Boeing Cuts Washington Jobs Despite Record Tax-Break Deal

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By Paul Shukovsky

The Boeing Co. received $242 million in Washington state tax preferences last year but is shrinking its in-state workforce.

Lawmakers had hoped those tax breaks would incentivize job growth or at least result in a stable workforce.

The company said May 26 it invested more than $13.5 billion in Washington last year, up from $13 billion in 2015. “The $13.5 billion Boeing spent in Washington last year reaffirms that the aerospace tax incentives are working as envisioned by our state leaders, whose goal was to make Washington more competitive for the industry,” said Bill McSherry, vice president of government operations for Boeing Commercial Airplanes.

The tax incentives are part of an estimated $8.7 billion package of tax breaks for Boeing—the richest package of state tax breaks in U.S. history—that was passed in 2013 in response to a Boeing threat to relocate its then-pending 777X aircraft program. Boeing sited the 777X program in Washington, and a substantial portion of its $13.5 billion investment last year went toward the program.

Clawback Bills

Boeing’s workforce in Washington dropped from 86,397 in January 2013 to 69,058 in April of this year, a further decline from 71,323 in January, according to Boeing figures.

The extent to which lawmakers agree with McSherry that the “incentives are working as envisioned by our state leaders” will be tested by whether the Legislature passes two bills to claw back a portion of the incentives based on workforce numbers. Republican-sponsored H.B. 2146 and Democrat-sponsored H.B. 2145 were both reintroduced May 23 during the Legislature’s second special session and could emerge as part of a grand budget/revenue compromise.

Boeing announced the tax incentive and investment figures in advance of a May 31 state Department of Revenue deadline for filing a required annual report, portions of which must be disclosed to the public.

“Boeing remains opposed to any effort to alter Washington’s aerospace tax incentives,” Boeing spokesman Paul R. Bergman told Bloomberg BNA in a May 30 email. “Doing so would simply increase the cost of building airplanes in this state, and unnecessarily put excellent, family-wage jobs in Washington at risk.”

‘Keeping its Commitment’

“Boeing is keeping its commitment to build the 777X in Washington, and has already invested more than $1 billion in the 777X Composite Wing Center in Everett,” Washington, Bergman said. “Aerospace is a highly competitive, global industry and the market has been very dynamic in recent years. Boeing has worked diligently to manage these shifting industry conditions by improving efficiency, reducing costs and, where necessary, reducing employment. The vast majority of job reductions during the past year have been the result of attrition, buyouts, and reducing layers of management.”

Both big Boeing unions, the Society of Professional Engineering Employees in Aerospace and the International Association of Machinists Local 751, have been pushing lawmakers for three consecutive sessions to pass clawback legislation they dub “aerospace accountability” bills. The measures failed to get out of committee in 2015 and 2016.

SPEEA Legislative Director Chelsea Orvella thinks the presence this session of both a Democrat and Republican bill, combined with “public frustration” over the continued slide in Boeing’s workforce, might be enough to get a bill out of committee this time. And she has a different spin than that of McSherry, who asserted the goal of the tax incentives is to make Washington more competitive for the industry.

“It is pretty clear the goal of the legislation that enacted the tax incentives in 2013 was to maintain and grow aerospace jobs in Washington,” Orvella told Bloomberg BNA May 30 in a telephone interview. “And since that bill passed, Boeing has reduced employment in Washington by 14,238 jobs. It is our belief that Boeing is not fulfilling the intent of those tax savings provided to the company. We’re not opposed to Boeing receiving incentives. But we believe they must be held accountable for keeping jobs here in Washington.”

Both the Republican and Democrat bills carry identical language in their brief summaries: “Honoring the legislature’s intent to create and retain local jobs through incentives provided to the aerospace industry.”

To contact the reporter on this story: Paul Shukovsky in Seattle at PShukovsky@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

For More Information

Text of H.B. 2145 is at http://src.bna.com/pk2.

Text of H.B. 2146 is at http://src.bna.com/pk3.

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