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Washington: Still a business-friendly state

National rankings contradict negative internal rhetoric


(April 22, 2011) — If Al Franken was still on Saturday Night Live portraying life coach and self-confidence guru Stuart Smalley (instead of serving in the U.S. Senate), some of our state’s elected leaders could have a session in front of his mirror repeating, “We’re good enough, we’re smart enough and doggone it, business people like us!”

When it comes to whether Washington state can continue to maintain and attract good-paying jobs, some of our elected leaders seem to have self-image problems that simply aren’t based in reality.

The recommended therapy is simple: Stop believing the politically motivated, demonstrably untrue rhetoric generated within the state that suggests this is a bad place to do business. Instead, start looking at what national business publications and public policy organizations — which don’t have an agenda or vested interest in the outcome — are saying about us. And finally, work together to build on our considerable business-climate advantages to make Washington an even more attractive place for businesses and industries.

THE BOEING COMPANY’S decision in 2009 to add a second 787 assembly line in South Carolina instead of Washington set off another round of hand-wringing speculation among public officials and opinion-makers about whether Washington is competitive enough to keep Boeing and other family-wage jobs in the long term. (For its part, Boeing said the decision was not a reflection of Washington’s business climate but was based on the company’s desire to avoid work stoppages by expanding into a southern state that actively discourages union membership.)

In the context of persistent statewide unemployment, business lobbying groups — and corporate-funded think tanks and public policy organizations — have seized upon Boeing’s decision and other lingering negative effects of the Great Recession to pursue their agenda. They seek to blame unemployment on our state’s “unfriendly” business climate. They do so with a clear agenda: to cut business taxes and regulations. That’s what they do. The day business lobbying groups decide taxes are low enough and regulations are fair enough is the day they go out of business.

Does that mean their gripes should be ignored? Of course not. Their concerns are sometimes legitimate and deserve to be addressed. But it does mean that sweeping claims that Washington has a poor business climate, or isn’t competitive with other states, should be taken with a grain of salt. Given the potential public policy implications of such sentiments, these declarations call for independent analysis and scrutiny.

SO, IS IT TRUE? Is our state a bad place to do business? The answer you get from outside the state is very different from what we hear inside our little echo chamber.

(A 2009 study by Deloitte Consulting suggested that Washington fairs poorly when compared to other states competing for aerospace jobs. This study can’t be considered independent, given that Boeing is one of Deloitte’s major clients. Deloitte received more than $100 million in fees from Boeing while “consulting” for the state. Despite this clear conflict of interest, Deloitte was also hired by the state in 2003 to recommend how to secure 787 assembly work. Deloitte successfully recommended that its client get a $3.2 billion tax break. So it came as no surprise in 2009 when Deloitte’s study recommendations conformed precisely with Boeing’s legislative agenda. It simply cannot be considered an objective analysis of the state’s business climate.)

National rankings that analyze state business climates — including those by conservative “pro-business” think tanks and policy groups — consistently rank Washington among the very best states for business.

They say we have comparatively low business taxes, a lighter regulatory burden, a highly skilled and highly trained workforce, excellent higher education, and for those reasons and many others, our state economy outperforms those of other states.

What follows is a sampling of those national rankings, including how Washington compares with West Coast neighbors Oregon and California, plus its aerospace industry competitors South Carolina, North Carolina, Kansas and Texas:

(The titles link to those publications’ and organizations’ analyses.)

North Carolina – 3rd
Washington – 5th
Oregon – 6th
Texas – 7th
Kansas – 10th
South Carolina – 34th
California – 39th

Forbes Magazine’s 2010
“Best States for Business”

Washington ranked near the top in several categories, including for access to skilled labor (2nd), regulatory environment (5th), and growth prospects (4th). We have risen since being ranked 12th in 2005. Forbes also recently ranked Washington No. 1 in retaining our college graduates in jobs in the state as opposed to the “brain drain” other states are experience where graduates move elsewhere.

Texas – 3rd
Washington – 5th
South Carolina – 8th
Kansas – 29th
North Carolina – 38th
Oregon – 39th
California – 48th

The Small Business & Entrepreneurship Council’s 2010 Business Tax Index

This Virginia-based group advocates for lower business taxes across the nation and ranks states “according to the costs of their tax systems for entrepreneurship and small business.” Among the taxes included in the assessment are income, property, inheritance, unemployment, and various consumption-based taxes, including state gas taxes. (The state with the lowest taxes ranks 1st.)

