Manufacturing Innovation Sunset Review:

1. Manufacturing Innovation Sunset Review: Legislature Should Allow Unused Program to Expire Preliminary Report Joint Legislative Audit & Review Committee September 21, 2011 Elisabeth Donner, JLARC Staff

2. Sunset Statutes Require JLARCto Review MIMES Program “Washington Manufacturing Innovation and Modernization Extension Service Program” (MIMES) Created in 2008 to provide small manufacturers with a voucher to pay for services such as: strategic planning, business development, and supply chain management Set to expire June 30, 2012 Absent specific action by Legislature JLARC’s recommendation: Allow the Program to expire Manufacturing Innovation Sunset Review Report Pages 1 - 2 & 4

3. Presentation Outline Overview of the MIMES Program Purpose Intended Outcomes How it Works Expenditures Appropriations Results of the Sunset Review • Recommendation Manufacturing Innovation Sunset Review Report Pages 2 - 3

4. 2008 Legislature Created the MIMES Program and Account (SSB 6510) • “To perform in the emerging marketplace, Washington manufacturers must master new technologies, streamline production processes…and enhance methods of work organization.” • Through “innovation and modernization techniques” Washington manufacturers would be able to “compete successfully” and “pay good living wages.” (RCW 43.338.005) Purpose Manufacturing Innovation Sunset Review Report Page 2

5. Legislation Noted the Intended Outcomes • Increase availability of services to Washington manufacturers, with intent of enabling manufacturers who have engaged in these services to: • Reduce costs; • Increase sales and profitability; and • Expand job opportunities. • Legislation also noted this growth would result in increased revenues from B&O taxes paid by these manufacturers. Intended Outcomes Manufacturing Innovation Sunset Review Report Page 3

6. Manufacturer Pays for services with voucher Repays voucher amount plus 5% Provides services How Does a Manufacturer Access Services through the Program? Applies for voucher Approves application and access to $ How it Works Dept of Commerce Qualified Service Provider MIMAccount Step 1 Step 2 Step 3 Source: JLARC analysis of SSB 6510. Manufacturing Innovation Sunset Review Report Page 2

7. No Money Has Been Sent Out through Vouchers for Manufacturers Vouchers to assist manufacturers $0 Rural manufacturer export outreach program, as directed by 2008 Supplemental Operating Budget proviso $60,816 Expenditures Department of Commerce administrative expenses $44,573 Total through end of FY11 $105,389 Manufacturing Innovation Sunset Review Report Page 3

8. Legislature Has Reduced Available Funding Over Time • (Dollars in thousands) • $306 • $246 • $230 Appropriations • $61 • 2008 Supp. Operating Budget • 2009-11 Operating Budget • 2010 Supp. Budget • 2011-13 Operating Budget Manufacturing Innovation Sunset Review Report Page 3

9. Sunset Statutes Require JLARC to Respond to Four Questions Manufacturing Innovation Sunset Review

10. Does the MIMES Program Comply with Legislative Intent? No The MIMES Program has not been used. Therefore, it has not met the expected outcomes for manufacturers who have engaged in innovation and modernization services. Manufacturing Innovation Sunset Review Report Pages 1 & 3

11. 2. Is the MIMES Program Operating Efficiently? JLARC could not assess Because the MIMES Program has not been used, JLARC could not assess the efficiency of the Program. Manufacturing Innovation Sunset Review Report Pages 1 & 3

12. 3. Is the MIMES Program Meeting Its Performance Goals and Targets? JLARC could not assess Because manufacturers have not used the Program, JLARC could not assess whether manufacturers who received services improved their performance. Manufacturing Innovation Sunset Review Report Pages 1 & 3

13. 4. Is the MIMES Program Duplicating Services? No, but some possible overlap JLARC did not find duplication of services with the MIMES Program, although there is possible overlap with programs that provide general assistance to Washington businesses. Manufacturing Innovation Sunset Review Report Pages 1 & 4

14. Possible Reasons Why Manufacturers Haven’t Used the MIMES Program Department of Commerce Required application process for a voucher may have made it “unattractive relative to some other types of personal and commercial small business loans such as credit cards and personal lines-of-credit.” State’s one qualified service provider Additional reasons may include lower bank interest rates and the availability of grants with little out-of-pocket costs to the manufacturer. Manufacturing Innovation Sunset Review Report Page 4

15. Recommendation: Allow Expiration Legislation that created the MIMES Program became law on June 12, 2008. Since that time, no manufacturer has used the Program. The Legislature should allow the Washington Manufacturing Innovation and Modernization Extension Service Program to expire. Manufacturing Innovation Sunset Review Report Page 4

16. Next Steps and Contact Information Proposed Final Report: November 2011 Elisabeth Donner 360-786-5190 elisabeth.donner@leg.wa.gov www.jlarc.leg.wa.gov Manufacturing Innovation Sunset Review