HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT March 14, 1995 9:10 a.m. MEMBERS PRESENT Representative Jerry Sanders, Chairman Representative Vic Kohring Representative Pete Kelly Representative Ed Willis MEMBERS ABSENT Representative Carl E. Moses Representative Eileen MacLean Representative Norman Rokeberg COMMITTEE CALENDAR Overview on Pacific NorthWest Economic Region WITNESS REGISTER SENATOR ALAN BLUECHEL, President Pacific NorthWest Economic Region 999 Third Avenue, Suite 1080 Seattle, Washington 98104 Telephone: (206)464-7298 Fax: (206)464-6859 POSITION STATEMENT: Overview on Pacific NorthWest Economic Region ROGER BULL, Executive Director Pacific NorthWest Economic Region 999 Third Avenue, Suite 1080 Seattle, Washington 98104 Telephone: (206)464-7298 Fax: (206)464-6859 POSITION STATEMENT: Overview on working groups relating to Pacific NorthWest Economic Region PAM NEAL, President State Chamber of Commerce 217 2nd Juneau, Alaska 99801 Telephone: 586-2323 POSITION STATEMENT: Supported Pacific NorthWest Economic Region ACTION NARRATIVE TAPE 95-4, SIDE A Number 000 CHAIRMAN JERRY SANDERS called the House Special Committee on Economic Development to order at 9:10 a.m. Representatives Sanders, Kohring, and Kelly were present. Chairman Sanders stated, for the record, that Representative Willis is attending another committee meeting and will join us as soon possible. Representatives Moses and MacLean were absent. CHAIRMAN SANDERS stated that the Pacific NorthWest Economic Region was established l989. Chairman Sanders noted that there are two representatives from Pacific NorthWest Economic Region who have very distinguished backgrounds. Senator Alan Bluechel who after 28 years with the Washington State Legislature retired recently. The second is Roger Bull who has a very distinguished career in the Canadian Foreign Service. Chairman Sanders stated that he found these men very impressive during the four hours he met with them. He stated that this will be a very informal meeting. He said after the presentation if there are any questions, the audience will ask first then the committee. Number 048 SENATOR ALAN BLUECHEL, President, Pacific NorthWest Economic Region, gave an overview of Pacific NorthWest Economic Region's background. He stated that since l989, the world has probably changed more in this five or six years than it has in the last thousand years, and this change is accelerating throughout the whole world. In that type of change there are both threats and opportunities. He said Pacific NorthWest Economic Region regards this as an opportunity because when you look at the global economy, certain regions of the world have an opportunity to become the major players in their regions. Mr. Bluechel asked how do we, as individual states and provinces, deal with this sort of thing. He stated that it so happens that the Pacific Northwest, which includes Alaska down to Oregon and east to Montana and Alberta, is really in a global sense one of the favored areas of the whole world, we sit in the middle between the European community and the Pacific Rim. Mr. Bluechel noted that in the Pacific rim 70 percent of the money of the world is now circulating and being generated in the economy. MR. BLUECHEL asked how do we as individual states and provinces deal with something like this because each one of us individually are quite small and we do not cast a large shadow on a global picture. He stated that when you take this region of Washington, Oregon, Idaho, Montana, British Columbia, Alberta and Alaska and you add the population together, you get about sixteen plus million people. He noted in their research they found that in order to obtain a critical mass to be able to play in the global economy, you need at least 12 million people and preferable you need 15 million people, but more importantly is when you take the gross domestic product of the region it, ends up as the tenth largest economic entity in the world. That means there are only eight countries that have a greater gross domestic product. He explained they have a gross combined product of 254 billion annually. MR. BLUECHEL noted he was pro tem of the Washington Senate in l989. At that time he passed a resolution through both houses, inviting the leadership of the legislatures throughout this five state two province region to come to Seattle to see if they had anything in common. He said five of the seven speakers and four of the five majority leaders were at the meeting. He stated the most interesting part of the meeting was they had every variety of philosophy there. There were socialist from British Columbia, extreme conservatives from Idaho and Alberta, and everything in between. MR. BLUECHEL said when they started discussing the global picture, the first thing they found was all their differences in philosophy simply fell off the table because it did not matter when you are dealing on a world scale. He said from that start