2004 Chair's Report

When the Washington State Legislature convened earlier this year, the nation was showing signs of economic recovery, the state was buoyed by Boeing’s announcement regarding 7E7 assembly in Everett and, for the first time in recent years, state lawmakers weren’t faced with a billion-dollar-plus deficit.

However, economic recovery had not yet taken hold in Washington, and unemployment continued to be among the nation’s highest.  Recognizing the still fragile condition of the state economy, the Washington Roundtable strongly urged lawmakers to protect competitiveness gains made in recent years and focus on shaping future economic prosperity through fiscal discipline and job retention and creation.

Lawmakers held the line on many competitiveness issues.  They largely avoided unsustainable new spending. They extended incentive programs for high tech and rural development.  They also protected important unemployment insurance reforms passed in 2003 and began implementation of the incentive package designed to keep Boeing in Washington.

State leaders also made strides toward providing a quality education for every student.  They enacted legislation putting standards-based high school graduation requirements in place beginning with the class of 2008.  They approved charter schools, which will infuse choice and innovation into the K-12 system.  The Legislature also acknowledged the need for innovation in the management and funding of higher education by supporting a pilot program for performance contracts between the state and its research universities.

These gains are important in making our state a better place to live and work.  However, economic recovery in Washington will be slow and aggressive steps are needed to support job creation and economic growth.  Much more progress is required to make the state’s regulatory, workers’ compensation and liability structures competitive and fair.  The state’s transportation infrastructure benefited from an investment in 2003, but more is needed to address system inadequacies that drain the state economy of an estimated $2 billion each year. 

When lawmakers return to Olympia next year, they will again face a budget shortfall expected to reach or exceed $1 billion; the inevitable result of Washington’s continuing economic difficulties.  Rebuilding the economy will require continued fiscal restraint and long-term dedication to improve competitiveness.  Washington cannot rely on its old economy to bounce back.  The manufacturing sector – the state’s historic economic base – has been ravaged in the last decade with nearly a third of jobs being lost.  The Seattle area alone lost 100,000 jobs in three years.  Many of these jobs will not return.  A national recovery and low interest rates will help, but the impact of these factors will not compensate for losses we’ve already experienced. No single sector is likely to offset those losses. 

Washington must proactively shape its future.  Policymakers can improve opportunities for recovery if they maintain fiscal discipline, avoid actions that cripple long-term revenue growth and make the improvements necessary to ensure Washington does not get left behind when other states pull out of recession and become more and more competitive.

Sincerely,

William W. Krippaehne, Jr., chair

Continued dedication to live within Washington’s means

The most important challenge for state lawmakers this year was to maintain the fragile fiscal stability created through the Priorities of Government (POG) budget process in 2003 and avoid actions that would increase bow wave (the cost of continuing services into the future) or hurt chances for economic recovery.  Lawmakers were largely successful this year in limiting new spending to the most essential areas.  As a result, Washington is in better fiscal shape than many other states.

However, our state’s fiscal challenges are not over.  Based on current projections, Washington will face a significant budget deficit during the next two-year budget cycle; much of it due to the continuingly sluggish economy and unsustainable carry-forward costs arising from double-digit health care inflation and the decision to defer rather than repeal citizen spending initiatives.  Lawmakers must continue to use the POG process to examine and prioritize all state spending and focus resources on those services citizens deem most important. 

All efforts must lead to job creation

It was critical for lawmakers to take steps this year to end job losses and foster a climate conducive to job creation.  While they weren’t successful in passing many of the reforms needed to stimulate hiring, lawmakers did take some incremental steps by renewing select tax incentives and protecting gains in unemployment insurance reform.

Much work remains to be done to reform the state’s regulatory, workers’ compensation and liability systems.  The financial and psychological burdens these systems create can be insurmountable for employers who want to create jobs and invest in Washington. For the second year in a row, the State Senate passed important workers’ compensation and liability reforms, however, those bills stalled in the State House of Representatives.  Lawmakers must take action next year. These policy changes are long overdue and they are critical to job retention and creation.

Protecting Washington’s global position

A wave of proposed protectionist legislation intensified the statewide debate regarding outsourcing in 2004.  If enacted, proposals to limit outsourcing would restrict market access, impose unnecessary regulatory costs and discourage investment in Washington.  Lawmakers were right to reject this legislation.  As one of the most trade-dependent states in the nation, Washington cannot afford to unilaterally cut itself off from the international marketplace.  Policymakers must expand, not limit, the ability of employers based here, to compete and win both locally and globally.

More effort needed to shore up Washington’s infrastructure

In its original report, the Washington Competitiveness Council cited investments in statewide transportation as the most important thing the state could do to improve its business climate.  Given the massive scope of transportation problems in Washington, a combination of statewide and regional funding is needed to address the state’s most pressing transportation needs.  During the 2005 session, it is essential that the Legislature and next governor take action on a package of priority, high-impact projects.

Continuing Washington’s commitment to a quality education for every student

After more than a decade of education reform, lawmakers passed important legislation recommitting our state to ensuring every student receives a quality education.  Beginning with the class of 2008, public school students must meet the state’s 10^th grade standards in reading, writing and math in order to graduate from high school.  They will have multiple opportunities to take the test and an alternate assessment or appeals process will be available for students who struggle after multiple retakes.  Today’s economy demands a firmer grasp of knowledge and skills from high school graduates than ever before.  This legislation ensures that every student will achieve those skills before leaving high school.

Lawmakers also passed charter school legislation that will increase choice and innovation in the K-12 system and direct vital resources to students who are most in need.

Promoting innovation in higher education

As a catalyst of innovation, new technology and workforce development, the state’s higher education system is essential to rebuilding Washington’s economy.  However, our postsecondary institutions have been constrained by over-enrollment, restricted state funding and ambiguity regarding the state’s desired outcomes for higher education. Given the fragile economy and state budget deficits already projected for the next biennium, it is clear Washington must manage the resources it invests in the postsecondary system efficiently.  Lawmakers took an important step this year by initiating a pilot program for performance agreements that will detail the responsibilities of both the state and its research universities and identify quantifiable performance measures.  These contracts will bring much needed clarity to the relationship between the state and the institutions and, as a result, lay the groundwork for plans specific enough to be actionable.

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