A Surprising Transportation Tax Proposal from Washington’s Governor

Gov. Gregoire working with USDOT Sec. LaHood and WSDOT Sec. Hammond on transportation issues in 2009. Image – WSDOT Flickr.

Governor Chris Gregoire proposes a new fuel tax, but where the revenue goes might disappoint road, transit, bike-ped, rail and other transportation interests. The Governor did not, as rumors last week suggested she would, recommend a 9.5 cent increase to the gas tax as part of her state budget proposal. The proposal is required by law every year by every Governor by December 20.

The new tax is a wholesale excise tax on gasoline and diesel fuel. “Drivers would pay an added 5 cents a gallon July 1, rising to 8 cents in mid-2015 and 12 cents in mid-2017, if the oil industry were to pass the tax entirely to consumers, according to the Department of Revenue,” reports the Seattle Times. Proceeds will fund the cost of K-12 student transportation, a program that will move from the education budget to the transportation operating budget.  By 2017, the tax and shift would free up an estimated $906 million to be spent in classrooms instead of on yellow buses. It is one of several proposals designed to comply with a State Supreme Court order to radically increase K-12 funding.

The Governor is not proposing a gas tax increase, which would be constitutionally directed to highway safety, maintenance, preservation and expansion projects. She is not proposing an increase to transportation-related fees, which could have been directed to transit and other non-roads projects and programs.

While this will surely disappoint transportation stakeholders, it’s their own fault. Governor Gregoire noted she invited the various interests to come in and figure out a funding proposal. If there was consensus, she’d propose the tax increase package to the Legislature. There was no consensus, so there’s no tax increase proposal. 

Governor Gregoire did provide the encouraging note that despite the lack of consensus on the details, stakeholders do want a transportation investment bill in 2013. Various business, environmental, and transit/bike/ped advocates are developing plans and will promote their own vision. It’s the right action, but enacting a bill in 2013 will be extremely difficult due to the need to find funding for K-12 education, and the on-going budget deficit.

Recognizing the lack of consensus, the Governor instead provides a five-page document to help Legislators, the Governor, interest groups and the public understand the urgency of the issues. The report, “Building a Better Future: Investing in Washington’s Transportation System,”(336kb pdf) covers:

  • How transportation supports the state’s economy
  • Where the state needs to invest to foster economic and community vitality
  • What are the revenue options

We’ll bring you more details about this report in coming days.

Here’s the transportation-related quote from the Governor’s news release (2.7mb pdf, includes budget docs):

“The governor is proposing a wholesale excise tax on gasoline and diesel fuel that would increase gradually over the next three biennia to eventually fund the entire pupil transportation budget. By using transportation taxes to fund pupil transportation, state General Fund dollars will be freed up to cover the other K-12 enhancements. To pay for those enhancements for the next two biennia, the governor is proposing to extend for three and a half years two temporary taxes that the Legislature enacted in 2010 —a business and occupation surcharge on certain services and a beer tax surcharge.

For the 2013–15 budget, the wholesale fuel tax would raise an estimated $367 million and the temporary tax extensions would raise $636 million.”

Incoming Governor Jay Inslee and the Legislature are under no obligation to accept this proposal. One or both of those parties are likely to modify or reject the proposal.

Dick Davis, of the Washington Research Council, notes some of the broader contest of the budget situation. For you non-Washingtonians, the “McCleary” refers to the Supreme Court/education funding issue.

“Gregoire has said repeatedly that new taxes will have to be part of the McCleary solution. In his campaign, Gov-elect Inslee rejected tax increases, as did members of the Majority Coalition Caucus in the state Senate. Sen. Andy Hill, slated to chair the budget committee under the coalition’s plan, thanked the governor and said he assumed new taxes were not an option. (Democratic majority leader Ed Murray reminds the MCC that the deal isn’t done yet.)

And yesterday, the Joint Education Finance Task Force split along partisan lines on whether new taxes were necessary. As John Stang reports in Crosscut, Democratic members of the group endorsed a list of options, including extending the “temporary” tax increases and using the transportation fund to pay for pupil transportation,” (Gov. Gregoire proposes new taxes in final budget release, Washington Research Council).