SHB 1406
In CommitteeHouse
Associate development orgs
Concerning associate development organizations.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill strengthens accountability for state-contracted business development organizations by requiring detailed performance reporting, setting measurable targets, and imposing consequences—including contract suspension—for organizations that fail to improve. It also updates funding formulas to ensure rural areas receive more consistent support.
- ADOs must submit annual performance reports including employment and economic data from the Employment Security Department, total funding received, and impacts on employment, wages, small business creation, and other metrics.
- ADOs must agree on specific performance targets with the Department of Commerce each contract cycle; those failing to meet targets in more than half of agreed measures must submit remediation plans.
- ADOs that fail to improve after remediation face a one-year contract suspension, during which they must explore alternatives like merging with regional partners or reorganizing.
- ADOs in counties with over 1.5 million people (e.g., King, Pierce, Snohomish) must report separately on services to small businesses and to businesses outside the region’s largest city.
- The Department of Commerce must develop a common web-based business information system for data reporting, with standardized measures and definitions updated every two years.
- ADO funding is now tiered: urban ADOs receive up to $500,000 per county (plus local match), while rural ADOs receive $85,000–$150,000 per county (plus local match, with up to 25% in-kind).
Who is affected
- Associate development organizations (ADOs) — Associate development organizations (ADOs) that contract with the state to provide business development services—these groups must now report detailed performance data, meet agreed-upon targets, and face potential contract suspension if they fail to improve.
- Local businesses and entrepreneurs — Businesses and entrepreneurs across Washington—especially small businesses—may benefit from improved support services if ADOs meet performance goals, or face reduced services if ADOs underperform and lose funding.
- State agencies (especially the Department of Commerce) — State agencies—particularly the Department of Commerce—must develop data standards, manage a new web-based reporting system, evaluate ADO performance, and decide whether to re-contract with underperforming organizations.
- Washington residents in urban and rural counties — Residents in urban and rural counties—especially those in high-population counties (e.g., King, Pierce, Snohomish) who may see more targeted support for small businesses and business relocations/expansions outside major cities.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
Rural ADOs receive significantly increased base funding ($85K–$150K vs. prior $40K cap), with up to 25% in-kind match allowed—directly improving capacity to serve rural small businesses, entrepreneurs, and remote workers who rely on local development support.
Business & EmploymentPeopleRef: Sec. 2(1)(b)Mandating standardized, ESD-verified employment and wage data improves transparency and accountability, helping ensure public funds generate real job growth and wage gains—especially for low- and middle-income workers who depend on stable local employment.
Public SafetyPeopleRef: Sec. 1(1)(a)The remediation and suspension process creates accountability for underperforming ADOs, preventing persistent inefficiency and redirecting resources to more effective providers—ultimately benefiting small businesses that need reliable, high-quality development services.
Business & EmploymentPeopleRef: Sec. 1(2)(b)–(c)Requiring urban ADOs to report separately on small business retention and expansion services—especially outside the largest city—targets support to underserved communities and prevents overconcentration of services in Seattle or Tacoma, helping small towns in urban counties access development aid.
Business & EmploymentPeopleRef: Sec. 1(1)(b)(i)The new web-based business information system with standardized metrics will reduce reporting burden over time and improve data comparability—enabling better policy decisions and more equitable resource allocation, especially for rural and minority-owned businesses that have historically been undercounted.
Business & EmploymentPeopleRef: Sec. 1(1)(a) & Sec. 2(2)
Potential Concerns (5)
Local governments and ADOs must invest time and resources into compiling and submitting detailed annual performance reports—including data from ESD, local economic impacts, and funding sources—which may strain small ADOs with limited staff or technical capacity.
Local GovernmentRef: Sec. 1(1)(a)The one-year contract suspension for underperforming ADOs could disrupt ongoing business support services—especially for small businesses—in regions where ADOs have deep local knowledge but struggle to meet new metrics, potentially reducing access to critical development services during the suspension period.
Business & EmploymentLean industryRef: Sec. 1(2)(c)The bill increases funding for rural ADOs but caps urban ADOs at $500,000 per county—despite urban counties often having larger geographic footprints, more small businesses, and higher service demands—potentially underfunding high-need urban ADOs relative to their scope, especially since local matching requirements may be difficult for low-resource areas to meet.
FinancialIndustryRef: Sec. 2(1)(b)The new reporting and performance requirements disproportionately burden small ADOs (e.g., rural or micro-organizations) that lack dedicated data staff or technology infrastructure, potentially forcing consolidation or exit from the program—reducing service diversity and local responsiveness.
Business & EmploymentIndustryRef: Sec. 1(1)(a) & Sec. 2(1)(b)Urban ADOs must separately track services to businesses *outside* the largest city in their region, but many urban counties (e.g., King, Pierce) encompass dozens of municipalities—creating significant administrative complexity and cost for ADOs without clear guidance on how to define “outside the largest city” or verify business location.
Local GovernmentIndustryRef: Sec. 1(1)(b)(ii)
Who Is Most Affected
Rural ADOs benefit significantly from the increased base funding ($85K–$150K) and flexible in-kind matching—enabling them to expand services to small farms, timber-dependent towns, and remote entrepreneurs who previously received inadequate state support.
Urban ADOs face higher funding caps ($500K) but also higher operational costs and reporting burdens; while they gain standardized tools, many may struggle to meet new metrics without additional staffing or tech investment—especially those serving low-income suburbs or smaller cities like Everett or Yakima.
Small businesses—especially outside Seattle/Tacoma—may benefit from improved ADO accountability and rural funding boosts, but could lose services if their regional ADO is suspended for failing to meet rigid targets; the new reporting on “businesses outside the largest city” may help redirect support to outlying towns.
State agencies (especially Commerce) gain new oversight authority and standardized data systems, but must hire staff to manage reporting, evaluate remediation plans, and enforce suspensions—adding administrative cost and complexity to an already lean program.
Residents in high-population counties (King, Pierce, Snohomish) gain targeted reporting on small business support outside major cities—potentially improving access to services in suburbs or smaller cities like Bellevue or Lakewood—but may see service gaps if local ADOs are suspended for noncompliance.