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No Transportation Bill This Special Session – Senate to Pass Boeing Bills Saturday and Adjourn

Senate Majority Leader Rodney Tom, D-Medina.

Senate Majority Leader Rodney Tom, D-Medina.

OLYMPIA, Nov. 8.—When Gov. Jay Inslee called lawmakers back to Olympia for a special session on Boeing, you could tell it was either going to be a short one or really, really long. Now that the gang of 147 has begun to assemble under the Dome, the answer is clear. Don’t blink or you’ll miss it.

Senate Majority Leader Rodney Tom said Thursday the governor jumped the gun when he called on lawmakers to pass a gas-tax increase. So after the Senate passes a handful of bills Saturday aimed at keeping Boeing from fleeing the state of Washington, it will adjourn and go home.

Inasmuch as the Senate is a rather important component of the Legislature, its adjournment essentially ends the session. That’s because the House can’t pass bills by itself. It might as well rap the final gavel too.

“The governor wants to hold it open,” Tom said. “I think that puts a little undue stress on members, and if we are really trying to work together — you know, let’s not do that.”

Thus ends Inslee’s plan to pass a transportation bill, announced grandly at a news conference Tuesday, and proving the adage that governor proposes and the Legislature disposes. The whole idea was a little odd in the first place, Tom said, given the fact that the bill was nowhere close to ready, the bill isn’t necessary for Boeing’s purposes, and the House Democrats’ transportation lead is in no position to negotiate. Tom said House Transportation Chairwoman Judy Clibborn is in Mexico on vacation. She isn’t cutting it short. “That makes it a little difficult,” he said.

An Inslee Misstep

As Boeing Co. officials watch from a corner of the conference room, Gov. Jay Inslee says the jetmaker is demanding action on a transportation package.

As Boeing Co. officials watch from a corner of the conference room, Gov. Jay Inslee says the jetmaker is demanding action on a transportation package.

Lawmakers are in session to pass a tax-break bill for Boeing that may or may not be an essential component in a deal that keeps the jetmaker in Washington. The Boeing Co. is looking to build a new plant for its next-generation 777X airliner, and other states – South Carolina in particular – had been putting up stiff competition. Inslee announced Tuesday that there were two things the Legislature needed to do to keep the manufacturer in the state. It had to pass a tax-break bill and it had to pass a transportation package – a roughly $10 billion gas-tax increase that has been one of the hottest potatoes at the statehouse for the last year. “The Boeing Co. has assured me that if the union approves that contract and the Legislature approves the package that I will propose to them, the triple-7X and its carbon-fiber wing will be built in the state of Washington,” Inslee said at the news conference.

But that thought is looking more and more like a political gambit by a Democratic governor aimed at embarrassing the Republican-leaning Senate Majority Coalition. Last session the Senate balked at passing the 10-cent-a-gallon gas-tax hike, and while it is negotiating a transportation plan with the majority Democrats in the House, it is doing so on its own schedule. Smart money has been that no deal will emerge until lawmakers return for a 60-day session in January. And in the last day or so, a rather convincing case has emerged that Boeing never made a gas-tax increase a condition for staying in the state.

For one thing, members of the Machinists Union are due to vote next week on a contract that makes big concessions on health and retirement benefits, offers a no-strike clause, and says in black and white that if the union says yes, the production line will be built in the Puget Sound area. Lawmakers say they have been convinced by Boeing lobbyists that the tax-break bill also must be passed. But the transportation bill? They think the governor was making it up.

“To say this was critical to the package overstated the position,” Tom said Thursday. “I think in something like this, where there is urgency, let’s do what needs to be done and not try to take advantage of the situation.

“There are members that feel like we’re getting jammed on this, and if you want a transportation package, and that is your goal, you don’t jam people. Because as soon as you jam somebody, there is a reflexive no on the other end, and that is not how we are going to get together a package.”

So much for that. Tom isn’t predicting whether lawmakers will have a transportation deal by the time the gang of 147 returns for a series of committee meetings Nov. 21. But the prospect may have become a bit more problematic, now that an entire chamber has been rubbed the wrong way. Sounds like a job for the 2014 session.

Boeing Bills in Motion

Inslee testifies before the House Finance Committee.

Inslee testifies before the House Finance Committee.

Although the session officially opened at 9 a.m. Thursday, there really wasn’t much action on opening day. The opening ceremonies in the House and Senate were pro-forma, meaning that only a handful of members were on hand for the flag salute and the session-opening motions. Members of key committees began arriving later in the morning, but the full complement of lawmakers is not expected until floor action takes place Saturday.

