Keeping Washington's Competitive Edge

1. Keeping Washington's Competitive Edge Washington Competitiveness Council

2. CompetitivenessCouncilMembers Co-chairs: Executive Director: Dick Thompson,Director of Government RelationsUniversity of Washington, Seattle Kerry Killinger Chairman, President and CEOWashington Mutual, Inc., Seattle Bud Mercer, President Mercer Ranches Inc., Prosser Alan MulallyPresident and CEOBoeing Commercial Airplanes, Renton Norman B. Rice President and CEOFederal Home Loan Bank of Seattle, Seattle Judith RunstadFoster Pepper & Shefelman PLLC, Seattle

3. CompetitivenessCouncilMembers Other members: John T. Powers, Jr., MayorCity of Spokane Andrea Riniker, Executive DirectorPort of Tacoma Paul Schell, Mayor City of Seattle The Honorable Barry Sehlin (R-10), Washington State House of Representatives Ron Sims,King County Executive The Honorable Sid Snyder (D-19)Washington State Senate Lucy Steers, Civic Activist and Public Involvement ConsultantSeattle Tom Stokes, CEOTree Top, Inc., Selah Steve Tso, PresidentWaferTech, Camas The Honorable James West (R-6)Washington State Senate Bob Drewel, Snohomish County Executive Ed Fritzky, Chairman, President. And CEO, Immunex Joseph K. Gavinski, City ManagerCity of Moses Lake Sally Jewell, Chief Operating  Officer, REI, Inc., Sumner John F. Kelly, Chairman and CEOAlaska Airlines, Inc., Seattle Terry Knapton, Chief Operating Officer, Colville Tribal Enterprise Corporation, Coulee Dam Richard L. McCormick, PresidentUniversity of Washington, Seattle Scott Morris, PresidentAvista Utilities, Spokane Bill Neukom, Executive Vice PresidentLaw and Corporate AffairsMicrosoft Corporation, Redmond H. Stewart Parker, President and CEO, Targeted Genetics, Seattle Tom Alberg, Managing DirectorMadrona Venture Group, LLC, Seattle Stan Barer, Co-Chairman and CEOSaltchuk Resources, Inc., Seattle John Begley, President & CEOPort Townsend Paper, Port Townsend Rick Bender, PresidentWashington State Labor Council, AFLCIO, Seattle Roger Boatwright, Executive SecretaryWashington State Building and Construction Trades Council, Olympia Jeff Brotman, ChairmanCostco Wholesale, Issaquah Phyllis J. Campbell, ChairCommunity BoardU.S. Bank of Washington, Seattle The Honorable Frank Chopp (D-43), Democratic Speaker of the House Washington State House of Representatives M.R. (Mic) Dinsmore, CEOPort of Seattle

4. Objectives • Discuss key business climate issues. • Improve public understanding of the importance of a healthy business climate to the future of Washington's economy. • Engage the business community in advancing a competitiveness agenda. • Identify and implement public policies that strengthen state and local governments' ability to respond to business community needs.

5. Issue Areas • Taxes and Fees • Regulatory and Permitting Issues • Physical Infrastructure • Human Capital and Innovation • Benchmarking

6. Recommendations • Proposed changes in statute--require legislation • Proposed changes in the Washington Administrative Code (WAC)--require a formal rulemaking process • Proposed administrative actions • Statements of position by the Council • Benchmarks/performance measures

7. Meetings • August 30 • September 18 • October 16 • November 13 • December 11

8. Most Imperative Recommendation:Fix our Transportation Problem • The most important competitive investment the state of Washington can make is to improve its transportation infrastructure. • Washington's currently overwhelmed transportation system threatens jobs and economic vitality, wastes people's time and money, diminishes quality of life, and degrades our environment. • To ensure Washington State's prosperity in the future, given the interdependence of the economies both east and west of the Cascades, we must improve our ability to move people and products.

