Ellen Simpson - March 09, 2009
Montana Wood Products Association
Economic Stimulus to Wood Products Industry
The Montana State Legislature will indeed have its hands even more full over the next few weeks as its members wrestle with the portion of federal stimulus dollars allocated to Montana. Much of the $800 million is earmarked and must be spent in the areas that are specified, but there is also discretionary money that allows the State to use as it sees fit.
It is in this discretionary pot of dollars that the plight of the timber community is recognized and the establishment of a revolving loan fund is proposed. Under Governor Schweitzer’s recommendation, $10 million would be set aside for mills and others in the industry to borrow from to ease the financial pain we have been under now for the better part of three years.
The borrowed money could be used by those companies that were, and remain, hit by the nationwide slump in the housing market. Unfortunately for Montana’s timber industry, we were at the beginning of the economic bubble that started to burst in late 2005 when it was evident the housing boom could not maintain its double digit growth. New housing starts began to diminish and lumber prices began to drop.
In spite of this current downturn, Montana continues to be one of the lucky states that has maintained an integrated forest products industry. This means each of the facilities and segments of the industry are dependent upon each other for survival. The loggers and truckers need the mills and manufacturers as places for their material and obviously the facilities need the raw materials in order to produce the value-added products they manufacture. Additionally, there are several plants that utilize only residual materials from sawmills in the form of sawdust and chips for production of their value-added products.
Another component of the need to keep the forest products industry viable is for landowners, including federal, state, and private, to have the ability to achieve broad land management goals of wildlife habitat, clean water, fire hazard reduction, and healthy forests are needed for all of those goals to occur. In other words, the sustainability of Montana’s forests is dependent on the very existence of the timber industry’s integrated nature.
The forest products industry is, and always has been, one of Montana’s basic industries, along with agriculture, mining, and oil and gas. As such, the forest products industry provides employment for more than 9,000 Montana families with average annual earnings per employee of over $40,000. Between one-fifth and one-quarter of Montana’s entire manufacturing industry is provided by the wood products segment so it is an important component of our State’s total economy.
Keeping those statistics in mind, it is understandable that our elected officials recognize the importance of keeping the integrated forest products facilities operating with the skilled workforce necessary to do so. A recent report from the Bureau of Business and Economic Research indicates that the benefits of establishing a revolving loan fund for the forest products segment could directly benefit one-third to one-half of the industry with an estimated 1,100 to 1,500 jobs retained and another 500 to 700 jobs restored. The 1,600 to 2,200 retained or restored jobs through the loan fund represent approximately $73 to $101 million in worker earnings.
Indirect benefits from the establishment of the loan fund would enhance the economy, again because of the integrated nature of the industry. The residual plants would benefit because their needed raw materials would be stable thus maintaining the employment of 800 Montanans with labor income of $55 million. Another 2,000 folks throughout Montana in the form of loggers and truckers would benefit by services they provide the overall forest products industry, including labor income of $85 million.
As you can see, the overall impact of the $10 million revolving loan fund would be beneficial to the State of Montana many times over in the multiplier effect of those dollars both in the production of products for consumer use and employment opportunities for thousands of hard-working Montana families.
As could be well-imagined, we will be watching closely to see how the stimulus package dollars are spent and we trust that our elected officials will make the right decisions on behalf of one of Montana’s basic industries.
Speaking for the Montana Wood Products Association based in Helena, I am Ellen Simpson. Thanks for listening.
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