SENATE BILL REPORT

ESHB 2706

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.

House Committe on Trade & Economic Development

Rereferred House Committee on Appropriations

Senate Committee on Economic Development & Labor

Senate Hearing Date(s):February 22, 1990; February 23, 1990

Majority Report:  Do pass as amended.

      Signed by Senators Lee, Chairman; Anderson, Vice Chairman; McDonald, McMullen, Matson, Murray, Smitherman, Warnke, Williams.

Senate Staff:Jack Brummel (786-7428)

                  February 23, 1990

AS REPORTED BY COMMITTEE ON ECONOMIC DEVELOPMENT & LABOR, FEBRUARY 23, 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.  The study, released in 1989, 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.

Communities in Washington which are dependent on defense spending are subject to major fluctuations in economic activity.  National leaders are predicting large cutbacks in military expenditures.  Communities, firms and workforces affected by cuts in federal spending may benefit from state coordinated efforts to diversify local economies.

SUMMARY:

The Advisory Committee on Economic Diversification is created in the Department of Community Development.  The department, with the assistance of the advisory committee, is to:

      1.Promote economic diversification as a response to dependence on defense spending.

      2.Monitor shifts in defense contracts and programs.

      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: its economic diversification efforts; changes in defense-related contracts and programs; and the possible impact these changes will have on firms and communities in Washington State.

      5.Identify firms and communities that are defense dependent.

      6.Help firms, communities, labor organizations, and local development organizations undertake diversification efforts.

      7.Coordinate with other state programs that assist businesses and communities with business turnaround efforts or products or market diversification efforts.

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.

Appropriation:    none

Revenue:    none

Fiscal Note:      available

Appointments by Legislature Required:     The President of the Senate appoints one Senator from each caucus.  The Speaker of the House appoints one Representative from each caucus.

SUMMARY OF PROPOSED SENATE AMENDMENTS:

The Community Diversification Program is created in the Department of Community Development.  The program is to monitor defense employment, identify communities and firms dependent on federal defense contracts, assist communities to broaden their economic base, assist businesses to produce new products or use new production processes, formulate a state plan for diversification in defense dependent communities, identify diversification efforts conducted elsewhere, and provide information to defense dependent communities, firms and workforces.

An advisory council is created to assist the department in carrying its diversification program.  The advisory council has representatives from business, labor, community groups active in diversification efforts, local governments from defense dependent communities, financial institutions, military leadership, and the Legislature, and one member with expertise in economic diversification.

The act is null and void if funds are not specifically authorized by the Legislature.

The act is scheduled to terminate on June 30, 1996, in accordance with the sunset process.

Senate Committee - Testified: Representative Cantwell; Margaret Shield, Washington State SANE/Freeze; Edward J. Fremeuw, Northwest Research Associates; Suzanne Curtis, Tacoma Chamber of Commerce; Marty Curtis, League of Women Voters