On the same day that new state reports showed joblessness climbed in February to 9.5 percent statewide, lawmakers moved forward two measures aimed at sparking job growth through major construction projects.
“We need to create jobs. Over 27 percent of the construction industry is sitting on its hands,” Rep. Hans Dunshee of Snohomish said in House floor arguments for a ballot proposal to borrow $861 million for energy improvements to public schools.
Majority Democrats in the House approved Dunshee’s bond proposal shortly before the Senate voted overwhelmingly to approve a tax break for technology companies that house their computer nerve centers in rural parts of Washington.
The parties were united on exempting data centers from paying sales taxes on their computer servers and electrical components.
“It’s going to create those clean, high-tech jobs that all the states are competing against,” said Sen. Rodney Tom, a Medina Democrat.
But while Dunshee and other Democrats said the government investment is needed to inject life into a dying construction industry, Republican Rep. Doug Ericksen of Ferndale said the school-construction referendum would drive up state debt and move the state in the wrong direction by having it borrow at a time lawmakers can’t pay the costs of government without raising taxes.
“The purpose of the special session should be to balance our budget and not raise taxes,” Ericksen said. He argued that Democrats have destroyed potentially 40,000 jobs by transferring nearly $1 billion out of the capital budget last year and this year, which the bonds plan would not completely make up for.
The unemployment increase was not unexpected; state revenue forecaster Arun Raha long has said joblessness would peak in the late spring at near 9.8 percent. But Raha also said this week in a monthly economic report that the rate of jobs growth is going to be very slow until 2011 – even accounting for temporary federal census jobs that run through May.
Against that backdrop, Democrats and Republicans tangled in a floor fight over Dunshee’s “Jobs Act,” which passed the House in January but needed a new vote in the special session after it died in the Senate. The state treasurer had raised concerns about its effect on the state bond rating.
The bond proposal would go to voters in November for approval. It would involve spending $861 million on upgrading school energy systems and removing health hazards. Supporters say it would create 38,000 jobs.
“The private sector creates jobs; the government doesn’t create jobs,” Ericksen said, outlining a principal difference between the two parties’ philosophies.
“If we are going to balance this budget, people are going to have to be put back to work. We can’t do it any other way. … It’s what we need to do to stimulate this economy,” countered Rep. Mike Sells, D-Everett. Sells suggested the state was sending children into decrepit schools that “we probably wouldn’t send felons to.”
Dunshee has said the bill would generate about 6,000 jobs a year and that its bond-interest costs would be paid in the first four years by sales taxes paid on energy improvements on public buildings.
Gov. Chris Gregoire and state Treasurer Jim McIntire had been skeptics when Dunshee announced a larger plan for school renovations in 2009. But spokeswoman Karina Shagren said Tuesday that Gregoire is “still intrigued by the idea” and is exploring it.
Chris McGann, spokesman for the treasurer, said McIntire’s main objection had related to the size of the bond and a lack of a revenue source to pay off the bonds.
“We’re working with the governor, Rep. Dunshee and the Senate to see if there is a way to do what he’s trying to do without jeopardizing the state’s credit rating,” McGann said.
Under Dunshee’s plan, savings from the energy improvements – including projects with new thermal windows, insulation and better ventilation and heating systems – would be retained by local schools.
And once the benefit of sales taxes wore off, the state general fund would be on the hook for the bond costs, which are pegged at $63 million a year.
The Senate now takes up the measure, and Democratic Sen. Karen Fraser of Thurston County said the Jobs Act “is in the mix” of ideas her chamber may consider as it drafts capital-construction plans.
“It’ll come over and get considered,” she said.
The Senate vote in favor of the sales tax exemption for data centers was 39-4 — even though Tom and other budget writers have otherwise pushed to end exemptions to plug a $2.8 billion budget shortfall.
This one, Tom said, won’t cost the state because companies have chosen to go elsewhere with their data centers ever since a 2007 ruling by the state attorney general that they don’t qualify for a rural manufacturing tax break.
“There’s no money if they don’t build,” he said.
Data centers require few employees to operate, but the coalition pushing them, including Microsoft and Yahoo, says a typical center creates 500 to 1,000 temporary construction jobs.
The benefits are not just hypothetical. Sabey Corp. has announced plans to build a 525,000-square-foot data center in Quincy for at least one technology company yet to be named.
Senate Bill 6789 would allow the tax break in 32 rural counties, but not the remaining seven. Pierce County lawmakers have been unsuccessful so far in expanding the tax break into more-urban areas such as theirs, where Benaroya Cos. expects to spend more than $100 million to build a data center in South Hill.