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By Jack Rogers From the July/August 2013 issue Washington always has been at the forefront of a new frontier in America, in industry as well as geography. The scenic wonder in the uppermost corner of the Pacific Northwest is known for snow-capped mountains, world-class commercial jets and pioneering software, the place where Boeing and Microsoft both surged into the front ranks of Fortune 500 industry giants. But like many locations, Washington now must be nimble in defending its established turf from aggressive competitors while preparing to meet unexpected challenges and exploit huge new opportunities. With climate change literally lapping up at his shores, a bridge collapse putting infrastructure needs front and center and overseas trading partners knocking on his door, Gov. Jay Inslee’s plate is full. But he set aside some time to sit down with Business Facilities and covered all the bases in this month’s Governor’s Report.
AGENCIES REALIGN IN A STRATEGIC APPROACH TO DEVELOPMENT
Gov. Inslee has been proactive in realigning state agencies to service Washington’s strategic goals for economic development. “We reorganized the Department of Commerce in April to align existing resources to tackle economic development in a more strategic way,” the governor explained. “Most notably, we carved out a new Office of Economic Development and Competitiveness that included pulling in the State Energy Office team from their stand-alone position within the agency.” Gov. Inslee’s team also identified roles for eight industry sector leads, who will work closely with local Associate Development Organizations and the private sector to capture business and jobs in Washington’s strongest sectors: agriculture, aerospace, advanced manufacturing, clean tech, information and communication technology, life sciences, maritime and defense. Several sectors, such as agriculture, aerospace and clean tech, are up and running, while the state continues to explore options for supporting the other sectors. “One option is cost-sharing arrangements with industry organizations, similar to the way the Office of Aerospace is funded in cooperation between the state and the Washington Aerospace Partnership,” Inslee noted. ”Partnerships and teamwork on multiple levels are essential to winning opportunities with existing and new employers in our state.” Gov. Inslee has made improving workforce training programs one of his economic development priorities. Institutions of higher education are busy working with high-tech industries in Washington to develop academic programs geared to producing skilled workers. “This willingness between industries and our higher education institutions to collaborate is a big advantage to ensuring our state invests in training students with the skills employers need,” Inslee said. The governor cited several high-profile examples of this type of collaboration, including the Pacific Northwest Center of Excellence for Clean Energy at Centralia College and a new state-of-the-art wine science center at WSU Tri-Cities. Inslee also noted that the aerospace industry has been a partner in the creation of the Washington Aerospace Training and Research Center, which opened in 2010 and has already trained and placed hundreds of students in high-demand, high-wage aerospace jobs. “These programs and more are only possible through the support and assistance from the industries themselves,” Inslee noted.
DEFENDING THE AEROSPACE CROWN
Washington has long been a leader in aerospace/defense manufacturing, but the state now is getting competition from right-to-work states like South Carolina, which snared Boeing’s 787 assembly facility. Gov. Inslee expressed confidence that Washington will maintain its leadership position in aerospace/defense, and not just by relying on military contracts. “Our state’s aerospace companies employ 131,000 aerospace workers, many of whom are second- and third-generation employees,” Inslee said. ”Our 1,256 aerospace-related firms represent every segment of the industry, including Tier 1 and Tier 2 suppliers, OEM manufacturers, composites and advanced materials firms, and aircraft interiors, engineering and tooling, avionics, IT and research and development companies, as well as UAV manufacturers.” The governor noted that during his tenure Washington recently sent its largest ever delegation to the Paris Air Show—51 delegates who met with businesses from all around the world. “We learned that two of our biggest competitive advantages are our highly skilled workforce and the depth and breadth of related supply-chain businesses,” Inslee told BF. “As the aerospace industry grows, we aren’t surprised to see some of that growth shared in other states. But our aerospace industry continues to grow as well.” In the past two years, Boeing has hired 13,000 employees in Washington State, which is home to more than half of its workforce globally. “While Boeing recently announced some retraction, employment levels are at the highest they’ve been in decades,” Inslee noted, adding. “They made headlines by committing to hire 2,000 workers in South Carolina by 2020. At that rate, it would take Boeing 45 years to do in Charleston what it’s done here in the past two years.” Inslee made it clear that Washington knows it can’t rest on its laurels and assume it won’t be challenged for its leadership position in the aerospace sector. “We know we’re in a global competition for jobs, and I don’t take our leadership position for granted,” he said. “I’ve been heavily focused on continuing to strengthen workforce development efforts, boost investment in STEM education and fund new improvements to our transportation infrastructure.” Washington is one of the most trade-dependent states in the nation with exports driving one-sixth of its economy, so expanding trade opportunities always is near the top of Gov. Inslee’s agenda. “We are always seeking ways to strengthen ties between Washington and Asian countries,” the governor said. “For instance, in 2012 we signed a memorandum of intent with the Confederation of Indian Industry [during a trade mission to India last October] to promote investment between Washington and India. When foreign companies invest in Washington, it represents their confidence in, and commitment to, the Washington economy. It’s a win for our state and, in our view, for the investor—so we stand ready to facilitate such investments where we can.” Beyond trade missions, this year Inslee proposed funding for trade programs that help small and medium-sized firms that want to tap into new markets, but might not have the ability or know-how, or face barriers in doing so. Inslee also pushed through $1 million to reinvest in foreign representation in high-growth markets such as Brazil, India, China and Mexico.
