Governor Gary Locke’s Remarks
Association of Washington Business Annual Legislative Luncheon
February 10, 2004

Good afternoon. It’s great to be back again for the annual Legislative Luncheon.

I want to begin by congratulating the Association of Washington Business for one hundred years of outstanding service to our state. Since 1904, you have played a major role in helping to shape public policy for economic growth. Thank you for a century of valuable contributions to our state.

Today I’d like to update you on our progress—and talk about my plans for this session. Then I’ll open it up for questions.

One year ago, I stood here and talked about my plan to deal with the fiscal crisis we faced. I discussed the Priorities of Government approach, a totally new way of budgeting and prioritizing all state programs.

It’s nice to be able to come back and say this: POG worked. The Priorities of Government budget I proposed funded the services that matter most with the money we had.

The Legislature adopted my approach. Some even went on to take credit for it! We avoided a general tax increase at a critical time for Washington’s economy. We cut programs by $2.6 billion in the current biennium. Yes, it hurt. But we managed this reduction without a crisis. And without dismantling core services to the people of our state.

The tough decisions are paying off. The economy is turning around. Our children are doing better than ever in school. Our most vulnerable children and adults are getting the help they need. Our state government is on solid footing. Our transportation system is on the mend.

In short, we’re in pretty good shape.

We made great strides the past year in improving our state’s business climate. We are becoming more competitive, especially in responding to the recommendations of the Washington Competitiveness Council.

The Competitiveness Council Scorecard issued at the end of the 2003 legislative session concluded: “Extraordinary effort led to remarkable results.”

The Competitiveness Scorecard tallied 32 bills that the Legislature passed and I signed into law last year—32 bills that advanced the Competitiveness Council agenda.

Many other recommendations have been implemented via Executive Order.

Our centerpiece accomplishment: We passed a 10-year transportation improvement plan, with $4.2 billion in new transportation improvements across the state.

This is a great start. But I know this group shares my determination to continue pressing for more transportation improvements for our state. Our economic development depends on mobility of people and freight.

We’ve also made substantial progress in regulatory reform, cutting red tape and streamlining regulatory processes. The Department of Ecology has set a goal to act on 90% of water quality permits within 90 days. We’re on target to meet this goal.

We simplified municipal B&O taxation, and prohibited “double taxation” of the same activity by two cities, giving greater predictability and encouraging investment in Washington.

We passed sweeping reforms to Unemployment Insurance, proposed by the business community, and passed Injured Workers’ Compensation reform, proposed by my administration.

How competitive are we?

The Boeing decision to land final assembly of the 7E7 in Everett is proof that Washington State is a great place to do business. We competed nationally against states known for economic development and business climate and we won! “Built by Boeing” will continue to mean “Made in Washington by the best aerospace workers in the world.”

We protected our aerospace industry—and the nearly 200,000 direct and indirect jobs it provides to our state.

In addition to Boeing, seven national chains have located regional distribution centers in Washington state since January of 2002. These companies looked at our state and chose Washington over other Northwest states. These companies like the business climate here. And together these companies are generating approximately 1900 direct jobs in our state.

Earlier this year, a South Korean biotech company announced it was moving its U.S. operations from Colorado to Washington state – ultimately generating some 300 jobs.

The 2003 session was one for the record books. But this is no time to rest on our laurels—there’s still much more to do!

I am working hard on several key economic development measures this session.

I think we need to increase our focus on industries of the future. We must promote 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, electronic devices and environmental technology.

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 and development in specific technology areas and for construction of research facilities.

We should also give our communities the economic development tools they need. We should partner with local communities to fund infrastructure to attract new businesses and help existing businesses grow and expand. 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.

I’ve also proposed tax incentives to help develop rural economies. I’ve proposed continuation of 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,” and the B&O tax credit for high-tech help-desk enterprises in rural areas.

I want to continue promoting our state’s great agriculture products, too. Our trade missions have been extremely successful. My 2004 supplemental budget proposal maintains funding for a state trade representative for China and Southeast Asia.

I’m optimistic that we’ll succeed in passing these specific economic development proposals this session.

But we also face a much larger issue—funding education system improvements.

Our economic future ultimately depends on a high-quality education system at all levels. That’s the only way to supply a first-rate workforce for a thriving, competitive state economy. Our children will need the best education possible to succeed in the global, high-tech, 21st century economy that awaits them after graduation.

We have made progress in education reform in our state. Our students are making great gains and responding to our tough new standards. Test scores are rising.

But we still have far to go in preparing our students for the highly competitive world of today and tomorrow.

More people than ever before are seeking a college education. By 2008-2010, we will need to expand enrollment at state colleges and universities by 25,000. But there aren’t enough professors and classrooms at our universities to meet that demand.

Meanwhile, employers are looking for more graduates in high-demand fields like nursing, computer sciences and engineering. Our high-tech companies will be hiring thousands of people each year. But our colleges and universities can’t even meet half the need. If our state can’t provide the necessary training and education opportunities for these jobs, businesses will hire people from outside our state.

How can anyone consider giving tax breaks to businesses to create more jobs without also giving our students a chance to land those jobs?

We need to make higher education opportunities more available.

From early learning to graduate school, it’s time to take our education system to the next level.

A world-class education system is the key to lasting economic vitality. But building a world-class education system requires funding. The investment needed to take us there is significant—but absolutely necessary.

The funding source must be dedicated, permanent and stable. The proposed Washington Education Trust Fund will give us this new, dedicated and stable funding for education, from early learning through higher education.

Last year we needed to live within our means without a tax increase. This year my budget again lets us live within our means without a tax increase. We are continuing to provide basic services without new taxes.

Tight budgets over the next few years will mean no expansions in higher education.

But parents want their children to have more than basic education. Our state needs a workforce that is the product of a world-class education system, not just a basic education system. And the Washington Education Trust Fund will give Washington voters an opportunity in November to choose the education system we want for our children and for our future.

I believe our economic future is bright. We have a great opportunity this session to build on our momentum. I look forward to working with you to keep Washington on the rebound and to make our economy stronger.

By taking the right steps in economic development and education, we will be making our state an even better place to live, work and raise a family.

Thank you.

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