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After huge tax incentive package, Boeing still ships jobs out of Washington

An artist’s concept of the aerospace company’s new family of 777X jetliners: the 777-9X, top, and 777-8X. (AP Photo/Courtesy Boeing Co., File)

Update: An earlier version of this post omitted some claw-back provisions included in the tax package passed last year. It also said Rep. Rick Larsen (D) lobbied machinists to vote for the Boeing contract. Larsen encouraged the machinists to vote on the contract, though he didn’t say how they should vote.

Eleven months ago, Washington Gov. Jay Inslee (D) signed a package of tax breaks and incentives aimed at keeping tens of thousands of Boeing jobs in the Puget Sound region. Valued at $8.7 billion over 27 years, the set of bills amounted to the single largest tax break any state has ever given to a single company.

Now, policymakers who feel they bent over backwards to accommodate the aerospace giant feel burned: In the past two weeks, Boeing announced it would move thousands of jobs out of Washington State.

Boeing announced last week that it would move about 2,000 high-paying engineering jobs in its defense division from the Seattle area to facilities in Oklahoma City and St. Louis by 2017. On Monday, the company said it would build significant portions of the wings and tails for its new 777X jet in St. Louis, which will mean about 700 more new jobs in Missouri.

“There is an undercurrent of disappointment that rises in some folks (including me) to the point of anger at Boeing,” state Sen. Adam Kline, whose district lies just north of one of the company’s major production facilities, said in an email. “This is the way Boeing thanked us, by placing the 777X in the Midwest. We’ve been had.”

The two sets of jobs moving to St. Louis and Oklahoma City aren’t technically related to the package of tax breaks passed last year. Those breaks were part of a broader effort to secure production of the 777X wide-body jet in the Puget Sound area; the planes will be finished at Boeing’s Everett plant, about half an hour north of Seattle. Inslee’s office said at the time that the 777 program supports about 56,000 jobs in Washington.

But the decision stings nonetheless. Lawmakers who voted to give Boeing the subsidies did so to keep the company firmly rooted in the city where it was founded, even as Boeing moved some of its critical units — including headquarter staff — to other cities.

Boeing says it’s staying in Puget Sound, though it acknowledges the challenges of a global marketplace requires some redistribution of company jobs.

“Boeing is committed to the Puget Sound region and its ties to the larger community. We are investing millions of dollars in our Puget Sound facilities,” said Wilson Chow, a Boeing spokesman. “Boeing is leveraging all its resources across the enterprise to stay competitive in a global marketplace, allowing us to remain successful in all of our locations, including Puget Sound.”

Chow pointed out that Boeing employs 54 percent more people in Washington than it did a decade ago, and 11 percent more than it did in 2009.

Inslee’s office sought to put a positive spin on the thousands of Boeing jobs still located around the Puget Sound region.

“None of our 777X jobs are leaving the state. The 777X is still ensuring tens of thousands of jobs for Washington’s aerospace workers,” said Jaime Smith, an Inslee spokeswoman. “Though we’d like to see as many Boeing jobs come to Washington as possible, it’s good that these jobs — which are currently located overseas — are coming back to the U.S. to union Machinists, engineers and others.”

Still, the fear of losing Boeing jobs was on display last year in Olympia, when Inslee proposed the package of tax breaks with what legislators described as a clear sense of urgency: Missouri, South Carolina, Utah and more than a dozen other states were preparing their own packages of tax incentives to lure the 777X jobs, and Washington legislators felt they had to rush to develop a more appealing package. They passed the breaks just three days after Inslee called them back into session.

The implicit understanding among legislators at the time, several sources said, was that the tax breaks would prevent other Boeing jobs from leaving the state. In retrospect, the fast-paced process hurt Washington’s bargaining power. The package of tax breaks included claw-back provisions if Boeing moved the 777X line out of state, or built a second assembly line elsewhere, but it did not include any claw-back provisions that would either require Boeing to maintain a certain level of employment in the region or prevent the company from taking advantage of the breaks even if it moved other jobs elsewhere.

“We essentially gave them a blank check,” said one Olympia insider close to Inslee’s office. “We didn’t leave ourselves any bargaining chips with respect to these engineering jobs.”

Transparency organizations have criticized corporate tax giveaways, especially those without claw-back provisions. Donald Cohen, who heads one of those groups, In The Public Interest, said companies like Boeing don’t make decisions to move jobs on a whim.

“They had to be considering this during the negotiations over the tax breaks. They didn’t disclose that, and the state didn’t ask, nor negotiate the details to account for possible deals like this,” Cohen said. “When governments give away billion-dollar tax breaks, or multimillion-dollar contracts, then we need to make sure the public will fully benefit.”

In Olympia, politicians have been slow to criticize Boeing’s move publicly, a testament to the company’s continued power in the state. When Boeing’s machinists’ union was considering a contract the company said was necessary to keep the 777X jobs in the state, Inslee and Rep. Rick Larsen (D) urged union members to vote on the contract, without specifying how they should vote, at the request of Boeing executives; both statements angering their labor supporters.

Several union chiefs boycotted a traditional Christmas party at the governor’s mansion that year in protest. The machinists union declined to endorse Larsen for re-election this year.

Even now, members are leery of criticizing a company that employs 81,000 people in their state.

Officials in western Washington have something of a chip on their shoulder when it comes to the aerospace giant. Founded in Seattle in 1916, Boeing 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.”