GREEN ENERGY IS GROWING IN WA
Washington is our top-ranked state in overall installed capacity for power from renewable energy; the state also tops our list for power generated from renewable energy [see Rankings Report]. In 2006, when voters passed Initiative 937, Washington became the second state in the nation to approve a renewable portfolio standard for its electrical utilities. “Two-thirds of the electrical power we consume is renewable and carbon-free, largely due to our reliance on hydropower,” Inslee told BF. The state is not stopping there—voters have approved new investments in renewables including wind, bioenergy, solar and other sources. Washington has more than 2,500 megawatts of wind energy projects in the ground, with more under development. By 2020, renewable electricity will make up over 80 percent of the power consumed in the state. The first bill introduced and passed by Gov. Inslee’s administration addressed climate change, making Washington one of the first states to respond to this looming challenge head-on. We asked the governor whether the effects of climate change already are having an impact on Washington. “The impacts of climate change are already being felt,” he said. “One sobering example is the recent partial relocation of one of Washington’s shellfish companies to Hawaii. After 34 years in Washington State, the business had to relocate its hatchery operations because the water has become too acidic.” Inslee noted that the Puget Sound alone contributes $20 billion of economic activity in the state and is linked to thousands of jobs in fishing, tourism and trade. It defines a big part of Washington—economically, environmentally and culturally. “Unfortunately, climate change is altering one of our state’s crown jewels,” Inslee explained. “In recent years, we’ve experienced more extreme flooding and wildfire. Snow pack in our mountains is beginning to diminish. Experts have estimated that if we don’t take any action to address climate change, potential costs to our state could reach nearly $10 billion per year by 2020 from increased health costs, storm damage, rising energy costs, increased wildfires, drought and other impacts.” Inslee, who has proposed electrifying the state’s transportation system, says there’s no one-size-fits-all solution to the challenge of climate change. “It will require innovation on all fronts, and a range of solutions that reduces carbon pollution and captures the economic opportunities of clean energy,” he said. “Improving our transportation system will require efficient vehicles, clean fuels, transportation alternatives and better land-use planning. Electricity can effectively power passenger and lightweight vehicles today. We are fortunate to have very affordable, reliable and clean electricity.” Inslee also noted the foresight of his state’s early investment in an electric vehicle charging network. “In 2012, the Nissan dealer in Bellevue, WA sold more electric cars (the Leaf) than any other dealer in the country,” he said. For heavier vehicles, natural gas is the likely bridge fuel to reduce the carbon pollution, Inslee said. Compressed natural gas is being deployed for mid-sized vehicles that return to base each day in Washington. Inslee cited liquid natural gas as “a ready and promising technology” for larger trucks and ships. According to Inslee, Washington is poised to be a global leader in the clean energy economy. This is an industry that taps into Washington’s innovative and entrepreneurial spirit as well as its forward-thinking commitment to preserving a high quality of life, the governor said. Inslee credited Initiative 937, which set the state’s renewable energy standard for electricity, as a groundbreaking new policy that has helped generate a significant portion of more than $7 billion in economic activity. The state provided Recovery Act support to the Center for Advanced Manufacturing Puget Sound (CAMPS) in 2009 to help Washington-based manufacturers provide after-market equipment, maintenance and repair to Washington’s wind-power industry. Washington also has deployed the CAMPS program to help some of the specialized manufacturers in the state that support the aerospace industry move into the wind-energy supply sector. Inslee notes that the manufacturing opportunities for solar photovoltaic equipment are more limited because of the large amount of worldwide production capacity. However, Washington has established some important market niches: REC Silicon in Moses Lake is one of the world’s largest manufacturers of polysilicon for the photovoltaics industry. The availability of clean and inexpensive hydroelectric was a key factor in the location of the plant in Washington. Washington also has two high-end manufacturers of solar modules: Silicon Energy and Itek Energy. Both of these producers have designed panels to high standards, making them among the most durable, long-lived modules available anywhere.
WA VOTERS HAVE HIGH HOPES
Among the unexpected developments that have landed on the governor’s desk, none was more surprising than a decision by state voters last fall to legalize the recreational use of marijuana. We asked Gov. Inslee whether he anticipates an influx of tax revenues and tourism from the state’s newest growth sector. He chose his words carefully [at press time, the federal government had yet to indicate whether it will let WA and CO skirt federal restrictions on growing and selling marijuana]. “[Our] voters took the unique step of approving a measure that moves marijuana out of the illicit market and [directs] the state to establish a legal market where it can be taxed and regulated,” Inslee said. “We do not anticipate a windfall from initial sales and we’re not booking any revenue from sales during the first year of operation,” he added. “There are simply too many unknowns.” Gov. Inslee also downplayed predictions that pot will make Washington a major tourist destination. “We will most likely see some tourism as a result of the unique nature of what we’re working on here, though most people will probably not buy a plane ticket to come here just to buy marijuana,” he said.