HOUSE BILL REPORT

ESHB 2706

As Amended by the Senate

BYHouse Committee on Trade & Economic Development (originally sponsored by Representatives Locke, Cantwell, Prince, Spanel, Wineberry, Betrozoff, Cooper, Basich, Raiter, Miller, Rector, Rasmussen, Moyer, Youngsman, G. Fisher, Prentice, Kremen, Nelson, Anderson, Valle, P. King, R. King, Ferguson, O'Brien, Jacobsen, Phillips, Pruitt, Wang, Silver, Brekke, Belcher and Sprenkle)

Promoting economic diversification for defense-dependent industries and communities.

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (11)

      Signed by Representatives Cantwell, Chair; Wineberry, Vice Chair; Doty, Ranking Republican Member, G. Fisher, Kirby, Kremen, Raiter, Rasmussen, Rector, Tate and Youngsman.

Minority Report:  Do not pass.  (2)

      Signed by Representatives Schoon and Moyer.

House Committe on Trade & Economic Development

House Staff:Paul R. Leistner (786-7663)

Rereferred House Committee on Appropriations

Majority Report:  The substitute bill by Committee on Trade & Economic Development be substituted therefor and the substitute bill as amended by Committee on Appropriations do pass.  (19)

      Signed by Representatives Locke, Chair; Grant, Vice Chair; Appelwick, Belcher, Bowman, Braddock, Brekke, Dorn, Ebersole, Hine, Inslee, Peery, Rust, Sayan, Spanel, Sprenkle, Valle, Wang and Wineberry.

Minority Report:  Do not pass.  (7)

      Signed by Representatives Silver, Ranking Republican Member; Youngsman, Assistant Ranking Republican Member; Doty, May, McLean, Nealey and Padden.

House Staff:      Susan Nakagawa (786-7145)

AS PASSED HOUSE FEBRUARY 9, 1990

BACKGROUND:

Washington state's economy is impacted by a wide range of defense-related expenditures. These include Army, Navy, and Air Force facilities, nuclear weapons production, and defense research and development and production contracts.

The Legislature commissioned a study on the impacts of military expenditures in 1988 from the Institute for Public Policy.  This study was released in 1989.

The study reported that, in 1987, Washington State ranked 12th in the nation in per capita defense spending.  Expenditures on payrolls and procurement in Washington represented about 6 percent of the gross state product, or $5.8 billion (in 1982 dollars). These expenditures generated an estimated 153,000 civilian jobs or 7.3 percent of the state's civilian labor force.

SUMMARY:

The Department of Community Development, with the assistance of an advisory committee on economic diversification is to assist defense-dependent firms and defense-dependent communities to diversify into non-defense-related economic activities. This economic diversification assistance includes the following:

      1.Promote and encourage economic diversification through dialogue and public education on cuts in defense spending and economic diversification;

      2.Monitor shifts in defense contracts and programs and provide this information to affected and interested parties;

      3.Research and write reports about the likely effect shifts in defense contracts and programs will have on firms and communities;

      4.Report annually to the governor and the legislature on: the economic diversification efforts of the commission; changes in defense-related contracts and programs; and the possible impact these changes will have on firms and communities in Washington state;

      5.Identify at-risk firms and communities, review the nature and extent of the defense dependence, and provide information to affected and interested parties; and

      6.Help firms, communities, labor organizations, and local development organizations to undertake diversification efforts by helping them get public and private technical and financial assistance.

A defense-dependent community is defined as a community in which the sum of defense-related salaries, wages and procurement spending equals or exceeds 5 percent of personal income in that community during any quarter of the previous 24 months.

A defense-dependent firm is defined as a private business organization that derives at least 25 percent of its gross sales during the previous 12 months from defense- related spending.

The advisory committee consists of 11 members; four members are legislators and seven members are appointed by the governor. The governor appoints the chair from among the 11 committee members.  The directors of the Department of Community Development, the Department of Trade and Economic Development and the Employment Security Department serve as nonvoting advisory members of the committee.

The advisory committee is staffed by the Department of Community Development.

The Department of Community Development, with the assistance of the advisory committee, is required to coordinate with other state programs that assist businesses and communities with business turnaround efforts or products or market diversification efforts.  These state programs include those in the Department of Trade and Economic Development, the Department of Community Development, and the Employment Security Department.

EFFECT OF SENATE AMENDMENTS:  The Senate amendment changes the advisory committee to an advisory council, and the membership is increased from 11 voting members to 15 voting members.  The four additional voting members include a representative of the military leadership in the state, a representative of the financial institutions of the state, and two representatives from local governments of communities dependent on defense expenditures.  The director of the Department of Community Development serves as the non-voting chair of the council, instead of a voting chairperson appointed by the governor from among the council members.  The three non- voting council members from the Department of Community Development, the Department of Trade and Economic Development, and the Employment Security Department are deleted.

The Senate amendment alters the duties that the Department of Community Development is required to carry out as part of diversification program.  The department is no longer required to promote dialogue and educate the public on economic diversification issues.  As an additional duty, the department is required to formulate a state plan for diversification in defense-dependent communities in collaboration with the Department of Trade and Economic Development, the Employment Security Department, and the Office of Financial Management.  The Department of Community Development is also required to identify diversification efforts being pursued by other states, the federal government, and other nations and make that information available to communities, firms, and workforces that are defense- dependent.

The due date for the first annual report by the department to the governor and Legislature on the activities of the community diversification program is changed from January 1, 1991, to January 1, 1992.  A sunset review provision is added.

Fiscal Note:      Available.

House Committee ‑ Testified For:    (Trade & Economic Development) Representative Gary Locke, Prime Sponsor of HB 2706; Maureen Kostyack, Washington State SANE/FREEZE; and Don Krupp, Department of Community Development.

(Appropriations) No one.

House Committee - Testified Against:      (Trade & Economic Development) No one.

(Appropriations) No one.

House Committee - Testimony For:    (Trade & Economic Development) The events in Eastern Europe provide an opportunity to reduce defense spending.  Cut backs in defense spending will occur and policy makers, regardless of their philosophy on defense issues, need to be ready to respond to the potential hardships caused by defense cuts.  Legislators must be proactive instead of reactive; it is better to diversify now than later.  Impacts will happen in Washington state, jobs will be affected, and workers will need assistance.  The bill would help to assess the needs of communities impacted by defense cut backs and would help these communities respond.

(Appropriations) None.

House Committee - Testimony Against:      (Trade & Economic Development) None.

(Appropriations) None.

VOTE ON FINAL PASSAGE:

      Yeas 65; Nays 30; Excused 3

Voting Nay: Representatives Ballard, Baugher, Beck, Betrozoff, Bowman, Brooks, Brumsickle, Doty, Forner, Fuhrman, Hankins, Heavey, Holland, Horn, May, McLean, Miller, Moyer, Nealey, Padden, Schmidt, Schoon, Silver, Smith, Walker, Wilson K., Wilson S., Wolfe, Wood, Youngsman.

Excused:    Representatives Basich, Chandler, Sommers D.