9. Taxes and Fees • Council Findings • Taxes and fees significantly affect Washington business's ability to compete. • Washington State must balance two competitiveness issues - the need to provide essential state services and the need to minimize the relative tax burden on business. • Currently, Washington’s initial tax burden on business is one of the highest in the nation.

10. Taxes and Fees • Council Recommendations • Avoid increasing taxes on business. Maintain existing exemptions and incentives. • Transportation improvements will require new revenue. Generate them through user fees, regional taxes and alternative financing mechanisms. • Clarify and simplify tax provisions, especially the following: • Manufacturing machinery and equipment sales and use tax exemptions, • Municipal taxation, and • Deduction of investment income from the business and occupation (B&O) tax.

11. Taxes and Fees • Council Recommendations(continued) • Reform unemployment insurance (UI) to make it more fair, predictable, and stable. • Develop and use tax incentives to keep and grow businesses in Washington. • Adopt key performance measures to better judge Washington's overall competitiveness, and the effect of its tax system on business climate.

12. Regulations and Permitting • Council Findings • Washington's environmental regulations are important to the environment and the health of citizens. • Rather than weakening Washington's environmental safeguards, the Council seeks a culture change within the regulatory agencies to help businesses get things done. • Washington's current environmental regulatory system is uncoordinated and inefficient, and contributes to regulatory problems that damage Washington's competitiveness. • The current regulatory structure unnecessarily delays projects, increases project cost, creates unnecessary uncertainty, reduces operating flexibility, and increases barriers to business growth.

13. Regulations and Permitting • Council Findings(continued) • Washington's inadequate water systems impose uncertainty on businesses and growing communities. • A lack of affordable housing impedes a company's ability to attract a quality workforce. Regulatory requirements that are overly burdensome can exacerbate the housing shortage.

14. Regulations and Permitting • Council Recommendations • Create leadership to streamline and build accountability in the environmental regulatory process. • Create a greater service ethic, improve attitude within regulatory agencies, and improve the agencies’ accountability. • Consolidate and/or coordinate permitting processes between agencies and levels of government. • Create a single state-government contact for businesses considering locating or expanding in the state. • Tighten the Washington Administrative Procedures Act (APA) to reduce agency discretion in the rulemaking process.

15. Regulations and Permitting • Council Recommendations (continued) • Increase funding to make the Growth Management Act work in a timely and effective manner. • Streamline the adjudicative processes related to land use. • Delay implementation of the proposed ergonomics rule until questions about its cost and effectiveness are answered. • Ease regulatory pressures to make it easier to build affordable housing in Washington.

16. Physical Infrastructure • Council Findings • Transportation, utilities, and telecommunications systems must ensure the fluid movement of people, products, and information. • The most important competitive investment the state of Washington can make is to improve its transportation infrastructure. Washington citizens currently lose $2 billion per year because traffic congestion wastes time and fuel and causes shipping delays. • Washington’s water laws and infrastructure do not adequately provide the capacity to meet 21st century demands and responsibilities.

17. Physical Infrastructure • Council Findings(continued) • Washington must reduce unnecessary delays in the siting of telecommunications and energy facilities. • Low-cost and reliable electricity is critical to Washington's economy. The financial viability and access to capital for Washington’s utilities are essential to meeting Washington's energy needs. • The Pacific Northwest needs additional electrical transmission lines to meet expected growth in energy demand.

18. Physical Infrastructure • Council Recommendations • Secure long-term, stable, reliable funding for transportation. • Establish performance measures to show that transportation investments are effectively addressing needs. • Use regional funding authority and alternative financing mechanisms. • Build additional water storage capacity. • Reduce unnecessary delays in siting telecommunications and energy. • Promote a regulatory and political environment that supports the financial health of the state's utilities and ensures the BPA’s ability to invest in new transmission capacity in the Pacific Northwest.

19. Human Capital and Innovation • Council Findings • Human capital and innovation are fundamental to gaining a competitive advantage in the modern economy. • Without action, Washington will fall behind other states and regions that are investing massively in these areas.