they proceeded to put together Pacific NorthWest Economic Region. Mr. Bluechel stated it took a couple of years to develop the articles of ratification. He explained in l991, they submitted the articles to all the l991 legislatures and they all passed during that winter session. Six of the articles passed through the regular routine of the House and Senate. MR. BLUECHEL stated that Alaska adopted a resolution, by the Legislative Council, joining Pacific NorthWest Economic Region. At that time a dues structure was set up. Mr. Bluechel explained the dues structure as follows: The four larger states and provinces, Oregon, Washington, British Columbia and Alberta pay $25,000 a year to Pacific NorthWest Economic Region. The three smaller ones, Alaska, Idaho and Montana pay $15,000 a year. This was matched by the private sector through associates in the private sector. Number 180 MR. BLUECHEL explained that Pacific NorthWest Economic Region is designed to do something neither Canada nor the United States really does, that is to create a really working public-private partnership. It is designed for a working public-private partnership where the private sector sets the course for the issues in the subjects to be taken up. It is not meant to be a bureaucratic type of operation, it is meant to work, it is meant to have very few rules and regulations. He noted there are only two rules right now, one is when they take up a working group, they must have at least three states and provinces agree to the working group. They must not conflict with anyone else. The second rule is they do not get involved in each others politics because this is a totally bipartisan effort. MR. BLUECHEL said all 703 legislators currently in the region belong to Pacific NorthWest Economic Region. Each legislative body in the American states selects one of their members, usually it is a leadership member of each caucus, to sit on the Delegate Council. The Delegate Council then selects one of their members to be on the Executive Committee. So there are seven members on the Executive Committee from the legislative body, one from each state and province. Then the Executive Committee chooses a president and a vice president, which must be from different countries. Number 210 MR. BLUECHEL explained the way they work is through working groups. He explained that there are series of working groups. The working groups have one co-chairman from the private sector and one from the public sector. Mr. Bluechel said the legislatures are very volatile so they expect the private sector to be the repository of historical perspective. MR. BLUECHEL said in l993, they added the Governors and Premiers to the Delegate Council, and there is a second piece of statutory legislation which modifies the original enabling act to add the Governor to the Delegate Council. He stated so far five of the seven states and provinces have passed the second piece of legislation. All have passed the first. Mr. Bluechel noted even through the Governors are not officially statute in each state they are recognized as part of the delegate council. Number 249 MR. BLUECHEL stated in Kananaskis, Alberta, they established instead of an associate membership for the private sector, a full Private Sector Council. He explained the private council is a paid membership from the private sector. They elect four members from each state and province to the Board of Directors of the Private Sector Council, and the Private Sector Council elects a chairman and a vice chairman to the Executive Committee. Mr. Bluechel stated they are ex-officio, they are both a 501C3 and 501C6 organization, so all the funds paid to Pacific NorthWest Economic Region from Canada and the United States are tax exempt. MR. BLUECHEL stated at the last meeting, Alberta established a new working group of government procurement. Under GATT all government procurement above the range of $250,000 is non restricted but cannot be restricted in any of the 117 GATT countries. MR. BLUECHEL mentioned another type of a working group is the timber working group, which Alaska plays a major role. He said this region composed of Washington, Oregon, Alaska, British Columbia and Alberta is the largest soft wood producing entity in the world. The second largest is Scandinavia, and it does not sell two by fours and raw logs. He stated that Alaska and the rest sell two by fours of raw logs, in effect, they are selling raw and natural resources. Mr. Bluechel stated they are not out to change that, what they are doing is adding a dimension of value added wood products. He said the intent and purpose of the timber working group is to take a lot of the displaced timber workers and find a manufactory or value adding type of production to timber. Number 323 ROGER BULL, Executive Director, Pacific NorthWest Economic Region, gave an overview of some of the working groups. He talked about the timber working group and stated that focusing