Dems Balk at Sales Tax, Environmental-Funding Measures – and Jaw-Dropping Announcement From Oregon Makes Low-Carbon Fuel Standards an Issue
By Erik Smith, February 14, 2014, Washington State Wire
The Senate Majority Coalition threw down the gauntlet on transportation Thursday, saying its members stand ready, willing and able to negotiate a gas-tax increase right now – and it even booked a room at the Capitol for the talks next Wednesday just in case the other team decides to come.
In a statehouse where the popular thinking is that anti-tax Republicans in the Senate are standing in the way of a $12-billion-or-so transportation deal, the move demonstrated that things are not as they seem. Democrats in the House and Senate found a thousand reasons to balk. The largely Republican majority coalition in the Senate is going too far, they said — by demanding big reforms in the way the state manages road projects and the way it spends gas-tax money. They complained about process. They said Republicans aren’t guaranteeing as many votes for a tax increase as they would would like. They insisted on a vote from the Senate before talks resume, a demand that breaks with historical precedent and seems hardly likely.
And just as the carping from the Democratic team reached a fever pitch at a news conference Thursday afternoon, a bit of news from Oregon created a sensation. Democratic Gov. John Kitzhaber imposed low-carbon fuel standards on the Beaver State by executive order. The same prospect is an oft-sounded fear in the halls of the Washington statehouse, and it has raised plenty of doubt in the minds of the very business-community interests that are most supportive of a gas-tax increase. State consultants have said low-carbon fuel standards might add a dollar to the cost of a gallon of gas – yet green-minded Democratic Gov. Jay Inslee has refused to promise that he won’t do the same thing.
In other words, the Senate Majority Coalition knocked the ball into the Democrats’ court Thursday – and it didn’t appear the other side was ready to pick up a racket and play. “Now I really believe we are miles apart,” said state Sen. Tracey Eide of Federal Way, the Democratic co-chairwoman of the Senate Transportation Committee.
No Negotiations Since December
What really might be playing out at the statehouse is the traditional reluctance to pass any major tax increase in an election year – a factor that may be even more potent for Democrats than it is for Republicans, who are typically averse to tax increases at any time. The problem is that the transportation issue hasn’t been operating on the Legislature’s timetable. Pressure has been building for a tax package – and a gas-tax increase – for the last several years. The last gas-tax hike passed in 2005, and much of the revenue from the state gas tax – now 37.5 cents a gallon – is encumbered by decisions made in previous years to issue bonds against that money that will take decades to pay off.
To pass a gas-tax increase, years of consensus-building are always necessary. The latest effort started in 2011, when then-Gov. Christine Gregoire convened talks between all interested parties. Her Connecting Washington task force identified $50 billion in long-term needs, a figure that might make anyone gulp. The talk for more than a year has been about a package that might generate upwards of $10 billion, with a tax hike of about a dime, coupled with other smaller increases in truck-weight fees and other measures. Last year the House Democrats passed a measure, though it was more a negotiating position than a full proposal, because a tough-to-pass bond bill was not included. Senate leaders released a new proposal of their own Thursday that would increase the gas tax 11.5 cents a gallon and would generate $12.4 billion.
And here’s the thing. Despite the promises from all parties that they would continue to negotiate during this year’s legislative session, they haven’t done it. Not a single negotiating session has been held. Senate Republican leaders said Thursday it’s about time they started. “We have got to get back in that room,” said Senate Floor Leader Joe Fain, R-Covington. “That is why we have taken the step of reserving the Senate Rules Room next week in the hopes that those that are interested in moving our state forward for transportation, Democratic House members, will go to the governor’s office and say that it is time for the talks to begin again.”
Senate Majority Leader Rodney Tom, D-Medina, said that if the governor wants to convene the negotiations in his conference room, that’s fine, too. He said he doesn’t care which room they use. “What we want to make sure is that we have a venue to move this forward, and that is why we have reserved the Rules Room.”
And to quell any doubts about the timing, before-the-election or after-the-election, Tom said the Senate would be happy to move transportation bills to the floor for a vote once an agreement is reached. If that means during the current legislative session, the Senate will be happy to do it. “There is no [need for a] special session,” he said. “It is time for us to get this done now.”
Senate Makes Big Moves
There are big differences between the proposal released by the Senate last November and the one they laid out Thursday. The main thing is that it responds to concerns raised by Seattle-area Democrats that it doesn’t put enough money into bike paths, pedestrian walkways, transit and other “multimodal” forms of transportation – the Senate has beefed that up to some $600 million. The transit-heavy counties of the urban Puget Sound area still would be expected to raise a large share of money through local levies.
But the sticking points are the same as they always were. Democrats are insisting that the state continue its longstanding practice of siphoning off gas tax money for the state general fund by levying a sales tax on road-construction materials. And they balk at another Senate reform idea – requiring that environmental projects prompted by road construction, mainly costly stormwater drainage facilities – be paid for from a different fund, the Model Toxics Control Act account, which is financed by the state’s hazardous substances tax. Those two moves would free up more than $1 billion for road construction.