20. Human Capital and Innovation • Council Recommendations • Increase support of research, development, and technology commercialization in strategically important industrial clusters. • Give research universities the tools and flexibility they need to continue to attract top talent and federal funding. • Expand capacity at colleges and universities, particularly in strategically important fields of science and engineering. • Accelerate training of workers for high-demand fields, including new workers, existing workers and displaced workers seeking to reenter the workforce.

21. Human Capital and Innovation • Council Recommendations • Improve still-lagging academic standards. • Address the challenge posed by a growing number of students who speak English as a second language. • Reverse a severe shortage of science and math teachers at all levels.

22. Benchmarks and Performance Measures • Council Findings • Many studies of Washington business climate are available but they are difficult to sort through. • The Washington State Office of the Forecast Council publishes an annual Economic Climate Study, but the benchmarks have not been updated. • Although benchmarks are available, they are not always used in policy analysis.

23. Benchmarks and Performance Measures • Council Recommendations • Reconvene the Economic Climate Study Advisory Board to update the benchmarks published in the Economic Climate Study. • Use benchmarks in policy analysis and performance reviews for state agencies.

24. Governor Locke’s Response • Governor Locke’s Priorities: • Creating new jobs • Solving transportation problems • Providing economic development infrastructure to rural communities • Streamlining the permitting system • Making water available to growing communities • Improving Washington’s tax environment

25. Governor Locke’s Response • Governor Locke’s Priorities (continued): • Providing universities flexibility to improve their responsiveness to industry workforce needs • Ensuring that Washington workers have the skills to fill available jobs • Reinforcing our commitment to education accountability • Tracking our progress in improving competitiveness

26. Governor Locke’s Proposal • Infrastructure • Create more than 20,000 new jobs, many in the next few years, by building roads and other state public works facilities. • Implement a long-term, comprehensive solution for Washington’s transportation problem. • Secure long-term predictable funding for the Community Economic Revitalization Board (CERB) as a vehicle for transportation and other infrastructure investments tied to economic development.

27. Governor Locke’s Proposal • Regulations and Permitting • Establish focused leadership to bring major reform and accountability to Washington’s regulatory system. • Reduce the time and expense of securing regulatory permits by creating a coordinated system that simplifies and speeds up permitting. • Provide greater certainty to business by establishing clear standards and timelines. • Expand the Master Business Licensing program to save businesses time.

28. Governor Locke’s Proposal • Regulations and Permitting (continued) • Benchmark permitting timelines in regulatory agencies to monitor progress and provide accountability to the public. • Work with the Legislature to take the next step in reforming Washington’s water law by setting and achieving proper in-stream flows and providing safe and reliable water supplies. Pursue funding for water storage.

29. Governor Locke’s Proposal • Taxes and Fees • Clarify tax provisions related to investment income. • Simplify municipal taxation and eliminate the possibility of double taxation by local governments. • Avoid general tax increases.

30. Governor Locke’s Proposal • Human Capital and Innovation • Provide tuition flexibility for universities so that they may offer competitive faculty salaries in strategically important fields while maintaining access to education for deserving students. • Tie university and college enrollment increases to high-demand fields, with preference to programs with model articulation agreements. • Expand worker retraining by adding 1,500 new slots for students of community and technical colleges, increasing the number from the current 7,200 to 8,700. • Provide $750,000 in new funding to train workers for newly located or expanded businesses.

31. Governor Locke’s Proposal • Benchmarking and Follow-up • Monitor Washington State’s progress toward improving its competitiveness by establishing new competitiveness benchmarks and using them in policy analysis and agency review processes. • Reconvene the Competitiveness Council annually to review progress on implementing their recommendations and discuss the state’s competitive status. • Continue reviewing recommendations and developing proposals in response to recommendations.

32. Next Steps • Follow-up meeting being planned for February: • Present a workplan for implementation. • Discuss status of administrative reforms and proposed legislation. • Provide additional data for benchmarks. • Additional follow-up meetings annually or as needed