OLYMPIA — Five years ago, a citizens commission asked state lawmakers to decide whether tax breaks received by the Boeing Co. and other aerospace firms should be tied to the number of jobs provided, or not.
On Wednesday, the same panel asked again.
The five-member Citizens Commission for the Performance Measurement of Tax Preferences unanimously agreed tax preferences enacted in 2003 and extended in 2013 are providing good-paying jobs, lowering costs for business, and preserving the industry as a whole as lawmakers intended.
But commissioners were unable to assess if that suite of tax breaks is achieving a fourth goal, to “maintain and grow” the aerospace workforce. Employment in the industry is higher now than in 2003, but lower than in 2013. Absent a clear link between the tax breaks and job creation, they asked lawmakers — as they did in 2014 — for clarity.
“The tax preference continues to meet the majority of stated objectives,” commissioners concluded in a recommendation that will be sent to lawmakers. “However, the employment objectives are ambiguous. The commission recommends the Legislature clarify its position on employment levels.”
Initially the recommendation suggested lawmakers either set a baseline against which future employment levels could be compared, or come right out and say they don’t intend to do so. Following a short discussion, commissioners axed the language because they didn’t want to appear to be trying to box lawmakers into a corner.
“Just like five years ago, we’re still in the situation that when it comes to the employment objective we still do not have enough guidance on how to look at that issue,” commission chairman Grant Forsyth of Spokane said after the meeting.
The recommendation will be considered Dec. 4 by the Joint Legislative Audit Review Committee, a bipartisan and bicameral legislative panel.
Tying the number of aerospace jobs with the receipt of tax breaks is not a new conversation.
State lawmakers and then-Gov. Gary Locke enacted incentives for the aerospace industry in 2003 to land the 787 Dreamliner assembly line for Washington. Those tax preferences were to expire in 2024.
During a November 2013 special session, legislators and Gov. Jay Inslee agreed to a 16-year extension, to 2040, to help convince Boeing to build the 777X in the state. It is projected the extension will save aerospace firms close to $8.7 billion in tax payments, nearly all of it accruing to Boeing.
Boeing did choose to build its new plane in Everett. But it also shed thousands of jobs in the months following the 2013 special session, prompting the commission’s calls for clarity.
Legislation introduced in 2015 and 2016 would have tied Boeing’s continued receipt of tax breaks to its employment levels. But those bills did not receive a vote.
The commission last reviewed the aerospace tax preferences five years ago. A report prepared by the state’s legislative auditor this year described a stronger and more stable aerospace industry. But it again concluded that without more data it could not be determined if the tax preferences encouraged hiring or prevented greater losses of jobs.
At a September hearing on the report’s findings, commissioners were urged to ask lawmakers to set goals for job creation and enact changes allowing portions of tax breaks to be “clawed back” by the state when those goals are not met. Business leaders insisted that it was unnecessary.
“By any objective measure, Washington’s aerospace tax incentives are working as intended,” Boeing spokesperson Paul Bergman said following the meeting.
As the auditor’s report pointed out, aerospace employment is up 38% since the incentives were enacted in 2003, he said.
“These are good jobs with average wages over $100,000 and benefits that exceed those provided by other industries,” he said.
On Wednesday, commissioners made a point in their recommendation of not wanting to make too big a deal about employment levels.
”Regardless of how the Legislature clarifies this issue, the Legislature must be very cautious in how it interprets and responds to employment changes as a factor in the preference’s efficacy,” they said.
“The industry, like manufacturing in general, are rapid adopters of new technology that enhances productivity. This has the potential to significantly lower the labor input over time. Also, business cycle events, which are outside the industry’s control, may lead to significant declines in employment that can persist for several years,” they said. “Given the above, employment changes by themselves are insufficient for evaluating the preference’s efficacy.”
Commissioners acknowledged afterward that the grounding of Boeing’s 737Max, and other current events, weighed on their minds as they contemplated the right tone to take in the recommendation.
“I believe the lawmakers understand that this issue is flagged. It is hard to measure without knowing their intent,” said Commissioner Andi Nofziger-Meadows of Edmonds. “But (employment level) is such a complex factor that it cannot be the only measurement. It has to be one of many.”