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When Boeing talks, will lawmakers listen?
With Washington state facing a multi-billion dollar budget deficit and rising unemployment, lawmakers are scrambling to figure out how to retain good jobs and keep tax revenues flowing into government coffers.
A key part of any economic stimulus proposal is making Washington more cost competitive, something employers say repeatedly.
In fact, Boeing issued that warning more than 15 years ago.
In 1991, Boeing CEO Frank Shrontz sent the first shot across the state’s bow.
In a carefully crafted speech to the Greater Seattle Chamber of Commerce, Shrontz warned that Washington could become an “aerospace rust belt” if our state leaders did not address the high costs that were hampering our ability to attract and retain companies.
His message was direct. Washington was becoming too expensive to build airplanes.
Then in 1999, Boeing CFO Debby Hopkins told the business leaders Washington needed to “sharpen its competitive edge.”
Keep in mind that was two years after Boeing merged with McDonnell Douglas Corp., giving the company other viable places ready to build airplanes.
In 2001, after almost a century in Washington, Boeing moved its corporate headquarters to Chicago.
That shock wave still resonates across our state.
In 2003, then-Boeing Commercial Airplane President Alan Mulally was blunt about Washington’s business climate, saying “it sucks.” Mulally’s words and the shock of the Chicago move caused legislators to take notice.
Gov. Gary Locke and legislators reformed unemployment insurance, which was part of a move that convinced Boeing to assemble the 787 here.
However, the core of those changes was reversed by the 2005 Legislature.
According to the WashACE 2009 Redbook, Washington employers pay the nation’s second highest unemployment tax at $637 per worker, while South Carolina employers pay $151.
In his presentation earlier this month, current Boeing Commercial Airplane President Scott Carson recognized the progress lawmakers have made since 2003 but told of a changing, more competitive world — a world where location is a choice.
Translation: If rising production costs and disruptions by strikes, traffic congestion or worker shortages jeopardize a company’s competitiveness, they must move to where they can compete.
First, Carson suggested the governor and lawmakers need to develop a sustainable budget that preserves essential public services without raising taxes.
That is becoming increasingly difficult because the size of the state’s revenue shortfall continues to balloon.
The latest projection has it increasing from $3.2 billion to $4.6 billion.
Because of the state’s tax structure, employers are more heavily taxed than individuals, and tax increases hit business the hardest.
While lawmakers might be tempted to target employers with higher taxes and fees, the ultimate victims will be the working people of our state.
Increasing taxes will jeopardize existing jobs, stunt job growth and delay the recovery.
Second, legislators need to reform state unemployment and workers’ compensation programs to prevent uncompetitive increases in employer costs.
Rising costs will force Washington employers to shed jobs or facilitate moving out of the state.
Third, Carson urged the state to complete all authorized and funded transportation projects as soon as possible.
Fourth, he urged the state to recommit to education accountability and target higher education investments to programs that contribute to economic growth.
Education systems need to support a healthy, brighter economic future for Washington residents, he said.
Finally, Carson was frank about the 27,000 member machinists’ union strike which lasted 57 days — and a possible walkout by the company’s 21,000 aerospace engineers.
“The only big winner in any Boeing strike is the competition,” he warned.
Carson’s recommendations are not new. Shrontz and Mulally presented a similar list of legislative priorities in 1991 and 2003.
Reading between the lines: Washington faces further erosion of Boeing jobs and the loss of production and assembly operations to other states if production stoppages persist.
Boeing has the ability to command the attention of media and public officials. In reality, company officials are speaking on behalf of all private job-producing taxpaying employers in our state.
Boeing has laid out the answer to our state’s economic dilemma.
Hopefully, the right people are listening.
Don Brunell is president of the Association of Washington Business.