on wood manufacturing does make sense because a lot of small communities grew because of exploiting the forest. Rather than see them die like many mining communities when the mine is depleted, it is our hope that through a value added industry these towns can stay alive and keep their jobs. Number 348 MR. BULL mentioned other working groups, one of real interest in Alaska is the tourism working group. Mr. Bull gave an example of what the legislators said to the tourism directors of the seven states and provinces, "why don't you consider working together in a working group." The director said this is very difficult because some of us have $20 million a year to spend on tourism promotion and some of us have $2 million. The director said they tried it, they had something that was called the two nation vacation and it did not work. Mr. Bull further explained that the legislators wanted them to try, and under the circumstances the functionaries, found they could try. He said they got together and discovered a lot of things they could do in common. Each of the states and provinces paid $10,000 to finance the study. In the end, there was such a range of possibilities, both among visitors and resources, that a single marketing campaign did not make sense. He stated that every one of the states and provinces has improved their marketing as a result of this study. Number 383 MR. BULL talked about the environment as another working group. He stated they focus on one issue which the fact is there are 2,600 companies in the Northwest engaged in providing environmental goods and services. Mr. Bull noted that we are the second largest concentration of a highly technologically advanced industry in the world. The largest is Europe with 4,000 companies. He stated what Pacific NorthWest Economic Region did was to encouraged the different states and provinces to improve or to create for the first time, associations, and environmental industries associations. He said one of those associations is here in Alaska, organized by Rex Lumbkin, and a group in Anchorage. Mr. Bull said there are associations in every state and provinces except Idaho where there is a larger association to which the environmental companies belong. There is an environmental council for the region which is actively engaged in working with us to develop export. Number 408 MR. BULL also gave an overview on a recycling working group. Recycling is a group which was originated in Alaska, he noted that Fran Ulmer, who was a member of the Delegate Council, urged them to get into recycling as an issue. He further discussed ways in which recycling can be changed from just being the right thing to do into something economical as well. Part of the problem is the size at which a recycling center becomes economical. The recycling work group received an Environmental Protection Agency (EPA) grant in order to bring recycles from various parts of the region to discuss how each had solved their own recycling problems. Number 454 MR. BULL then discussed the export working group. He stated late in l993, at a meeting in Idaho, Senator Bluechel came up with a proposal. He said we have been working on all these different sectors, when you get down to it, the objective is to create jobs. The way to create jobs is by selling things to each other. Ultimately, it is by exporting from region, value added, turn our resources into products and sell the products to the world. Number 515 MR. BULL explained the product is catalyst, it originated in the state of Washington as the Washington market place. He said it was designed to do something very simple. There are dozens of sources of business opportunities, magazines, newspapers, federal, state and private publications, E-mail, bulletin boards on the internet. The Catalyst Program takes the opportunities identified from all these sources and classifies them using an eight digit extended SIC code. The next step is to classify all of the businesses within the private sector with these same codes. One company may have as few as 1 code, or as many as 50. He stated when an opportunity is coded in the computer it is then sent out by fax machine to all companies that contain a matching code. This will be done in the evening by fax because although some companies have access to modems and E-mail the majority of companies today have fax capability. When a company receives its faxed list of opportunities it can respond to a particular opportunity and more detailed information will be faxed the following night. Mr. Bull stated that a reasonable cost for Alaska to participate in this program would be $20,000, some of which could be recuperated through fees on industry participation. Alaska's Chamber of Commerce already has a fax network of companies who are used to receiving information over the fax. These faxes would appear to be coming from Alaska and all inquiries would be made to local agencies. This would make follow