue to generate jobs once built, because they operate for years or even decades. Each year, the Chamber finds, the operation of these projects could generate $145 billion in economic benefits and involve 791,000 jobs.

Keystone XL is shovel-ready.TransCanada is poised to put 13,000 Americans to work to construct the pipeline - pipefitters, welders, mechanics, electricians, heavy equipment operators, among other jobs - in addition to 7,000 manufacturing jobs that would be created across the U.S. Additionally, local businesses along the pipeline route will benefit from the 118,000 spin-off jobs Keystone XL will create through increased business for local goods and service providers.

According to the Los Angeles Times, even if the administration rejects the project, it may not be enough to kill it, industry analysts said. Americans' thirst for oil probably will push the administration and TransCanada to find a way to transport Canadian crude across the United States.

Let's hope so. Meanwhile, we ought to hope our Canadian friends don't run out of patience and give up on us.

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

Greener Skies over Seattle

Two years ago, Boeing and Alaska Airlines teamed to promote a pilot project called Greener Skies over Seattle.

The Association of Washington Business (AWB) thought it was a good idea and contacted the Federal Aviation Administration (FAA) and members of Congress asking them to support it.

The FAA awarded Boeing a $3.1 million contract last October to implement the initiative. Now it is moving along to the point where the FAA will conduct environmental review meetings next week in Federal Way and Shorelines on January 25 and 26, respectively.

Greener Skies uses satellite-based flight guidance technology to enable aircraft to descend more efficiently and safely into SeaTac International Airport, resulting in a reduction of aircraft fuel consumption, emissions and noise in the Puget Sound region.

In intial testing of Greener Skies over Seattle, Alaska Airlines was able save fuel and reduce emissions by 35 percent compared to a conventional landing by using precision navigation called Required Navigation Performance (RNP). 

Carriers equipped to fly these procedures will save a combined 2 million gallons of fuel per year or more, which equates to a savings of 22,400 metric tons of Co2 or removing 4,100 cars off the road each year.   

AWB honors Raha

AWB honored Arun Raha, the outgoing chief state economist, on Thursday in Olympia.  Raha is leaving to become the corporate economic director for Eaton and will be based in Cleveland, Ohio.

Since his last day is January 31, AWB decided to honor him before he left the state.

Gov. John Spellman led the effort to create the Economic and Revenue Forecast Council in 1984. This law established a new process for producing official economic and revenue forecasts for the State of Washington. The director's job has been to project state revenues based on the performance of the economy.

Raha took over as the head economist in October 2008, just before the Great Recession hit. His initial gloomy quarterly forecasts were like a buckets of ice water compared to the regular surpluses predicted in previous years, Seattle Times reporter Andrew Garber wrote when publishing Raha's announcement.

"Since September we've pretty much been on target so I thought I'd quit while I'm still ahead," Raha deadpanned in a phone interview with the Times, with his usual dry humor. "I don't want to be one of those guys that quits when he's way past his peak."

Raha is a popular and entertaining speaker. He is known for his one-liners.  For example, he told the legislature that return to normalcy is like a desert mirage.  The closer you get to it the farther away it moves.

"We will miss you," AWB President Don Brunell said in presenting him with an AWB 100-year anniversary wool blanket woven specially for the Association of Washington Business by Pendleton Woolen Mills, Washougal. "You did your job well and didn't catch a break on the economy but your quick wit and sense of humor helped to soften the blow of the bad news you had to deliver." 

In response, Raha told those attending AWB's lobby lunch on Thursday that he felt the working relationships between government and business were constructive and aimed at problem-solving.  That is good when you are tackling the tough issues.