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Commentaries and editorials

Legislators Send Tax-break Bills
to the Governor

by Deirdre Gregg, Business Journal staff writer
Puget Sound Business Journal, March 19, 2004

Before they adjourned March 11, state legislators sent to Gov. Gary Locke several tax breaks for businesses, including a $3 million tax credit for the last surviving mill in the state's shrinking aluminum industry.

But approving a supplemental budget and coming up with a replacement for the outlawed blanket primary took up a good part of this year's short, 60-day session.

Many of the business community's other top priorities, like a proposal to cap the minimum wage, failed to make headway. On other issues, such as workers' compensation, the Legislature passed some small changes but did not push through substantial reform.

Tax breaks.
One bill, SSB 6304, gives short-term tax relief to aluminum smelters. The bill reduces business-and-occupation taxes, provides a B&O credit for property taxes and a sales- and use-tax exemption. The credits are expected to be worth about $3 million to Alcoa Inc.'s Intalco plant in Ferndale, the last operating aluminum smelter in the state. They expire in 2006, when the cost of electricity is expected to drop.

Declining aluminum prices and the increased cost of electricity have crippled the industry in Washington. According to the bill, aluminum smelters in 1998 employed more than 5,300 people and had taxable income of $2.4 billion. By 2002, the industry employed only 2,200 and its taxable income was down to $700 million.

The Intalco plant cut production and about 200 positions last October, when the Bonneville Power Administration raised prices by 2.2 percent. Alcoa originally said it would shutter the plant altogether if the BPA went ahead with its original plan to raise rates by 15 percent. To receive the tax breaks, Intalco must retain at least 75 percent of the jobs that were on the payroll as of Jan. 1, 2004.

Several other significant tax exemptions were also approved by the Legislature. ESHB 2546, an extension of high-tech tax breaks, was signed into law by the governor on Feb. 19.

The measure, recommended by the governor's Competitiveness Council, extended B&O tax credits for research-and-development spending to Jan. 1, 2015. The bill also extended sales- and use-tax credits for construction and qualified investments in R&D programs.

The Legislature added some accountability provisions to help track the effectiveness of the tax credits. The state Department of Revenue will annually survey companies on the amount of the credit they've taken. The DOR will also collect information, such as how many new products companies have developed and how many full- and part-time jobs were created. Companies also will provide general information about salaries and benefits.

SSB 6240 extends several tax breaks for companies in rural areas through 2010. Businesses that open high-tech help desks in rural counties will get a full B&O tax credit, while businesses that make software in rural counties get a tax credit of $1,000 for each new job created. The bill also extends a sales- and use-tax exemption for construction materials used to build manufacturing and R&D facilities in rural counties.

Workers' compensation.
More than a dozen workers' comp reform bills were introduced this session, backed by business groups like the Association of Washington Business, the National Federation of Independent Business and the Building Industry Association of Washington.

Two bills dealing with fraud were passed by the Legislature. ESHB 3188, supported by the state Department of Labor and Industries and the Washington State Labor Council, gives L&I some additional tools to address fraud and abuse of the systems by workers, employers and health-care providers.

SB 6428, which lets L&I act more quickly to suspend a health-care provider, is also supported by the Washington State Labor Council.

Two other bills, HB 1691 and SB 6356, aim to lower costs by letting nonphysician health-care providers treat injured workers when appropriate. The bills would establish pilot programs to allow advanced registered nurse practitioners and physician's assistants to provide care.

Oil-spill prevention rules.
The Point Wells oil spill late last year prompted legislators to address potential oil spills, but they left actual rule making to the state Department of Ecology.

SSB 6641 requires the department to develop rules to reduce the risk of oil spills by 2006. The rules will probably require that fueling vehicles be surrounded by booms in certain circumstances. Other provisions might include requiring automatic shut-off systems or extra personnel during fuel transfers.

Of the 2,195 bills introduced in the state Legislature this year, 280 made it through both houses to Locke's desk. The governor has 20 days to act on a bill from the time it arrives in his office, and expects to wrap up work on the legislation around April 1.

Deirdre Gregg
Legislators Send Tax-break Bills to the Governor
Puget Sound Business Journal, March 19, 2004

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