HOUSE BILL REPORT

HB 1495

BYRepresentatives Vekich, Cantwell, Hargrove, Basich, Belcher, Kremen, Day, O'Brien, Locke, Jones, Ferguson, Wineberry, Rector, Wang, Cooper, P. King, Walk, Schoon, Sayan, Spanel, Dorn, Rasmussen, Brekke and Morris

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.  (13)

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

House Staff:Bill Lynch (786-7092)

Rereferred House Committee on Appropriations

Majority Report:  The substitute bill by Committee on Trade & Economic Development be substituted therefor and the substitute bill do pass.  (18)

      Signed by Representatives Locke, Chair; Grant, Vice Chair; H. Sommers, Vice Chair; Appelwick, Belcher, Braddock, Brekke, Bristow, Dorn, Hine, May, Rust, Sayan, Spanel, Sprenkle, Valle, Wang and Wineberry.

Minority Report:  Do not pass.  (5)

      Signed by Representatives Silver, Ranking Minority Member; Bowman, McLean, Nealey and Padden.

House Staff:      Susan Nakagawa (786-7136)

AS REPORTED BY COMMITTEE ON APPROPRIATIONS

MARCH 5, 1989

BACKGROUND:

Washington has one of the nation's highest business failure rates. The total estimated job loss over the seven year period from 1979 and 1985 due to business failures, plant closures, or the permanent abolition of shifts or positions is between 308,000 to 385,000 jobs.

Increased social costs to the state were estimated at $8,900 in 1986 for each primary job lost in the form of increased unemployment compensation, public assistance, and lost tax revenue due to lost wages.

The 1988 supplemental budget continued an appropriation of $300,000 to the Department of Trade and Economic Development for the creation of a business and job retention program.  The program will expire at the end of the 1987-1988 biennium unless it is reauthorized.

SUMMARY:

SUBSTITUTE BILL:  A business and job retention program is established within the Department of Trade and Economic Development. The program must include a retention services program which will provide technical assistance to businesses and workers in which there is a risk of a plant closure, mass layoff, or business failure. The technical assistance must include turn-around assistance to firms.  The turn-around assistance should identify management activities and other actions such as diversification that will enable continued operations. The Department may contract for specialized services to provide this turn-around assistance.

The Department of Trade and Economic Development is also directed to establish an early warning program within the business and job retention program. The early warning program will use existing information available from state agencies to identify firms at risk of closure.  The program will also work with business organizations, labor groups, educational institutions, nonprofit organizations, and others in order to develop and implement means of identifying at-risk firms on a state-wide basis.  Confidentiality requirements contained in statute must be observed.

A labor liaison must be established as part of the business and job retention program.  The labor liaison will be responsible for helping to identify firms at risk of closure, provide labor with business and job retention services, assist in the formation and operation of employee-owned businesses, and identify opportunities for increased labor-management cooperation. The Department may contract to provide these services.

The Department of Trade and Economic Development must develop model local business surveys and assist local efforts in the use of the surveys.  The surveys will gather information that will help identify firms at risk of closure and identify the potential for long-term job retention and expansion.

The Business and Job Retention Program must identify research activities that would enhance the ability of the state to identify firms at risk.  A report describing these activities shall be provided to the appropriate House and Senate committees by December 1, 1989.

The Governor is directed to establish a Business and Job Retention Advisory Committee consisting of eight members.  Appointments must be made within 30 days of the effective date of the act. The Committee consists of four business members, four labor members, and the following directors of agencies or their designees as ex-officio members: Department of Trade and Economic Development, Department of Community Development, Department of Revenue, Office of Financial Management, and the Department of Employment Security.  At least one labor and one business representative must reside east of the Cascade Mountains.  No more than two business and two labor representatives may work for an employer with more than 500 employees. The Governor designates which member shall serve as chair of the Advisory Committee.  Advisory Committee members may be reimbursed for travel expenses. Staff assistance to the Committee is furnished by the Department of Trade and Economic Development.

