Governor Gary Locke’s Remarks
News Conference—Tax Incentive and Reform Package for 7E7
June 9, 2003

We're here to announce what we’re doing to keep Boeing jobs and keep Washington competitive for all businesses

Aerospace is our state’s most dominant industry
Accounts for 200,000 jobs, direct and indirect
Aerospace accounts for $700 million (2002) per year in state tax revenue

What’s at stake with 7E7 final assembly includes both 7E7 and other final assembly production lines:

As many as 150,000 jobs

As much as $540 million in tax revenue per year

Accordingly, I am proposing a tax incentive and reform package that will make our state more competitive against other states and help Boeing and its supplier network reduce its costs and compete more effectively with Airbus.

These reforms will also further improve our state’s competitiveness—and help all Washington businesses.

Tax Incentive Package

Elements:

B&O rate reduction for the aerospace industry--$54 million in 2005-2007

B&O tax credit for R&D--$20 million in 2003-2005

Property tax relief—$0.7 million Everett, $10.7 million Moses Lake

Port Authority--$26 million in leaseback program for Moses Lake site 2003-2005

Discussion

General points:

Thoughtful package to address how Boeing will do business in the future

It addresses the entire aerospace industry – Boeing and all of its suppliers

Entire package is contingent upon Boeing locating the production of the 7E7 here and further safeguards to make certain that the tax package is delayed if the 7E7 production timeline slips.

Siting decision to be memorialized by an Memorandum of Agreement (MOA) between Boeing and the Governor.

It has B&O reductions to reduce the cost of conducting business here in our state of Washington

It has targeted research and development incentives to mitigate the up front costs to Boeing and to their supplier network

It has targeted property and sales tax abatements for new construction at both Everett and Moses Lake sites that will make up comparable with incentives offered in the Southeast states that we are in competition.

B&O tax reductions to reduce cost of doing business:

B&O rate reduction is in two phases. The 2nd phase will not occur until the 7E7 begins production

Unemployment Insurance Reform

Washington has one of the most expensive UI systems in the country—among the top 5

We need reforms to bring our state into line with others so that we can be more competitive

I support UI reform that meets the following principles

Retain as much current people eligible for benefits as much as possible
All cuts and benefit reductions must be phased in to mitigate displacement
The system itself must meet solvency requirements and be stable, resilient
Must provide safeguards for Part time workers and those fired because of illegal acts of employers

Workers Compensation Reform

I continue to support current proposals to reform WC in the area of hearing loss

Claims for hearing loss have escalated dramatically since 1992.
The number of claims has risen from 884 in 1992 to 4,218 in 2001.
The cost of claims has risen from $3.3 million in 1992 to $40.3 million in 2001.

My proposal would save $14 million annually and restore $200 million to our revenue in one-time savings.

It also would make sure that the medical needs of workers are met while ensuring that disability payments were made only in appropriate cases.

The original proposal is preferable because it is simpler to administer, produces greater savings, and is more equitable.

I can support either proposal because both accomplish the objectives we had in proposing legislation.