Weekly Wrap: Washington State, South Carolina Clash in jobs Competition

By: - October 2, 2009 12:00 am

States offer private companies tax breaks and other incentives all the time to expand or relocate their business, even during the worst recession in modern times.

Just this week, Virginia Gov. Tim Kaine (D) announced millions of dollars in enticements for a corporate headquarters relocation – and Missouri Gov. Jay Nixon (D) offered state goodies for an airport hangar addition. Both will create hundreds of jobs.

So it was rare to see in the same week a state decline to put forward a new financial package to its largest employer. Washington Gov. Chris Gregoire (D) said the state would not offer the Boeing Co. new incentives to build a second assembly line for its 787 Dreamliner jet next to the existing one in Everett, Wash. Up to 900 jobs are at stake.

South Carolina hopes to take advantage of Washington’s rebuff. So far, the state has offered Boeing existing tax incentives and the ability to borrow for transportation improvements if the jet-maker opts for Charleston. Boeing, which has already applied for building permits in South Carolina, says it will announce its choice by the end of the year.

Gregoire and state economic development officials say additional tax credits and other incentives are not needed because of the built-in advantages that already exist in Washington. They believe Boeing will conclude that it will be more economical to locate a second wide-body assembly line next to one that is operating effectively now, instead of splitting them up on two coasts. Boeing says having a second line would allow the company to increase production to 10 jets a month by the end of 2013.

Rogers Weed, Washington’s commerce secretary, told the Seattle Times that manufacturing costs probably would be lower in South Carolina but building the wide-body in Everett would carry less risk because workers and contractors in Washington are experienced and a supply network already exists.

Many Boeing workers in Washington are members of the International Association of Machinists. Workers at South Carolina’s existing Boeing plant recently voted to expel the union. Boeing management, hurt by an eight-week strike in 2008 and others in recent years, may be influenced by South Carolina’s more favorable labor climate.

South Carolina Gov. Mark Sanford (R) said the state’s competition with Washington is taking place behind the scenes. “We are not doing it with press releases and publicity, because I don’t think that’s the best interest of the negotiation process,” he said Wednesday (Sept. 30), according to a Charleston ABC News 4 report.

Utah won a national award for best state Web site earlier this month, in part because Gov. Gary Herbert (R) said it carried out his goal to increase “government efficiency and transparency.” Among other things, the Web site allows residents access to details about public meetings- “including address, date, time, and agenda.”

But don’t look for the meeting schedule of the state Advisory Commission to Optimize State Government, which Herbert created two days after winning the Web site honor. The panel, which the governor named to recommend ways to streamline state government, has closed its meetings to the public.

The Salt Lake Tribune asked the publicly funded commission to open its meetings, but a state attorney rejected the request because he said the panel does not come under the state open meetings law since it was not established by either the state Constitution, statute, rule or resolution.

Media lawyer Jeff Hunt told the newspaper it was ironic that a panel set up to help government work better “is shutting out the public.”

Two states released a couple of eyebrow-raising audits this week that serve as a reminder that during a recession, governments cannot afford to waste money.

In North Dakota, the state auditor found that a $40 million initiative of Gov. John Hoeven (R) to generate jobs could not prove it has created any. The Centers of Excellence Commission, which is supposed to determine whether the four-year-old program is working, has never ordered a technical review of any project to see whether it is effective, according to the Associated Press . A 2008 report said the program had led to 1,200 jobs and $169 million of economic benefits, but the audit questioned the accuracy of the data used to reach those numbers.

New Mexico’s auditor, Hector Balderas, told a legislative finance committee that 90 local governments that spend $1 billion in taxpayer money are at least a year behind in completing audits as required by state law. Balderas said the tardy audits increase the risk of waste, fraud and abuse. In August, Balderas found that more than $3 million was embezzled from a rural New Mexico school district that was several years behind in filing audits, according to the Associated Press .

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Stephen Fehr

Stephen Fehr is a senior officer with Pew’s government performance portfolio. He is a lead writer on many of the products generated by the portfolio, specializing in state and local fiscal health.