Washington state legislators will meet Thursday in Olympia for a week-long special session aimed at providing billions in tax breaks for Boeing, part of a multi-element deal that will keep tens of thousands of aerospace jobs in the state in exchange for labor and legislative concessions.
The deal and the special session are results of months-long negotiations over the Boeing 777X commercial aircraft. If the airplane manufacturer gets what it wants, Boeing will agree to manufacture and assemble both the composite wing and the aircraft as a whole at its Washington State plants.
Gov. Jay Inslee (D) announced Tuesday that he would call legislators back into session to consider extending commercial aircraft tax incentives to 2040 and to expand a sales and use tax exemption on construction of buildings used to manufacture aircraft and parts. Boeing also wants the state to increase the number of students in community and technical colleges, students who would provide Boeing with its next generation of highly skilled workers.
The legislative package [pdf] would also designate the new extended-range jet a “project of statewide significance,” which would streamline the permitting process. Legislators will be asked to pass a transportation revenue package to repair and expand bridges and roads.
“I am asking lawmakers to pass a package of legislation that will guarantee that the Boeing 777X and its carbon fiber wing are built in Washington State,” Inslee said at a news conference Tuesday. “If we can do this in the next seven days, we can be certain that Washington’s aerospace future will be as bright as its past.”
The ambitious legislative package has to be coupled with a new eight-year labor agreement between the company and its union, the International Association of Machinists and Aerospace Workers. Under the proposed contract [pdf], the Machinists would each receive a $10,000 signing bonus and larger matches on 401(k) retirement plans. Union workers are being asked to give up traditional pension plans, in exchange for retirement savings plans. The company’s wage structure will change, and health care premiums will rise.
The machinists union will vote on the new contract next Wednesday, the union said.
Alex Pietsch, the director of Inslee’s Office of Aerospace, said the legislative package also includes tweaks to the state’s implementation of the Clean Water Act, which is an issue of concern to Boeing. Inslee wasn’t directly involved in the labor negotiations, Pietsch said, but once the deal came together it became clear a legislative package would have to go hand-in-hand with the labor deal.
Sources watching the deal closely said it amounted to an admission by the company that its 787 aircraft, which have been plagued by mechanical problems and grounded several times, should have been built by the more experienced machinists. But the company won significant concessions from the union, which felt the need to give up long-term benefits to save tens of thousands of jobs that might otherwise have gone to Boeing plants in other states. Media reports suggest Boeing was considering locating its 777X program at sites in Utah, Texas or South Carolina.
The long-term labor deal gives both sides a chance to claim victory, and to give each other credit. In a statement released late Tuesday, Ray Conner, CEO of Boeing Commercial Airplanes, praised IAM chief Tom Wroblewski “for his leadership, vision and determination to forge an agreement of historic proportion.” In his own statement, Wroblewski said the 777X “and the jobs it will bring to this region warrants consideration of the terms contained in Boeing’s proposal.”
If the deal makes it through the machinist vote, and the legislature passes the comprehensive tax and infrastructure package, Inslee in particular stands to benefit politically.
“Governors [who] deliver Boeing jobs win reelection. Period,” said one Democratic strategist who didn’t work for Inslee last year.
But there’s no guarantee that the divided legislature will rubber-stamp Inslee’s proposal. Several members of the state House and Senate said they were irritated when they learned the special election would be called a few minutes after Inslee’s office blasted an announcement to the media. And Republicans effectively control the state Senate, thanks to a power-sharing deal the GOP worked out with two Democratic senators.
But members said Inslee’s proposals are likely to pass in the end because the alternative is too frightening to consider.
“Uncertainty isn’t good for the state, or the politics around Boeing. Everyone wants Boeing to stay and build great airplanes here,” added state Rep. Zack Hudgins (D), who represents a district that includes a major Boeing manufacturing facility.
Boeing, founded in Seattle in 1916, has long been one of the region’s major employers. Before the technology boom driven by Microsoft, Amazon and others, the Puget Sound region was highly dependent on airplane manufacturing; when Boeing cut more than 60,000 jobs in the late 1960s, two Seattle real estate agents put up a billboard in 1971 near SeaTac International Airport that read: “Will the last person leaving Seattle turn out the lights.”
In recent years, Boeing has expanded its manufacturing in other states, frequently at the expense of jobs once based in Washington. In 2001, the company announced that it would move its global headquarters to Chicago. Boeing began assembling parts of the 787 Dreamliner at a new plant in North Charleston, S.C., in 2004. Earlier this year, the company announced that it would move hundreds of engineering jobs from Washington to Southern California. Boeing also employs more than a thousand people in Alabama, Arizona, Missouri, Pennsylvania and Texas.
Boeing and the industries it creates and depends upon around Washington State generated $76 billion in economic activity last year, Inslee’s office said. The 777 program alone generated $20 billion and supported 56,000 jobs.
“Making that airplane here and doing so for decades to come is of paramount importance to the state of Washington,” Pietsch said.