Governor Gary Locke’s Remarks
Association of Washington Cities Legislative Action Conference
January 29, 2004

Good morning. I am honored to be back here again for the Association of Washington Cities Legislative Action Conference. The AWC is a vital force in our state’s political process. For more than seven years as governor, I have relied on this group to lend valuable perspective to the most critical issues we face. And for more than seven decades, my predecessors have done the same.

This morning I’d like to discuss some of the top priorities for cities and towns across Washington, and share my plans for the coming session.

But before we look ahead, let’s take a moment to reflect on an important victory. Year after year I have stood here before you and emphasized the urgent need to improve transportation. And I’ve always been able to count on your energetic support.

Well, we finally succeeded! The transportation package I signed into law last year will invest nearly $4.2 billion over 10 years in transportation improvements throughout our state. We will build and expand highway lanes and interchanges. We’ll make highways safer. We’ll get freight to market more quickly. And we’ll provide commuters transit, rail and other alternatives to driving.

This is a great start. These improvements will benefit communities all across our state. But there is more to do. As this group well knows, we must press for expanded transportation improvements.

A healthy transportation system is one of the keys to a thriving economy. It’s important to our future economic vitality that we remain committed to improvements.

We must also commit to future economic vitality in other ways. This session I’ve proposed several key economic development measures. These measures will further improve our competitiveness and help our cities.

I want to give our communities the economic development tools they need. We should partner with local communities to fund infrastructure to attract new businesses and help businesses grow. Forty-eight states now use tax increment financing to allow growth to pay for itself. I’ve proposed that we do the same. Our communities need this tool to keep moving in the right direction. The EDGE program I’ve proposed will give them this tool and support business development and growth.

We must also encourage more investment in rural Washington. I support using tax incentives to help develop rural economies. I’ve proposed extending the sales tax exemption on construction of manufacturing and research facilities in these areas. This legislation would also extend the B&O tax jobs credit in rural communities, and continue the B&O tax credit for help-desk enterprises in rural areas.

We must also improve the infrastructure financing process. We need to speed legislative approvals of Public Works Trust Fund projects, and encourage partnerships between local governments.

I want to continue our efforts to promote our state’s great agriculture products. Our trade missions have been extremely successful, and my 2004 supplemental budget proposal maintains funding for a state trade representative for China and Southeast Asia. We will also continue the “From the Heart of Washington” program to encourage Washington consumers to buy Washington products. The proposed budget increases funding for the Small Farm and Direct Marketing program, too.

Even as we improve infrastructure and support the businesses and industries of today, we must plan for the industries of tomorrow. We must invest in innovation.

We are home to some of the top technology companies in the world. Our universities enjoy stellar reputations as leading research institutions. They are powerful engines of economic development. Research and development activity in our state has spawned industries of the future in advanced computing, biotechnology, advanced materials, environmental technology, and improved farm yields.

These industries have created thousands of jobs already, and will provide thousands more in the future. The investments we make in these technology areas will fuel this growth.

I’ve proposed that we extend tax incentives for research in specific technology areas and for construction of research facilities.

Just as our economy must adapt and change to reflect changing realities, we also need a sales tax system that’s more in line with the 21st century.

A few years ago, I served on the National Advisory Commission on Electronic Commerce. It was clear to me then that state and local governments needed to simplify their sales tax systems. Such simplification paves the way for Congress to require all sales, including those made over the Internet and by catalogue, to be subject to sales tax.

This issue is more important today than ever. In 2003, revenue losses in Washington State due to uncollected sales tax on remote sales totaled $321 million—$248 million for state government and $73 million to local governments. The revenue loss will only increase. Internet sales continue to grow by 25% per year.

We were one of 34 states that joined to do something about it. We passed legislation authorizing the development of a multi-state agreement. We spent 18 months hammering out the Streamlined Sales and Use Tax Agreement. The Agreement streamlines the sales tax system and harmonizes its administration in 45 states and 7,500 local jurisdictions.

Last year I signed into law a bill that implements most of the Agreement. This year, I hope to sign an additional bill to bring Washington into conformity with all the Agreement’s provisions. We should continue to lead on this issue by joining with the 17 other states that have fully adopted the Streamlined Sales Tax Agreement. Congress may not act this year. Even if Congress does act, it is unlikely that it will be to serve the states’ and cities’ best interests. State and local governments need to take the lead, and we will.

Once implemented nationwide, the Streamlined Sales and Use Tax System will enable all sellers to use one, simplified, modern system that is better suited to the digital economy.
It may ultimately lead to allowing states to collect sales tax for all catalog and Internet sales.

Already, more than a dozen companies have begun to voluntarily collect sales tax (though not required) and remit to Washington state.

We will need to make changes to sourcing provisions. I have directed the Department of Revenue to work in partnership with cities, counties and other local governments to arrive at a reasonable, acceptable mitigation alternative. I am confident that we will reach a satisfactory resolution of these issues.

We are all passionately concerned with economic development in our communities and across our state. And we can’t talk meaningfully about economic development for very long without also discussing education.

Successful economic development requires investment in education. There is an inextricable link between economic development and education. A vibrant economy requires a world-class education system to prepare tomorrow’s workforce, and to provide opportunities for lifelong learning.

We’ve made great strides in raising K-12 academic achievement the past several years. Our students now exceed the national average in many subjects, and lead the nation in numerous categories.

We’ve worked hard to make higher education more affordable through Promise Scholarships and other financial aid programs for working middle class families.

We’ve worked hard to make higher education opportunities available. We’re struggling to try to catch up with rising numbers of people seeking a college education. This session I am proposing a $30 million increase in state-funded enrollment at state colleges and universities. This is an increase of up to 5,200 full-time students. And it includes up to 2,700 students in high-demand fields.

We’ve worked hard to guide our state toward a world-class education system. But from pre-school to graduate school, we have more work to do. We must significantly increase our commitment to improving education if we hope to build a vibrant economy with ample opportunities for good jobs.

Building a world-class education system requires funding. The investment needed to get to the world-class level is significant—but absolutely necessary.

State budgets will be tight over the next several years. Medical costs for vulnerable adults and low-income children and prison costs are on the rise. And we can’t keep making higher education the budget balancer!

The funding source must be dedicated, permanent and stable. That’s why I’ve been working with the education community to develop the Washington Education Trust Fund. And that’s why I will champion this effort.

This is an investment in our children. An investment in lifelong learning for all of our citizens. An investment in all of our communities. An investment in our state’s economic vitality. An investment in a better Washington. It’s time to make this investment and properly fund education.

In many key areas, this will be a pivotal year for our state. We have established strong momentum in key areas. We have the opportunity to make advances in education, economic development, rural health care, and other top priorities.

I plan to do my best to make sure this year we continue to build on the momentum toward a brighter future. And I hope you will join me.

Together, we can make Washington an even better place to live, work and raise a family.

Thank you.

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