HOUSE BILL REPORT

HB 1438

BYRepresentatives Vekich, Hargrove, Schoon, Kremen, Winsley, B. Williams, Grant, Rasmussen and Wineberry

Establishing a business and job retention program.

House Committe on Trade & Economic Development

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass. (15)

      Signed by Representatives Vekich, Chair; Wineberry, Vice Chair; Amondson, Beck, Braddock, Cantwell, Doty, Fox, Grant, Hargrove, Kremen, Rasmussen, Schoon, B. Williams and J. Williams.

House Staff:Stephen Hodes (786-7092)

AS REPORTED BY COMMITTEE ON TRADE & ECONOMIC DEVELOPMENT

FEBRUARY 1, 1988

BACKGROUND:

A large majority of the state's citizens will continue to be employed in in the next ten years at firms which are currently in operation in the state. The industrial restructuring and cyclical economic downturns in many of the state's traditional industries has resulted in considerable suffering by employees, firms, and communities and has also entailed substantial expenditures of public funds.

Between 1979 and 1985, an average of 2.2 million jobs a year were lost in the nation due to plant closures, business failures, and mass layoffs.  During the same period, Washington State permanently lost between forty-four thousand and fifty-five thousand jobs per year, a total of between 308-385,000 jobs.

Estimates of the public costs of economic dislocation in the state range from $10,800 in 1982 to $8,900 in 1986 for each primary job lost in the state in increased unemployment compensation, public assistance costs, and lost tax revenue due to lost wages.  The annual total cost to the state of these three items range from $158 million in 1982 to $130 million in 1986. These estimates do not include the costs of increased social and health programs due to rising social problems caused by higher levels of unemployment.  The estimates also do not include the costs to the state of lost secondary employment.

As the state economy has experienced the strains associated with industrial restructuring in the 1980's, state agencies have responded, utilizing limited available state and federal resources.  State agency efforts have included: data analysis, assistance to the unemployed and retraining on the part of the Employment Security Department; assistance to local communities by the Department of Community Development;  efforts to locate new buyers for viable facilities by the Department of Trade and Economic Development.  State agencies have worked together to respond to threatened firm or facility closures in the often restricted time available.  A working agreement has been developed between the Departments of Community Development, Employment Security, Trade and Economic Development, and the State Board for Vocational Education defining their roles in preventing or reducing the impact of plant closures and mass layoffs.

Other states have initiated more ambitious efforts to respond to reduce the impacts of industrial restructuring.  Among the most extensive programs are those in New Jersey, Massachusetts, New York, California, Arizona, South Carolina, and Illinois.  Major elements of these more extensive programs include: early warning systems to identify endangered firms, the provision of technical and financial assistance to firms-at-risk; assistance in identifying new buyers and other assistance to assist in the reopening of viable closed facilities under new ownership; the provision of assistance to employees impacted by facility closures and mass layoffs, including retraining, if necessary.

SUMMARY:

SUBSTITUTE BILL:  The Business and Job Retention Program is established in the Department of Trade and Economic Development.  The program is managed by a director appointed by the Governor.  The managing director is directed to work with a wide range of existing state and local business assistance programs.  The director may enter into contracts with private consultants with the approval of the director of the Department of Trade and Economic Development.

The managing director shall consult as necessary with a wide range of impacted groups. The managing director is to designate service delivery regions of one to six counties in size.  The director shall establish business and job retention teams for each region, with an associate development organization acting as the team coordinator for each regional team.  Teams must consult with local labor business, labor, and local governments and shall consult with a wide range of affected local organizations as necessary.

The managing director is to develop a model local business survey and assist the regional teams in utilizing it.  The surveys are designed to gather information about business needs and to identify firms-at-risk.  The local teams shall provide technical and managerial assistance to local businesses and employees.  The teams shall contact firms or employees indicating the potential for closure, mass layoff, or relocation, shall assess firms to determine their viability, and shall coordinate the delivery of required technical assistance.  Teams may not require local businesses to fill out surveys.

The Department of Trade and Economic Development shall analyze trends in the state's industries and workforces, shall make such analysis available to affected businesses, employee groups and local governments, and shall work with them to develop long-term strategies for economic growth and revitalization.

The Employment Security Department shall collect a wide range of relevant data and shall make it available to the managing director.  The data shall include employment and wage levels in the state's industries and local areas, levels of dislocated and part-time workers, and permanent mass layoffs and closures in the state.  The Department shall also provide information and assistance to the program on available training resources.

The Department of Community Development shall assist the local teams through its existing programs.  The Board for Vocational Education shall assist the program through the development of partnerships between educational institutions and businesses to utilize the Job Skills program.

The managing director is to develop and administer a business and job retention feasibility fund.  Funds are to be made available to local governments or non-profit community organizations to study the feasibility of options for continuing the operation of industrial facilities threatened with closure or which have closed.  Each study is limited to 50 thousand dollars. Priority is given to facilities in distressed areas, employee buyouts, large facilities, viable facilities in mature industries.

The program shall publish an annual report to the Legislature which shall include assistance provided under the program, results regarding business and job retention by localities and industries.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  The substitute bill directs the managing director to consult with a wide range of groups as needed.  The original created an advisory committee with a specified membership.  The substitute bill directs local teams to consult with local business, labor, and local government.  It also directs local teams to consult with a wide range of local groups as needed.  The original included a wide range of local groups as members of local business and job retention teams.  The substitute authorizes the managing director to develop and administer a business and job retention feasibility fund.  Funds are to be made available to local governments or non-profit community organizations to study the feasibility of options for continuing the operation of industrial facilities threatened with closure or which have closed.  Each study is limited to 50 thousand dollars. Priority is given to facilities in distressed areas, employee buyouts, large facilities, viable facilities in mature industries. The substitute provides an appropriation of 1.1 million dollars from the federal interest payment fund to the Department of Trade and Economic Development to finance the program.

Appropriation:    $1,100,000.00 to the Department of Trade and Economic Development.

Fiscal Note:      Requested February 1, 1988.

House Committee ‑ Testified For:    Jeff Johnson, Washington State AFL-CIO;  Jim Tusler, Washington State AFL- CIO.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    Program badly needed. Labor would like more balance in state efforts between recruitment and job retention.  Need representation in these issues from the work force.

House Committee - Testimony Against:      None Presented.