up assistance more personal and keep freight forwarding and aspects of business within the state. Mr. Bull stated in the future, this system would allow smaller businesses to join together and bid jobs they would not normally be able to handle individually. This system can also be leased to organizations who want to contact all the representatives within a specified industry by using this database of coded companies. Mr. Bull concluded that at the end of the three years of federal funding, he would hope the Catalyst Program would be self sufficient. Number 719 CHAIRMAN SANDERS asked if the audience had any questions. Number 732 REPRESENTATIVE PETE KELLY asked Senator Bluechel what the voting structure is if you have several regions of different populations and economic regions. SENATOR BLUECHEL replied that it is just one vote per state and province, however, every vote taken must be unanimous. He explained that they are geared to provide a structure for businesses to win. In other words, they open the door as the legislatures have, for businesses to make the sale. He stated this is strictly business oriented, it is not concerned with welfare, environment, etc. Number 788 REPRESENTATIVE KELLY said Mr. Bluechel mentioned he was completely out of politics and the timber supply is shrinking and creating some problems. Representative Kelly asked how do you separate politics when the timber supplies are shrinking. Number 795 SENATOR BLUECHEL responded that he was in the timber business and is fully aware of it. He noted he said the wrong thing and explained what they are trying to do is bring politics into the real world of business. He said instead of being an interference, structure it even in a very focused area to help rather than hinder. Further, discussing timber, he said one of the biggest problems with timber is the dispute between Canada and the United States on what are standards, rules and regulations. He noted they did not want to touch this at all, but Glen Clark, who is the number one minister in British Columbia and Vice President of Pacific NorthWest Economic Region, said he thinks we should get together as a region and set common standards, operating procedures and goals. He stated we can do this as a region, and everybody else in the world is going to look at us and are not going to try to override us with other standards. Number 868 MR. BULL stated they have been asked to participate and were invited by Governor Symington to come to his state of Arizona to advise them on organizing a regional group. Number 915 REPRESENTATIVE VIC KOHRING asked to what extent is Alaska's involvement so far. Number 918 MR. BLUECHEL said Alaska has been a charter member along with six others. He noted Alaska has not paid the last dues of $15,000, but has been participating as a full member. Mr. Bluechel stated the main purpose they are here is not only to tell us what Pacific NorthWest Economic Region is doing, but to encourage Alaska to continue participation. He also encouraged Alaska to join the Catalyst Program, because for $20,000, you get $540,000 worth of results. He mentioned it actually would be more than that because the states of Washington and Oregon, over the past few years, have invested probably $750,000 to $1 million in infrastructure. Mr. Bluechel said their goal and the federal objective is to expand this to 150,000 companies. The $20,000 is to start classifying the Alaska businesses by their SIC codes and any Alaskan leads would also by classified. If 500 Alaskan companies participate and we make 50 matches a year and those matches each produce $100,000 of business, then for $20,000 you have produced $5 million. He said realistically someone else has done all the leg work and put the whole thing together and we have the operating system and all the federal government is saying, we would like you to expand it but we want you to pay your share of it. Number 955 REPRESENTATIVE KOHRING stated Mr. Bluechel mentioned matching dollars and asked if he was talking about federal matching dollars. Number 957 MR. BLUECHEL explained the federal grant was for $420,000 and if Alaska pays $20,000 a year to the catalyst system, Alaska will be a full participant in the full federal grant. Number 964 MR. BULL stated that right from the start, participation should be based on population in the state and the number of companies. REPRESENTATIVE KOHRING asked if they were asking for two different fees, $20,000 for the Catalyst Program and $15,000 for the membership. Number 968 MR. BLUECHEL replied that $15,000 is for the membership and the $20,000 is the start up cost for entering catalyst. He explained the catalyst is one part of the export working group and the export working group is quite complex. This is one single part of the export working group and it stands aside from the Pacific NorthWest Economic Region membership because it is operated. Once it is in operation, it is a straight fax