Governor proposes $12 billion transportation plan fueled largely by new carbon fee (or is it a tax?)

Gov. Inslee launched the 2015 transportation finance debate yesterday, unveiling an ambitious plan and introducing a new “cap and trade” program. From the news release:

Rather than raise the gas tax on all motorists, the plan would be funded largely through fees and bonding as well as on a new carbon pollution charge. Sources of major transportation-related pollution, such as the oil and gas industry, will pay a charge for every ton of carbon they emit into the air.

The revenue raised through the carbon pollution charge, about $4.8 billion over 12 years,  would be the equivalent of the amount of revenue generated by a 12-cent gas tax increase.

More details of the funding plan will be released today in Seattle. The Let’s Move Forward plan outlines how the money will be spent.

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And where the money comes from.

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Insleee also proposes new and expanded local option authorities.

Reaction to the proposal has been swift. Seattle Times columnist Danny Westneat sees it as a big step for the governor.

It’s the Full Inslee: A plan to pay for ambitious expansions in government programs by charging the state’s 130 largest air polluters for the carbon they emit.

Skeptics also stepped forward, including a prominent player in the Republican-controlled Senate. From the Seattle Times:

Sen. Curtis King, chairman of the Senate Transportation Committee, predicts petroleum companies will pass their cap-and-trade costs to consumers.

“It’s going to raise the price of a gallon of gas,” said King, R-Yakima. That would mean higher costs for Yakima Valley fruit shippers, he said.

The Times story points to a critical issue in the plan.

Environmentalists may ask what’s the point of collecting carbon fees and then spending those on highway projects?

Inslee’s aides reply there’s a separation in the plan: The cap-and-trade income would go only toward green uses, such as transit grants or incentives for electric vehicles, and to maintain existing roads. The highway megaprojects would be funded through gas taxes and motorist fees, such as licensing and weight charges for cars and trucks.

To which King raises an obvious concern.

Normally, part of the gas tax would be set aside for maintenance — money that’s also an emergency cushion to pay debt, if need be. But Inslee’s plan means the gas tax would need to be 100 percent pledged to repay construction bonds, said King.

If revenues plunge, the state might wind up delaying projects, or in a worst case, tapping the general fund, King said. “It places the state in a precarious position.”

Yet, King is quoted as commending the governor for getting the conversation started. Many had feared transportation would be sidelined this year because of general fund budget challenges. That would be a mistake. We’ve deferred investment on critical economic corridors and necessary maintenance for too long.

As the Associated Press reports, the governor lays out the current conditions.

The state will face a 52 percent drop in its maintenance budget and 71 bridges will become structurally deficient if the Legislature is not able to pass a transportation budget in the 2015 session, he said

The Olympian reports on polling finding only limited support for a new tax on carbon, indicating that this funding mechanism may face tough sledding in the next session.

One statewide business poll done for conducted by G Squared Strategies found nearly 54 percent supported a carbon tax if offset by lower sales taxes and lower taxes on business.

And,

Separate polling done by Bellevue-based GMA Research for the National Federation of Independent Business found concerns about the way Inslee may pursue a carbon fuels standard, which the governor has not yet proposed. GMA’s survey – based on a poll of 250 small business owners and 250 voters – found low public awareness that proposals to deal with climate change were in the works. It also found 78 percent of its business owners and 66 percent of voters want to wait until the impacts of California’s standard are seen before Washington takes a similar step that could raise fuel prices.

That same poll said more than two-thirds of business owners and voters want any such proposal voted on statewide, while 25 percent of small businesses and 20 percent of voters wanted the Legislature to act.

With gas prices continuing to fall, it’s likely there will be spirited discussion of sticking with conventional transportation funding mechanisms as opposed to introducing a new tax/fee next year. Again, more to come.

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