If voters approve Initiative 976 to cut car-tab fees across Washington, opponents say the state Legislature could be sent into havoc trying to backfill funding cuts, setting off a “Hunger Games-style” competition between agencies.
Backers of the initiative say: So what?
“Government does not reform itself when it’s fat and happy,” initiative sponsor Tim Eyman said during a recent debate before the Yakima Herald-Republic editorial board. “The only time they actually have to rethink what they’re currently doing is when the voters challenge them to do it.”
As voters mail in their ballots for Tuesday’s election, state lawmakers are beginning to consider how they may cope with budget cuts that could quickly come to dominate the legislative session set to start in January.
Assuming the measure withstands widely expected legal challenges, all sides agree it would force changes to state spending next year and beyond. But what Eyman calls a rethinking his opponents have decried as forcing government to “rerack” budgets as Washington faces an ever-growing list of infrastructure needs.
Tapping into taxpayer frustration about the cost of registering vehicles, I-976 would reduce many car-tab taxes and fees to $30. It would also eliminate a .3% sales tax on vehicle purchases, remove local authority to charge certain car-tab taxes and attempt to repeal car-tab taxes used by Sound Transit.
The changes would reduce funding to Sound Transit and state accounts that pay for road and highway work, special needs transportation, Washington State Ferries and more. Cities currently relying on local car-tab fees would lose money used largely for road maintenance.
“It’s going to hit everything,” said Rep. Jake Fey, D-Tacoma, who chairs the House Transportation Committee.
Cuts or new revenue?
I-976 would reduce state funding for transportation by about $175 million this fiscal year and about $302 million in the next, according to a state analysis.
The cuts over two years represent about 5% of the total 2019-2021 state transportation budget, but the state’s multimodal account would take the biggest hit. Unlike some other funds, that account can pay for non-roads projects like transit.
Local governments could also lose about $58 million a year from local car-tab fees and look to the Legislature for help.
“I would probably just do at first a straight across [cut],” said Sen. Steve Hobbs, D-Lake Stevens, who chairs the Senate Transportation Committee. “Then, Hunger Games-style, the agencies or departments would have to defend what they’ve got.”
Hobbs would prioritize safety and maintenance of existing roads and bridges as well as funding for the Washington State Patrol, he said. New projects would likely be delayed or put “on hold indefinitely.”
Yakima Sen. Curtis King, ranking Republican on the Senate Transportation Committee, said “multimodal has got to start paying some of their share,” referring to how much users pay for non-roads projects like transit, though he did not offer a specific proposal.
“We need to listen to the people of the State of Washington,” said Olympia Rep. Andrew Barkis, ranking Republican on the House Transportation Committee, “and … not just make it worse by adding more taxes to offset the one they got rid of.”
Eyman, who is facing a long-running campaign-finance lawsuit brought by the state attorney general, has often touted a “$3.5 billion surplus” in the state’s coffers that could backfill the cuts. That figure, now about $3.1 billion in the latest available projections, includes the state’s rainy-day fund that even some conservative groups are hesitant to drain.
About $2.2 billion is in that fund. Lawmakers need a three-fifths vote to spend from that account — except after catastrophic events and during times of low employment growth. The remaining $952 million in reserves are not in the rainy-day fund and could be spent with a simple majority.
Although Washington’s economy has grown in recent years, the state’s tax system “does not keep pace” with demand for services, Office of Financial Management Director David Schumacher warned state agencies last year.
State transportation projects are typically funded with vehicle-related fees, like the gas tax, car-tab fees and vehicle-weight fees. Serious talk about new revenue is unlikely in a short 60-day session that would start in January, immediately following an anti-tax vote, some lawmakers said.
Spending from the rainy-day fund or operating budget “is forcing recessionary policies and recessionary cuts at a time when the state is not facing a recession,” said budget writer Sen. Christine Rolfes, D-Bainbridge Island, “and will put us in much weaker place when we actually have a national recession.”
Eyman himself unsuccessfully sued last year over lawmakers redirecting money to education instead of the rainy-day fund, but now says he’s “just accepting the fact that they really don’t want to save the money.”
“They’re either going to spend it or we’re going to get some of it back with $30 dollar tabs,” Eyman said in an interview this month.
Not the first car-tab fee cuts
Lawmakers have been in this quandary before.
Eyman’s first successful $30 car-tab measure, Initiative 695, passed in 1999. Although a court later struck down the initiative, lawmakers reduced car-tab fees anyway.
Cuts reached beyond transportation because car-tab revenue was used for other purposes like public health. The loss represented about 30% of the state transportation budget, according to documents from the time.
Over several years, lawmakers dealt with the aftermath, backfilling in some areas. By 2002, slammed with a recession and proposing doing away with the backfill, then-Gov. Gary Locke warned, “The full impacts of 695 will roll over us like a wave.”
To make up for the hit to cities and counties, lawmakers allocated some money to local governments, but that spending fell over time. The Legislature then began directing some real-estate tax revenue to cities and counties, but the amounts from that program are less than what they once got from car tabs.
Rural cities were hit hardest, according to a 2005 report from the Association of Washington Cities. To cope, cities cut programs, tapped their reserves, put off projects or passed new taxes and fees. The result was that average citizens may not have seen many impacts to city services, but some cities were depleting reserves, according to the report.
The state’s ferry system took a particularly hard hit.
Washington State Ferries lost about 16% of its operating budget and faced a shortfall of three-quarters of its capital budget. The agency cut service and increased fares. The system largely redirected money budgeted for maintenance and replacement of ferries and terminals toward operations.
State transportation and ferry officials laid out a bleak picture.
“We are at stake nothing less than our long-range survival … Frankly, our backs are against the wall,” Terry McCarthy, then-deputy secretary of Washington State Ferries, told legislators in January 2000.
Two decades later and facing another car-tab initiative, the agency’s challenges are familiar.
An aging fleet has heightened calls for expensive new boats. Over the next 20 years, 12 of Washington State Ferries’ 22 boats will be at or near the end of their planned life span.