to the businesses, once the infrastructure of cataloging and classifying is done that is what the cost is for. He explained that Oregon will be charging their users. Number 986 MR. BULL gave an explanation of how the catalyst database can generate income and that is by allowing third parties to solicit from the various groups within the database. Number 010 SENATOR BLUECHEL said this is part of the export package but there are other parts to the export package. There are four areas that are key to a business. First, is finding a bid or a tender that you can respond to, and the end is shipping the product and getting paid. The second part is the most concern to small businesses. He said they have the program in place but it is somewhat embryonic. He further discussed the third part which, for most companies, is how to get financed. The last part which they asked Oregon to become the lead entity on is creating flexible networks. Mr. Bluechel explained that if you get all these four parts together, a small company in Juneau can utilize all of these things to go with the company in Montana or somewhere else to get a job. REPRESENTATIVE KOHRING asked if the funding request has been formally put in to the legislature. MR. BLUECHEL responded that he did not know. REPRESENTATIVE KOHRING asked if Alaska has been a dues paying member for the last several years. Number 063 MR. BULL replied that Alaska has been paying dues since l991, and further explained the distinction between the Pacific NorthWest Economic Region dues and the catalyst start up costs. Number 078 MR. BLUECHEL explained that the dues can be put into statute, and read an example taken from the Washington statues. REPRESENTATIVE KOHRING asked Pam Neal of the State Chamber of Commerce to comment on her view points, effectiveness of this program and the benefit to Alaska by participating in this program. Number 088 PAM NEAL, President, State Chamber of Commerce, stated that they are very interested and she was very impressed with the invitation. She asked if there is any activity in the private industry, in Alaska, at this time. MR. BLUECHEL answered yes. In the environmental technology, Alaska has an association which participates in Pacific NorthWest Economic Region. MS. NEAL stated she received many inquiries asking who in Alaska could provide this type of service. She also stated the Alaska State Chamber supports this initiative and the chamber would offer its services in sending out a questionnaire. Number 102 REPRESENTATIVE KOHRING asked if this would be the Department of Economic Development's budget. MS. NEAL responded that she did not know and was wondering about that herself. Number 106 REPRESENTATIVE SANDERS mentioned the dues were funded through the Legislative Council and they have two options of payment of membership; either to continue to let leg council pay annually, or to look into introducing a bill to establish payment by statute. Chairman Sanders asked if the catalyst could come through the Department of Commerce. He asked if there is a channel where private industry or the State Chamber could do that on their own even if the state was not participating as a government. Chairman Sanders said if they chose not to participate, he would hope that the catalyst would be available to the public sector. Number 116 MR. BULL responded that they would not wish to promote catalyst with the state when the state is closed. Number 133 MS. NEAL stated the thing she found most attractive about this structure is the partnership between government, the public sector, and the private sector. She said it would be less than effective if the state and government were not financially committed. Number 144 MR. BLUECHEL noted one question he did not answer fully. The way most states do the dues is put it in their legislative budget, and most states say the Pacific NorthWest Economic Region dues shall be paid half by the House and half by the Senate. Number 156 REPRESENTATIVE KOHRING commented that it is a pretty nominal amount especially if it is a good program. He said the state is going to realize some economic benefit from it. MR. BULL said to get value in the membership, you have to throw yourself into the organization, you have to be prepared to involve legislators who are interested in the different working groups. CHAIRMAN SANDERS stated, for the record, that Representative Ed Willis arrived at 10:30 a.m. and asked Representative Willis if he had any questions. REPRESENTATIVE ED WILLIS said his staff person is in attendance taking notes so he will not get into what has already been gone through. CHAIRMAN SANDERS introduced Representative Willis to Senator Alan Bluechel and Mr. Roger Bull. Chairman Sanders stated that if there are no further questions, they will disburse of the formal part of the meeting. ADJOURNMENT There being no further business to come before the committee, Chairman Sanders adjourned the meeting at 10:45 a.m.