Virgin on Business: Who Gets What?

Lets review the recent history of Washingtons economic
development programs and sector-specific initiatives.

State government has a position dedicated to aerospace, and it offered an incentives package to encourage Boeing to build the 777X here. Meanwhile, the state jettisoned its own tourism marketing and promotion efforts, leaving that to the industry.

Tax incentives for technology research and development have expired and werent renewed in the most recent legislative session.

Speaking of which, the states clean-tech industry scored big with a $40 million extension to the Clean Energy Fund. The biotech industry didnt fare nearly so well: Not only will the Life Sciences Discovery Fund not receive any more money, but $11 million was moved from its own reserves to the general fund.

Yet, in that same legislative session, tax incentives were extended for aluminum smelters; fruit/vegetable, dairy product and seafood processing; and wax and ceramic materials used to create molds during the process of creating ferrous and nonferrous investment castings used in industrial applications.

Are you picking up a pattern here?

Didnt think so.

The topic of economic development incentives and recruitment and retention programs is a perennial favorite: Who gets them?How much? In what form? Why? And do they even work?

The problem is not so much that the questions arent posed or considered; its that theyre rarely answered in anything other than a haphazard and piecemeal fashion.

Especially when the question is why? Sometimes the answer is defined in practical terms, usually jobs or on occasion tax revenue. Or its a matter of political power, related to the size of the target beneficiary and how forcefully that persuasion is wielded; this might explain why aerospace usually gets what it wants, but the tech industry, which in size and economic impact rivals the plane guys, doesnt.

On occasion, the answer has to do with force of habit: Weve always done it that way. Aluminum smelting used to be a big deal in this state; now were down to just two smelters.

Then theres this favorite justification: Everybody else does it.
The answers tend to get a little more philosophical when the question turns to why not?

Thats not a legitimate function of government anyway. Government shouldnt be picking winners and losers. If the private sector wont support it, why should we?

The arguments against can turn practical, too because we cant afford to although even that response poses a philosophical conundrum whether incentives, depending on how theyre structured, really cost anything if the state wasnt going to get the jobs or tax revenue if it did nothing.

A combination of the philosophical and the practical is driving some states to consider, at least on a haphazard and piecemeal basis, what theyre doing in the way of economic development incentives. A favorite target of the moment is film production. Michigan legislators this year went after a state program paying filmmakers to shoot in the state, saying the money could be better used fixing roads. Washingtons tax-credit program expires in 2017.

Filmmaking is one industry among hundreds with its own incentives, marketing programs, research funding pool or some other form of targeted assistance and promotion. The state would be well advised to take a methodical and flinty look at those programs, then draft some sort of coherent strategy for what its doing and why, even if that means saying, Yes, were picking these as winners. Everyone else, so sorry. Youre out of luck. If the state doesnt do this, government and the taxpayers who underwrite it can expect to be confronted by a long line of supplicants, each posing the same question: Wheres mine?

Monthly columnist Bill Virgin is the founder and owner of Northwest Newsletter Group, which publishes Washington Manufacturing Alert and Pacific Northwest Rail News.