Higher gas prices may tax state government

OLYMPIA – Car owners concerned about rising gas prices can cancel a vacation or car pool to work, but the state government sees itself held over that $70 barrel of oil when it comes to buying gas for school buses and heating schools, prisons and other state-run buildings.

State budget analysts worry rising fuel costs could also end up decreasing state tax collections. But Gov. Christine Gregoire’s budget analysts say it’s too soon to tell whether those added costs will increase the budget deficit for the coming biennium.

Wolfgang Opitz, deputy director of the state Office of Financial Management, said recent tax collections indicate fuel prices have not cooled the economy. The state has already brought in $121 million more than predicted in the February forecast, he said.

An updated forecast is due out next month.

In the interim, Opitz’s office has asked Gregoire’s Council of Economic Advisers to evaluate the possible effect of skyrocketing fuel prices.

State Economist Chang Mook Sohn predicted that higher prices will cause Washington residents to spend $7.8 billion on gasoline this year, or $1.3 billion more than they spent in 2005.

The Department of Transportation relies heavily on gasoline sales because most of the money available for road maintenance and construction comes from the gas tax.

But because the state’s gas tax – now 31 cents a gallon – is based on volume rather than price, the state is likely to collect less as people attempt to conserve, even if they’re spending more money to fill their tanks.

Eric Meale, the Transportation Department’s economic analysis manager, said he has a “gut feeling” that there will be some reduction in consumption this year and that would cause a decline in the $990 million the tax generates annually.

Sohn said the overall state economy has not cooled yet because consumers are continuing to spend, flush in many cases with money from refinanced home mortgages.

“People are trying to maintain their lifestyle as long as possible,” he said.

Opitz said he doesn’t expect a big change in the state’s revenue, partly because forecasters anticipated oil prices of about $65 a barrel.