The Department of Trade and Economic Development is directed, in consultation with the Advisory Committee, to provide funds to study the feasibility of various options for continuing or renewing the operation of industrial facilities which may close or have already closed. Funding may be provided to local governments, ports, local associate development organizations, local labor organizations, or local nonprofit community organizations. The Department may require a dollar-for-dollar match for the funds.  No more than $35,000 of state funds may be spent on any study, and only one study may be funded for each industrial facility.  The Department must give priority in availability of funds to: closures, mass layoffs, or business relocations out-of-state which affect large numbers of employees';  employee buyouts; and industrial facilities in distressed areas.  The Department must also consider the severity of problems affecting the business and workers and the impact of the social and economic costs of the closure, mass layoff, or relocation.

The Director of the Department of Trade and Economic Development is required to select in response to proposals, local development organizations to undertake local business and job retention activities.  The selections must be made with the approval of the Advisory Committee. Local business and job retention activities shall include identification of local firms at risk through the use of local business surveys or other methods; initial assessments of businesses and workers to determine their viability, identify problems, and determine the skill levels of workers; and the provision of technical, managerial, training, and related assistance to businesses and workers.

The contracts awarded pursuant to the response for proposals for local business and job retention activities must be based upon a local organization's ability to identify and assist firms at risk, build a partnership between labor and management, local need, ability to work with affected parties, and geographic balance. The Department is responsible for implementing training programs for local organizations who receive contracts.  Local organizations eligible to receive contracts include associate development organizations, local governments, ports, local labor organizations, local educational institutions, community-based organizations, nonprofit organizations, and local private industry councils. The Advisory Committee is directed to work jointly with any labor-management cooperation program which is established.

The Department of Community Development, in consultation with the Employee Ownership Advisory Panel, is directed to fund training for labor and management in cases of employee buyouts to retain employment in the state.  The Department may require a dollar-for-dollar match for state funds.  No more than $10,000 may be given to any one employee-owned firm.  Priorities for funding must be given to firms with a large number of employees, and firms which play a major economic role in distressed communities.

The Business and Job Retention Program is established as a combined effort of the Department of Trade and Economic Development, Employment Security Department, Department of Community Development, Department of Revenue, and the Office of Financial Management. Each agency is directed to provide staff and expertise as needed.  In addition, the State Board for Community College Education and the Superintendent of Public Instruction are directed to assist in providing coordination between local business and job retention programs and local educational institutions on educational and training needs.

The Department of Trade and Economic Development must publish an annual report to the appropriate House and Senate Committees on the activities of the program.  Information must be reported by county, standard industrial classification, and size of firm.

Proprietary information is exempted from the Public Disclosure Act.  The Department must incorporate provisions to ensure that confidentiality is maintained over any financial or proprietary information into each contract.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  The substitute specifies that turn-around assistance to business may include diversification actions. Changes are made to the Advisory Committee to ensure representation from eastern and western Washington, representation by smaller businesses, and to include legislators. The Governor designates the chair of the Advisory Committee. Local labor organizations are included within the groups allowed to conduct feasibility studies of options to keep a business from closing or to allow a business to reopen. The labor management cooperation program is removed, but the business and job retention program must work with any labor-management cooperation program which may be established.  The Department of Trade and Economic Development must incorporate confidentiality provisions to protect financial and proprietary information into each of its contracts. The Substitute also removes the appropriation.

CHANGES PROPOSED BY COMMITTEE ON APPROPRIATIONS:  None.

Fiscal Note:      Available.

House Committee ‑ Testified For:    (Trade & Economic Development) Representative Max Vekich, Bill Prime Sponsor;  Bill Stewart, Department of Trade and Economic Development; Terri Olson, Security Pacific Bank - Washington; Bryant Woods, Department of Trade and Economic Development; Jeff Johnson, Washington State Labor Council, AFL-CIO; and Sarah McCoy, Puget Sound SANE.

(Appropriations) Representative Max Vekich; Jeff Johnson, Washington State Labor Council; Jim Cummings, King County Economic Development Council.

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

(Appropriations) None Presented.

House Committee - Testimony For:    (Trade & Economic Development) The pilot programs are working well.  It is a community-based program that helps ensure the well-being of the local area, particularly in communities which are heavily dependent on a few businesses. Turn-around assistance to businesses can often make the difference as to whether a business will remain open.

(Appropriations) Where the pilot Business and Job Retention Program is operative, it has helped build local job capacity.  Washington has been adversely affected by plant closures and currently ranks fourth in the nation.  This type of program is essential for a changing society.

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

(Appropriations) None Presented.