HOUSE BILL REPORT

SSB 6792

BYSenate Committee on Economic Development & Labor (originally sponsored by Senators Bluechel, Warnke, Hayner, Smitherman, Patrick, Niemi and Sellar)

Creating the community diversification program.

House Committe on Trade & Economic Development

Majority Report:  Do pass as amended.  (7)

      Signed by Representatives Cantwell, Chair; Wineberry, Vice Chair; Kirby, Kremen, Rasmussen, Rector and Tate.

Minority Report:  Do not pass.  (4)

      Signed by Representatives Doty, Ranking Republican Member; Moyer, Schoon and Youngsman.

House Staff:Paul Leistner (786-7663)

Rereferred House Committee on Appropriations

Majority Report:  Do pass as amended by Committee on Trade & Economic Development.  (18)

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

Minority Report:  Do not pass.  (7)

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

House Staff:      Susan Nakagawa (786-7145)

AS REPORTED BY COMMITTEE ON APPROPRIATIONS FEBRUARY 24, 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:

BILL AS AMENDED:  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;

      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; and

      7.Formulate a state plan for diversification in defense-dependent communities in collaboration with the Employment Security Department, the Department of Trade and Economic Development, and the Department of Community Development.

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 14 members; four members are legislators and seven members are appointed by the governor. The governor appoints the chair from among the 14 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.

AMENDED BILL COMPARED TO SUBSTITUTE:  The bill as amended limits the focus of the intent section to defense-dependent firms, communities and employees.  Definitions of terms are included and the advisory council is changed to an advisory committee.  The composition of the advisory committee is altered to include 14 voting members, 10 appointed by the governor and four who are legislators.  The non-legislative members include representatives of the business community, labor organizations, local governments, and the military leadership of the state, as well as a professional with expertise in economic diversification.  The chairman of the committee is appointed by the governor from among the 14 committee members.  The directors of the Department of Community Development (DCD), the Department of Trade and Economic Development (DTED), and the Employment Security Department (ESD) serve as non-voting members of the committee.

The Department of Community Development is required to complete additional tasks including educating the public on economic diversification and defense- dependency, researching and writing reports on the likely impacts of shifts in defense spending, preparing an annual report to the governor and the Legislature, and coordinating with existing economic diversification programs in DTED, DCD, and ESD.  The provision is deleted that declares the act null and void if funding is not provided by June 30, 1990.

CHANGES PROPOSED BY COMMITTEE ON APPROPRIATIONS:  None.

Fiscal Note:      Requested February 21, 1990.

House Committee ‑ Testified For:    (Trade & Economic Development)  Senator Eleanor Lee, Chair, Senate Committee on Economic Development & Labor; Senator Alan Bluechel, Chair, Washington 2000; and Dave Rogers, Washington Public Ports Association.

(Appropriations)  No one.

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

(Appropriations)  No one.

House Committee - Testimony For:    (Trade & Economic Development)  The amendments proposed by SANE-Freeze combine the best of both the House and Senate bills on economic diversification. Washington State will be impacted by defense spending cuts.  The large defense-dependent companies will be able to make the adjustment but smaller firms and communities may have problems. This bill was created by SANE-Freeze with the guidance of the study done last year of economic dependency on military spending in Washington State.  We have a choice in this state of being unprepared for defense spending cutbacks or planning ahead and taking action.

(Appropriations)  None.

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

(Appropriations)  None.