Legislative Democrats balk at ending the sales tax, because it means less money for state programs – an arguable point, given that no money is generated if no tax package passes. Green groups object to the idea of encumbering the MTCA fund, where lucrative receipts from fast-rising oil prices have allowed it to become a catch-all fund for favored environmental programs and overhead costs at the Department of Ecology. A third point of dispute raises the hackles of labor unions – the Senate wants to make changes to apprenticeship programs and state prevailing-wage rules on road-construction projects. The latter proposal aims to bring the state in line with federal prevailing wage rules; current state survey procedures mean contractors are required to pay higher wage rates than they are under federal regulations.
One key difference between the Senate’s current proposal and an earlier version released in November is that it earmarks money that would be generated by elimination of the sales tax, $840 million in total. Some $177 million would go to State Patrol salaries, $331 million for completion of the long-awaited North-South Freeway in Spokane, and $331 million for completion of the approach to the Highway 520 bridge. It might not make much difference in the long view – the two road projects were funded by the Senate’s earlier proposal. But it might give certain constituencies reason to sit up and take notice. By doing it that way, the Senate gives the state troopers’ union and the citizens of Seattle and Spokane reason to support the sales-tax reform.
Catches Democrats Off Guard
Democrats appeared aghast that the Senate would take their proposal public, rather than offering it quietly behind closed doors. “I think negotiating in the press and in the public sphere, and putting up proposals in a public venue, is not the way we are going to get there,” said Sen. Marco Liias, D-Mukilteo. Eide went further: “This is not in good faith,” she said.
But it did underscore the fact that no talking has occurred for the last 60 days, and there has been no private venue in which the Senate might make an offer. At their news conference, Democrats said the Senate is shortchanging bike paths, pedestrian walkways and transit, though they acknowledged they were reacting to earlier proposals and not this one. They said they hadn’t had enough time to analyze the Senate’s new plan.
Their comments about the Senate spending reforms were more on-point. They said they need the sales-tax revenue to help pay for the big demands for K-12 funding that will come to the forefront next year, when the Legislature must figure out a way to pay the $5 billion tab for the Supreme Court’s McCleary decision. Democratic Floor Leader David Frockt, D-Seattle, called it a “poison pill” Democrats are unwilling to accept. He said the stormwater-funding plan seemed “something that is classically designed for us not to accept, because it is going to cause the entire environmental community to peel off this package. It has been said to us, well, you just need to tell the environmental community to go away.”
Dems Demand Republican Votes
Much was made of the fact that the Senate Majority Coalition is expecting Democrats to vote for the package. Senate leaders said they can guarantee 13 of their 26 members will vote yes. Democrats say that’s not good enough. House Transportation Chairwoman Judy Clibborn, D-Mercer Island, said the House insists that before talks resume, the Senate coalition must “either pass its proposal or provide a clear demonstration that it has enough votes to pass. We look forward to resuming negotiations once the Senate Majority has finished negotiation amongst itself.”
That demand might be a bit much, by historical standards. Rarely do legislators take a tough final vote for vote for a gas tax increase before there is a deal between the two parties, because bond bills require a 60-percent vote of each chamber. So votes from both sides are needed. Senate votes on transportation packages have traditionally reflected bipartisanship.
On the key vote for a transportation package in the Senate in 2003, there were 15 Republican votes and 14 from the Democrats. In 2005, there were 7 Republican votes and 19 from the Democrats.
Fuel Standards are Corker
Democratic Gov. Inslee isn’t making matters any easier. The Majority Coalition maintains a gas-tax increase is inconceivable if the governor might impose low-carbon fuel standards by executive order. The fact that Oregon Gov. Kitzhaber did exactly that Thursday afternoon only fanned the fears. Inslee signed an agreement in October with Kitzhaber, California Gov. Jerry Brown and representatives of British Columbia in which he pledged Washington would impose the same policy. The Department of Ecology maintains state law allows the governor to do so.
“The low carbon fuel standard is definitely the 600-pound gorilla that is in the room,” said Senate Energy Chairman Doug Ericksen. “We could see a dollar-a-gallon tax increase with low carbon fuel standards. Now Oregon, California and British Columbia have done it, and Jay is the only one who hasn’t, so I think the trust factor is running a little thin here in Olympia right now. We’ve offered him multiple opportunities to say he won’t do it, and each time he has reserved the right to do it by executive order.”
Inslee spokesman David Postman said low-carbon fuel standards should not be an impediment to a transportation deal because the governor has pledged to subject any proposal to stringent economic analysis. “The governor’s transportation team has taken a look and believes that today’s MCC proposal puts us further apart than when negotiations ended the evening of Dec. 18,” he said. “That’s particularly true on the very important issue of shifting sales tax revenue. While it is unfortunate that two months later the sides appear further apart, we are encouraged that there was a proposal made today and a willingness to negotiate.”