HOUSE BILL REPORT

HB 576

BYRepresentatives Jacobsen, Unsoeld, Wang, P. King and Wineberry

Providing for the establishment of an office of employee ownership.

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, Cantwell, Doty, Grant, Hargrove, Holm, Kremen, McLean, McMullen, Moyer, Rasmussen, Schoon and B. Williams.

House Staff:Stephen Hodes (786-7092)

AS REPORTED BY COMMITTEE ON TRADE & ECONOMIC DEVELOPMENT

MARCH 2, 1987

BACKGROUND:

Washington state has a tradition of cooperative and employee-owned businesses which dates to the early years of the century.  These cooperatives have primarily consisted of agricultural marketing cooperatives and of cooperative plywood production firms.  These cooperatives have served to increase the market power of individual producers by permitting joint marketing, and have permitted the maintenance of competitive wood products manufacturing which might not have remained in the state in the absence of employee cooperatives.

In recent years, employee cooperatives have been utilized as one method of maintaining production in response to plant closures, especially in distressed areas.  In the eighty employee buy outs which have occurred nationally since 1972, an estimated seventy of these firms remain in operation.  Most of these firms have experienced increased productivity and profitability.  The financial incentives of employee ownership and employee stock ownership plans in the federal Deficit Reduction Act of 1984, maintained in the Tax Reform Act of 1986, have served to maintain the attractiveness of employee ownership as a job retention strategy.

State agencies have provided assistance in recent years in the formation of worker cooperatives in cases in which such formation has been used as a method of retaining employment threatened by plant shutdowns.  There is currently a limited technical capacity within state agencies to provide assistance of this type to respond to the continuing restructuring of industries in the state.

SUMMARY:

SUBSTITUTE BILL:  An employee ownership program is established in the Department of Community Development.  The program shall include the provision of technical assistance in the formation, development, and management of employee-owned businesses.  Technical assistance is defined to include conducting feasibility studies, coordinating financial assistance, and providing training to management and labor on employee ownership.  The program is to maintain a listing of firms and individuals with expertise in employee ownership.

The Department of Community Development is directed to publicize the employee ownership program through state agencies responsible for economic development, including the Department of Trade and Economic Development, Employment Security, and the Small Business Development Center and its outreach programs.  An annual report to the governor and legislature is required.  The bill appropriates $150,000 to the Department of Community Development to fund the program.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  The substitute directs the establishment of an employee ownership program in the Department of Community Development rather than the establishment of an Office of Employee Ownership.

Appropriation:  $150,000 to the Department of Community Development.

Fiscal Note:    Requested February 4, 1987.

House Committee ‑ Testified For:     Representative Ken Jacobsen,and Steve Brault, attorney.

House Committee - Testified Against: None Presented.

House Committee - Testimony For:     One element to facilitate economic development in the state.  Will assist groups working to retain jobs in cases of plant shutdowns by broadening knowledge of legal issues, funding sources.

House Committee - Testimony Against: None Presented.