The House Finance Committee is set to take a vote on the Boeing tax-break bill today, following a hearing Thursday afternoon. The Senate Ways and Means Committee will hold a hearing of its own today. House Bill 2089 re-enacts a series of tax breaks passed by the 2003 Legislature, when the 787 was the issue. Those tax breaks are scheduled to expire in 2024, and the measure extends them for the 777 through 2040. The value of the 16-year extension is estimated at $8.7 billion.

Lawmakers also expect to pass non-controversial measures increasing funding for workforce training programs and streamlining the permitting process for Boeing plants.

Inslee put in an appearance before the House Finance Committee Thursday afternoon as he made the case for the tax-break bill. And in the Democrat-controlled House, the questioning was friendly – not a word about the transportation gaffe.

Inslee said the tax-break bill has been in the works for months. “This is something that we have been reviewing for months, to evaluate the consequences of this particular plan,” he said. “This was not just spun out of whole cloth in the last 24 hours.”

A Really Big Tax Break

Reuven Carlyle, D-Seattle, chairman of the House Finance Committee.

Reuven Carlyle, D-Seattle, chairman of the House Finance Committee.

One of the ironies of the situation is that lawmakers in both parties are scrambling to pass what is assuredly one of the biggest tax-break bills in Washington-state history – despite the fact that legislative Democrats have taken a hard line on tax breaks in the past. Labor has been a key player in the anti-loophole crusade. But as testimony opened, all parties were all smiles.

Larry Brown of the Machinists Union made the pitch for labor. “I know this is a big ask for some folks; it does involve a lot of consideration and a lot of money. But I just want to point out that from our perspective, we think there is a three-to-one return if we build the triple-seven here in the regions. There are 33,000 Machinists that are building these airplanes and we believe that every one of those members depend on this next big airplane being built here in Washington.”

Does an enormous tax break give Democrats pause? Certainly, said Reuven Carlyle, chairman of the House Finance Committee, but this bill is configured a little differently than the 2003 measure. One provision cancels a business and occupations tax break – a major portion of the tax-break package — if any part of 777 production is moved out of state. Boeing caused a good deal of consternation among lawmakers in 2009 when it opted to build its second 787 production line in South Carolina, while the earlier tax breaks remained in place.

“There was a great deal of angst and anxiety and frustration and resentment with respect to the second line, and this legislation corrects the language problem that allowed that to happen,” Carlyle said. “I think people feel good about that.”

The bill also requires the Joint Legislative Audit and Review Committee to review the effect of the tax break every five years, starting in 2019.

Carlyle said Boeing has made it clear that the tax break is an essential component of the deal, as important as the union contract. “Representatives of the company have looked me in the eye and said this is an essential component of their overall decision,” he said. “They feel it is critical. I can only take it at face value.”

House Republican Floor Leader J.T. Wilcox, R-Yelm, noted that Boeing has never made that point about a gas tax increase. “No one from Boeing has told any of us that there is no deal if we don’t have a transportation package this session,” he said.

A Full-Court Lobbying Press

Boeing lobbied in its usual way for the bill – which is to say that it made no public appearance whatever. But all the leading figures in the business-community effort to convince Boeing to stay trooped to the microphone in the committee hearing room to urge lawmakers to pass the bill – Steve Mullin, president of the Washington Roundtable, Kris Johnson, president-elect of the Association of Washington Business, and Maud Daudon of the Seattle Chamber of Commerce and Washington Aerospace Partnership.

But along the way, a few figures offered praise with a somewhat backhanded tone. Mark Johnson of the Washington Retail Association praised the committee for its wisdom in embracing a whopping tax break for business. “We support the role of tax exemptions and tax incentives as part of an overall tax and economic development policy. We also embrace the notion that tax exemptions and incentives provide today can result in incorrect indirect and induced economic benefits in future years. And so we support the work of Gov. Insley and this committee in recognizing these future benefits and future indirect and induced economic benefits as necessary and appropriate factors to be considered and valued as part of the legislature’s consideration of tax exemptions.”

And Patrick Connor of the National Federation of Independent Business made the point a tad more directly. If tax breaks are good for big business, why not for everyone? He said he was filled with optimism by the “rush to extend these tax preferences to a multinational corporate titan that could choose to locate this project and the thousands of jobs that go along with it in literally any state in any country. Hopefully that will put to an end the myth that Washington’s tax and regulatory climate is good for business, particularly small businesses who rarely enjoy such special tax treatment.”

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