Washington State Senate Bills 6711-6715
On January 26, Senator Lisa Brown and several other key senators introduced five bills to the Washington Legislature. They propose an underestimated and inexpensive set of programs that can help to mend an oversight by Washington lawmakers over a decade ago. Significantly, the bills address chronic complaints that Washington State is a hard place for small business formation. And they open the door for relatively modest investments in training and assistance at the grassroots level to assist citizens who otherwise would never be able to approach self-employment as a real option in their lives.
? In its implementation of the federal Workforce Investment Act (WIA) in the early 1990s, the Legislature intentionally chose to emphasize policies that supported guiding the unemployed workforce into existing Washington firms. At the time, Northwestern communities faced one of our periodic waves of unemployment, and the new federal law gave us an opportunity and an obligation to improve our state's ability to put people back to work.
? From that initiative, came the State and Regional Workforce Investment Boards, and in turn
? the focus on industry employment needs,
? the training of unemployed to meet those needs, and
? the legislation and administrative rules that established (among other things)
? the one-stop WorkSource System,
? the regional business outreach programs, and
? unemployment insurance features that permit the workforce to take advantage of training and guided training for targeted placement in existing firms.
Those were major tasks, and in the main they worked.
The Washington Legislature chose not to support one provision in the WIA. The Act permits states to use Unemployment Insurance (UI) policy to support periods of training for self-employment, as it does for other employment training. To some extent, choosing NOT to enable Microenterprise support and taxing policy, investment funding, Microenterprise loans, and development organizations, created a demand for non-profit Microenterprise Development Organizations (MDOs). MDOs grew in Washington communities as a response to a chronic need for new entrepreneurs for alternate financing, basic business and management training and places where they could get ongoing assistance once established. In 1990 there was no organization in the State representing the Microenterprise per se, so there was probably not a strong constituency for this kind of support at the time. Today, the Washington State Microenterprise Association (WA SMA) has members from communities across the state.
On January 26, 2006, during the hearings for these bills, the federal Corporation for Enterprise Development (CFED) released its annual Economic Development Report Card. Out of possible grades of "A" through "F", Washington is ranked # 20 on the list, barely holding on to last place in the "Grade B" category. This mediocre result it quite literally a result of our State's failure to support new business development--the objective ratings process points this out clearly.
Sadly, it's not a question of inventing a new wheel, as some have suggested. It's a question of using a proposition that has been available to us under federal law for over a decade. Ironically, the federal government funded a model test program in Washington more than a decade ago. The states of Washington and Massachusetts were selected to try out local versions of this test program. Washington’s 1990 effort was named the “Self-Employment Economic Development (SEED) Program”. Follow-up studies showed that the concept worked in both states, but especially so in Washington. The results are available at http://www.allbusiness.com/periodicals/article/483792-1.html. According to the Dept of Labor website, this voluntary program for supporting new business development has now been implemented by Delaware, Maine, Maryland, New Jersey, New York, Oregon and Pennsylvania.
Bills 6711, 6712, 6713, 6714 and 6715 need to be seen as a complete package to support the smallest businesses.
Taken together, they offer the following features:
? Interactive training for a minimum of 25 hours would be available to prospective entrepreneurs through state and nonprofit agencies and on the Internet at no cost to the participant; satisfactory completion of the program would generate proof (a certificate, probably) that justifies eligibility for other parts of the package. (SB 6712)
? One incentive offered to new business owners who complete the training and certain other hurdles (licensing, tax registration and certain other normal business steps) is a 24-month exemption from B&O tax during the first 5 years of operation. Since microenterprises rarely create enough volume in their early years to "dent the B&O bucket," this is a low-cost--but symbolically very relevant--exemption. (SB 6712. Senate Fiscal Notes suggest the number of firms affected might be as high as 3800 firms per year)
? A third provision authorizes the WorkSource system to identify persons whose period of current unemployment is likely to extend past the period of allowed Unemployment Insurance (UI) benefits (where an obsolete or unique industry closes down in a community, as an example). These people would be offered the opportunity to prepare for self-employment (training, planning activity, etc.) instead of pursuing mandatory job searches in areas that may not offer appropriate employment. (SB 6713). [Under the Washington SEED Program, these people received unemployment benefits while training and preparing for their own business, the same as other unemployed people. If their business got off the ground before the UI benefits expired, they could receive the balance in a lump sum to help get the new enterprise to work.]
? The fourth provision permits the state to invest in microenterprise development indirectly by providing grants and loan funds to Microenterprise Development Organizations (MDOs) across the state, administered through a contract with an established domestic association of such organizations. The State Microenterprise Association would be accountable for requests, awards and accounting for expenditures of all monies, and would receive no more than 10% of funds as its own operating monies. (SB 6714)
? The final provision of this package simply requires the state's Workforce Investment Boards (State and local levels) to include Microenterprise development policy as a formal part of their activities, integrated with the other activities of workforce assessment, statewide workforce planning, recruiting and development, training and education. (SB 6715)
An affiliated bill, SB 6716 was not presented as a part of this package, but has strong supporting features. Under today's rules, banks licensed to operate in Washington are measured each year and controlled based on performance standards, which implemented the federal Community Reinvestment Act (called "CRA"). Banks that want to expand, improve product selections, go into a new market or have other plans, must go to the State Department of Financial Institutions (DFI) for approval of these plans. The State DFI relies on a grading system ("A" through "F") to determine if an institution should qualify for approval. This bill, for the first time in Washington, would include a bank's efforts to support Microenterprise and MDOs as a criterion for measuring their CRA citizenship scores.
These bills form an interactive whole that will permit the State to develop a missing piece of our overall economic development picture. There is no economic, economic development or social reason for us to deny Washington the tools that are available to all other states to generate new businesses and create new opportunity for our citizens.
J.R. Sloan, Business Consultant
MBA, LUTCF
(509) 467-2241, jrsloan3@hotmail.com
J Sloan Enterprises
Spokane, Washington