Right ways and wrong ways to fund transportation

One of AGCs top legislative priorities is passage of a comprehensive transportation package to address congestion unmet preservation and maintenance needs and freight mobility.

One of the big questions is how to pay for a package. Governor Inslee recently introduced a carbon cap-and-trade mechanism which would tax high carbon emitters and provide $400 million per year for transportation spending.

Heres a way to fund transportation! Thats great right? Nope.

AGC strongly opposes funding transportation via a carbon tax. The most efficient and reliable way to fund transportation is through a gas tax increase. Here are some important differences between the two approaches:

18th Amendment protections
(See the wording of the 18th Amendment to the state constitution at the bottom of this article.)

This is very important to the funding discussion. Per the state constitution gas-tax receipts must be spent on transportation. Carbon taxes? Maybe maybe not. The Governor and Legislature might agree to appropriate money to transportation but theres no guarantee that they would do so nor any guarantee that future Legislatures wouldnt back track. AGC is well aware that the Legislature is not averse to taking money from capital budgets to spend on the general budget. The Public Works Trust Fund is one example: money that was theoretically earmarked (but not constitutionally protected) for public infrastructure projects has been swept into the operating budget. AGC doesnt want to put current and future transportation funding at risk in this manner – so the 18th Amendment-protected gas tax is the way to go.

Timing and reliability
How long would it take to get a cap-and-trade mechanism up and running? How long would it take for significant amounts of funds to actually flow to transportation? Hard to say but what is certain is that the gas tax system has long been up and running with no bugs to iron out. New revenue could flow quickly.

Plus how certain are we that a cap-and-trade/carbon tax system would generate the amount of total money (about $1 billion total $400 million to transportation) that the Governor projects? We cant really know for sure because weve never done it before! The state is very proficient however at predicting what a gas tax could generate because we have decades of experience with it.

Diminishing funds
The Governor proposes to tax carbon in order to reduce the amount of carbon emitted. That suggests that the amount generated would diminish over time. In fact that would be the point of taxing it – to reduce carbon emissions. This suggests that transportation construction commitments could be made that the state operating budget would ultimately have to finish. How would and unstable source of revenue affect bonds that would be let for large projects? It is likely the effect would be higher borrowing costs.

Its a fair point to say that the gas tax is also a diminishing source of revenue – greater fuel efficiency etc. It is likely that a gas tax alternative will have to be found at some point – but that point is several years away.

 An efficiently administered 10-12 cent constitutionally protected gas tax increase would generate about $12 billion in revenue for transportation over ten years even allowing for greater fuel efficiency. This remains the most prudent way to address the states increasing transportation needs.

For more information contact AGC Chief Lobbyist Jerry VanderWood 360.352.5000.

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AMENDMENT 18 to the Washington State Constitution
Art. 2 Section 40 HIGHWAY FUNDS. All fees collected by the State of Washington as license fees for motor vehicles and all excise taxes collected by the State of Washington on the sale distribution or use of motor vehicle fuel and all other state revenue intended to be used for highway purposes shall be paid into the state treasury and placed in a special fund to be used exclusively for highway purposes.

Such highway purposes shall be construed to include the following:

(a) The necessary operating engineering and legal expenses connected with the administration of public highways county roads and city streets;

(b) The construction reconstruction maintenance repair and betterment of public highways county roads bridges and city streets; including the cost and expense of (1) acquisition of rights-of-way (2) installing maintaining and operating traffic signs and signal lights (3) policing by the state of public highways (4) operation of movable span bridges (5) operation of ferries which are a part of any public highway county road or city street;

(c) The payment or refunding of any obligation of the State of Washington or any political subdivision thereof for which any of the revenues described in section 1 may have been legally pledged prior to the effective date of this act;

(d) Refunds authorized by law for taxes paid on motor vehicle fuels;

(e) The cost of collection of any revenues described in this section:

Provided That this section shall not be construed to include revenue from general or special taxes or excises not levied primarily for highway purposes or apply to vehicle operator’s license fees or any excise tax imposed on motor vehicles or the use thereof in lieu of a property tax thereon or fees for certificates of ownership of motor vehicles. [1943 House Joint Resolution No. 4 p 938. Approved November 1944.]