Washington – 11th
Texas – 13th
Oregon – 14th
South Carolina – 24th
Kansas – 35th
North Carolina – 41st
California – 49th

The Tax Foundation’s State Business Tax Climate Index

The Tax Foundation’s 2011 index is a “tool for lawmakers” to assess how their business tax climates compare with other states and points out, “States with the best tax systems will be the most competitive in attracting new businesses and most effective at generating economic and employment growth.” (The state with the lowest taxes ranks 1st.)

Washington – 1st
Texas – 4thOregon, California, North Carolina, Kansas, and South Carolina – n/a

U.S. News & World Report’s “7 Best States to Start a Business”

This report ranks which states were the best for entrepreneurship and starting a business. (Only the top seven states were listed.) In ranking Washington No. 1, U.S. News and World Reports cited our tech-intensive economy, low taxes, and the highly productive, high-wage manufacturing workforce.

Washington – 2nd
California – 7th
Oregon – 14th
Texas – 18th
North Carolina – 24th
Kansas – 26th
South Carolina – 39th

The Kauffman Foundation’s State New Economy Index

“Working to harness the power of entrepreneurship,” this nonpartisan public policy group poses the question, “To what degree does the structure of state economies match the ideal structure of the New Economy?” It measures “knowledge jobs, globalization, economic dynamism, transformation to a digital economy, and technological innovation capacity.”

Kansas – 13th
Washington – 14th
Oregon – 15th
North Carolina – 21st
Texas – 25th
California – 29th
South Carolina – 42nd

The State Competitiveness Report of the Beacon Hill Institute at Suffolk University

This measures a range of variables, from fiscal policy to business development, to compare states’ ability “to attract and retain business and to provide a high standard of living for its residents over the long run.”

Washington – A
Kansas – A
California – C
Oregon – C
Texas – D
North Carolina – D
South Carolina – F

The Corporation for Enterprise Development’s Asset and Opportunity Scorecard

CFED is a nonpartisan think tank, whose sponsors include Bank of America and Wal-Mart. In its Asset and Opportunity Scorecard, it assigns letter grades assessing each state’s performance in terms of “financial security, business development, homeownership, health care, education, and tax policy and accountability.”

Texas – 3rd
Washington – 14th
North Carolina – 23rd
South Carolina – 24th
Oregon – 25th
California – 38th
Kansas – 40th

The American Legislative Exchange Council (ALEC) State Competitiveness Index

“Tax and economic policies are essential to the competitiveness of our states,” says this group of self-described free-market conservatives. This report presents state economic outlook rankings based on public policies that “have a proven impact on growth, revealing which states have the best chance of experiencing economic recovery, and which need to re-examine their policies before they can expect to see improvement.”

Washington – 4th (20.2%)
California – 10th (17.2%)
Oregon – 11th (17.0%)
Kansas – 38th (6.2%)
Texas – 44th (5.1%)
South Carolina – 48th (4.5%)
North Carolina – 50th (3.1%)

U.S. Department of Labor’s Union Density Rankings

This is one of the Washington State Labor Council’s favorite ones. In the context of the aforementioned rankings, it dispels the myth that having a strong, vibrant labor movement is bad for business. Washington is among the most heavily unionized states — about one in five workers are union members. Many of the competitiveness rankings consider the well-trained, high-wage workforce that is associated with union membership to be GOOD for business.

YES, THERE ARE A FEW business climate rankings that don’t rate Washington so highly. And of course, it is those studies’ rankings that are cited by business lobbying groups within Washington state. Meanwhile, with every new positive assessment of our business climate, state business groups go into “damage-control” mode by picking apart each study’s methodology and explaining why these national groups just don’t understand the unique burdens state and local governments place on businesses in our state.

Our point is not that state policymakers should be Pollyannas and ignore opportunities to improve our business climate just because Washington scores relatively well in these rankings. The point is that the state’s internal echo chamber of criticism must not be allowed to create an atmosphere of panic in this discussion. Clearly, Washington has a great deal to offer employers, and even more can be done to build on those advantages.

Politically motivated, demonstrably untrue rhetoric about Washington being unfriendly to business undermines those efforts and distracts from the real action that we should be taking to build on our success.

This special report was prepared by David Groves of the Washington State Labor Council, AFL-CIO.

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