Wednesday, April 14, 2010

Reporter's Notebook

Steve McDonagh can be reached at

State government could learn much from local Great Recession “survivors”

Well they tell us it’s over. Of course, I'm referring to the Special Session of the Washington State Legislature, which ended this week after endless wrangling between Democrats saying, “We did the best we could,” and Republicans who say, “We didn't do enough.”

There is no way to tell if what they did was enough, not enough or way too much – probably because there isn't even consensus on the status of the so-called Great Recession which put the state in this budgetary mess in the first place.

Economic indicators all seem to be pointing to the fact that the downturn is over and we are now in a period of slow recovery. However, many academics and historians who will eventually define the Great Recession in chronological terms, still say it's too early for them to make a determination as to when it officially ended (or will end?).

The one thing they can all agree on is that the worst seems to be over.

At the end of April, the VBJ will host the 6th Annual Southwest Washington Business Growth Awards. The entries this year were, as expected, far fewer in number than in past years. However, there were a surprising number of entrants who managed to expand their businesses by growing gross revenues, net income, adding employees or locations. Many of these local companies prove that, even in a downturn or tight economic times, there are opportunities for businesses to grow and to ensure their viability going forward.

Many companies “grew” revenue and/or net income by tightening the belt. Some reluctantly cut employees, others eliminated perks and put off discretionary capital expenditures. Some businesses grew by finding new sources of revenue or by diligently managing their inventory to reduce the cost of goods sitting on the shelf.

One consistent attribute of this year's finalists was that they did not “batten down the hatches” and simply try to ride the downturn out. They were pragmatic in their approach to cutting expenses, diligent in reviewing new opportunities and aggressive in acquiring and retaining customers. Several finalists increased their marketing and promotion budgets, others increased their sales force to keep pressure and a presence on the market. In the end, it seems it was a combination of several of these actions that helped steer these companies to growth in tough economic times.

All of this takes us back to the just-completed special legislative session. I haven’t had time to look at all of the effects of the resulting budget -- but it seems that the legislature could learn a lot from this year’s BGA finalists.

In business -- and running the State is a business -- cuts are sometimes necessary. But the trick is in making the cuts that will not only provide the greatest net savings, but to also avoid making the cuts that will prevent or hinder future growth and revenue.

The cuts made by the legislature to education, and in particular, higher education, is akin to a business drastically cutting their marketing and promotion budget, as well as their sales force during tough times. Our students and college graduates are our future. They need to work, start businesses, buy homes and pay taxes to provide revenue for the state. The more difficult we make it for them by limiting access and programs in education, the more we impede our ability to ensure future growth.

And as shown by our 2010 BGA finalists, growth can happen during tough economic times. During the next legislative session, I can only hope our legislators show the pragmatic, diligent and aggressive decision-making demonstrated by this year's Great Recession "survivors."