Export fuel tax out of transportation package after concerns from neighboring states

OLYMPIA – A $17 billion proposed transportation package in Washington that passed the state House on Tuesday no longer includes a controversial fuel tax.

The proposal, which would have put a 6-cent tax on all fuel produced in Washington but exported to another state, angered lawmakers in Oregon, Idaho and Alaska. It would have brought in $2 billion for the 16-year transportation package.

An amendment that passed 52-45 on Tuesday removed the tax from the package. The package itself passed 54-43 on Tuesday and heads back to the Senate for final consideration.

House Transportation Chair Rep. Jake Fey, D-Tacoma, said on the floor he heard some “serious concerns from our neighbors” on how this tax would affect their economies.

“We felt that there had to be a different way in addressing our needs,” Fey said.

The Oregon Legislature and Gov. Kate Brown sent a letter on Friday urging Washington lawmakers not to “pit Oregon against Washington,” and to remove the tax from the package. Idaho lawmakers unanimously passed a resolution strongly encouraging Gov. Jay Inslee to veto the tax. Alaska lawmakers threatened retaliation over the tax, including a $15.75 surcharge on a barrel of oil produced in Alaska and delivered to a state that imposes a tax on fuel delivered to Alaska.

Up until Saturday, Washington Democrats, including Inslee, stayed committed to the inclusion of the tax in the transportation package.

The package funds maintenance of roads, new transit projects and replacement of existing fish passages. In Spokane, it means $50 million to start work on a bus rapid transit line on Division Street, $4 million for the design of a bridge over Interstate 90 near Liberty Park and additional money for bicycle and pedestrian projects.

The package doesn’t use a new gas tax or new bonding to fund it.

It is funded with more than $5 billion from the cap-and-trade plan, which puts a cap on emissions for the largest polluters in the state. Under the plan, the state keeps the revenue from allowances purchased by polluters that cannot clean up their work to meet the cap. It’s also funded with infrastructure funds and a one-time $2 billion transfer from the general fund.

The export fuel tax was expected to bring in $2 billion for the proposal. Part of that will now be made up by a $1.5 billion transfer over 15 years from the state’s Public Works Assistance Account, which provides funding for loans to local governments for various infrastructure projects.

Fey said this transfer would be “less disruptive to our neighbors and to our own citizens.”

Republicans, on the other hand, argued it would take away important funding for local projects. Rep. Mike Steele, R-Chelan, said taking away the funding from the public works trust fund could “devastate projects across Washington state.”

Public Works Board Chair Kathryn Gardow urged lawmakers in a statement Tuesday to find another funding source.

“This is not the only solution to replace that revenue shortfall,” Gardow said. “The Public Works Board asks the 2022 legislature to pause long enough to find other revenues or options to leave the state’s nationally recognized local infrastructure tool alone.”

Republicans also had concerns about the $2 billion transfer from the general fund for the package. Republican transportation leaders in the Senate released a proposed transportation package on Tuesday that would not use any new taxes or fees. Instead, it would be funded with the state motor vehicle tax.

Rep. Andrew Bavrkis, R-Olympia, introduced an amendment Tuesday to use the motor vehicle tax instead of the $2 billion transfer from the operating budget. Doing so would make the package more sustainable for future transportation funding, Barkis said on the floor.

It would allow the Legislature “to make a decision on how we want to fund transportation now and in the future,” he said.

Fey said rather than taking money from a funding source that is not always reliable, the “prudent” thing to do is take the funds that are available now through the operating budget.

Part of the package already passed the Senate but has since been amended, so the Senate will still need to give final approval. The 60-day legislative session ends March 10.