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Boeing got huge tax breaks, state got no job guarantees

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By Dan Catchpole and Jerry Cornfield
Herald Writers
Published:
EVERETT — When Washington lawmakers rushed to extend a monster tax break to Boeing Co. for the 777X, a few argued in vain for assurances the aerospace giant wouldn't ax engineering jobs in the process.
Democratic lawmakers wanted provisions to stem the flow of billions of dollars in savings to the company if it didn't sustain its workforce at generally the same levels through the life of the tax break.
But their concerns were shelved by House and Senate leaders and by Gov. Jay Inslee, who didn't want to risk losing thousands of jobs associated with assembling the new jetliner to another state.
Now leaders of unions for the Machinists, who will get many of those jobs, and the engineers, whose ranks are getting thinned, are going to press lawmakers to take another shot at it in 2015.
“We as a state did not agree to $8.7 billion worth of tax breaks for these companies so that they could create minimum-wage manufacturing jobs, and move good-paying engineering jobs out of state,” said District 751 Legislative Director Larry Brown.
Ray Goforth, executive director* of the Society of Professional Engineering Employees in Aerospace, better known as SPEEA, described what transpired in November as “legislative malpractice.”
“The Legislature can stop this immediately,” he said.
Right now, it is unlikely there is enough political will among lawmakers or in the governor's office to act.
“We would have liked to have been able to win protection for every single Boeing job now and in the future for the next 100 years,” Inslee said. But Boeing officials “made it clear that this was untenable for them and we would not be able to win the machinists jobs if we insisted on that.
“If we were unsuccessful before, I don't know why we would be successful today,” he said.
Boeing agreed to put fabrication of the plane's carbon fiber wing and final assembly of the aircraft in Washington if lawmakers signed off on the tax break — which they did in the hurried special session — and Machinists agreed to steep contract concessions — which they did under duress in January.
The tax break bill, which Machinists endorsed, passed by margins of 45-2 in the Senate and 75-11 in the House. Nothing in it requires Boeing to maintain any specific number of workers
“There's no doubt that people knew there were gaps. There was a certain tone (from lawmakers) that we'd like to see stronger language, but this is the agreement we came to,” said Chelsea Orvella, legislative lobbyist for SPEEA. “We're trying to gauge what's politically possible. We're hearing a lot of frustration.”
Sen. Maralyn Chase, D-Shoreline, said she knew the firm intended to realign its workforce, but never imagined when she voted for the tax break that meant 2,000 or more engineers could lose their jobs or be transferred.
“We really got snookered,” she said. “I'm just so fed up with Boeing,”.”
She is among a small group of Democrats in the House and Senate trying to figure out what, if any, avenues exist for toughening the tax break bill.
“The question is what we can do at this point,” said Rep. Mike Sells, D-Everett, chairman of the House Labor and Workforce Development Committee and secretary-treasurer of the Snohomish County Labor Council.
This issue of protections arose often during discussions held behind closed doors, almost all involving Inslee, in the three-day special session.
“Strong efforts were made to get strong commitments to specific employment numbers and were unsuccessful,” said Rep. Reuven Carlyle, D-Seattle, who chairs the House Finance Committee.
Jeff Johnson, president of the Washington State Labor Council, said he lobbied for several amendments to the bill, including protections for engineering and technical workers, and stronger language to hold Boeing accountable if 777X-related work moved out of Washington.
“He thought they were interesting ideas, but he concluded that Boeing wouldn't accept that language,” Johnson said.
Others broached the idea of tying the tax incentives to creation of a specific number of jobs, along the lines of what South Carolina did in the package it put forth to win the second 787 assembly line. Under such a scenario, Boeing would have to achieve certain levels of employment to earn the full $8.7 billion in savings.
Inslee said he discussed the various provisions with Boeing representatives and “they made very clear that they were unwilling under any circumstances to give any particular numerical number of employment guarantee.
“Had we insisted on some provision that had some numerical minimum employment in the state of Washington, we would have got zippo, nadda, nothing and that 1-million-square-foot building would be under construction in St. Louis or California or somewhere else today,” he said.
Though Washington didn't secure a no-net-job-loss provision, Inslee said the state did “win some things that management didn't like.
“They didn't like us forcing the wing to be built here. They didn't like having a provision that you can't open a second line” outside the state, he said. “They didn't like that but we had enough negotiating clout to negotiate those things and win those things.”
Andy Nicholas, a senior fiscal analyst at the liberal Washington State Budget and Policy Center warned lawmakers in November that nothing in the bill prevented Boeing from moving engineering jobs and production of other airplanes elsewhere.
To achieve that required linking incentives with specific job numbers, which is what South Carolina did in the package it passed in order to secure the second 787 assembly line, he said.
“There is no guarantee that there will be a net increase in Boeing jobs here,” Nicholas said in a recent interview.
On balance, the final product improved upon the tax incentive package passed in 2003 to win the 787 Dreamliner, Carlyle said.
“While not as much as many of us would have liked, (the 777X tax incentive package) was a responsible pact to balance the long term interest of aerospace employment growth,” Carlyle said.
In that special session, not all attempts to toughen the law occurred behind closed doors.
On Nov. 8, Inslee testified to the Senate Ways and Means Committee that the tax break legislation would counter the “constant drumbeat” of jobs leaving Washington for other states.
Shortly after Sen. Bob Hasegawa, D-Seattle, proposed language to specifically keep design and engineering jobs for the 777X based in Washington.
The committee's Republican chairman and ranking Democratic member opposed him. It failed.
In hindsight, Hasegawa thinks his language would have saved engineering jobs.
“I would have hoped so. That would have been the goal,” he said. “Looking back, I think it was a missed opportunity.”
Dan Catchpole: 425-339-3454; dcatchpole@heraldnet.com; Twitter: @dcatchpole.
Correction, May 5, 2014: Ray Goforth's title was incorrect in an earlier version of this story.
Story tags » Boeing777JobsGovernorLegislatureMachinists

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