Gas tax increases key to fueling Washington transportation budgets

Washington state lawmakers propose gas tax increases to address transportation budget shortfall. File photo

Both the House and Senate proposed hikes in the tax Monday, among other revenue options, to fill a $1 billion shortfall in the next two years

Jake Goldstein-Street
The Washington State Standard

Washington drivers would see higher gas taxes beginning this summer under transportation funding plans state House and Senate lawmakers unveiled Monday.

The chambers approach what would be the first gas tax increase since 2016 a bit differently.

The Senate’s proposal would raise the tax 6 cents per gallon, bringing it to 55.4 cents — not including the 18.4 cent federal rate. The state tax would then rise by 2% annually to account for inflation starting the following year.

The House goes bigger, looking to raise the state tax 9 cents, and then index it to inflation.

Both hikes would take effect July 1. The Senate gas tax proposal would raise $1.5 billion over the next six years, lawmakers say. The House: $1.8 billion.

Washington’s gas tax is already the third-highest in the nation behind California and Pennsylvania, according to the U.S. Energy Information Administration.

“If we were to use our existing resources alone, it would mean significant delays to projects all over the state. It would mean suspending workforce development initiatives at ferries and State Patrol and it would mean [an] inadequate transportation system,” Senate Transportation Committee Chair Marko Liias, D-Edmonds, said during a press conference Monday.

The combination of ballooning construction costs and flagging gas tax collections has left lawmakers searching for new options for years. Without new state revenue, they warn of road projects sitting half-built as they wait for more funding.

“As we started this process, we faced a variety of challenges,” said Sen. Curtis King, the top Republican on the Senate Transportation Committee. “You look at billions of dollars in shortfalls in maintenance and preservation. Numerous projects that we saw multi-million dollar increases in costs. Our roads were becoming less and less safe to travel on.”

As it stands, the transportation budget faces a $1 billion shortfall over the next two years, growing to $8 billion to meet current obligations over the next six years, some lawmakers have cautioned. The Senate has a plan to shift a chunk of that total — spending tied to replacing culverts — over to the state’s capital budget.

Replacing the culverts is part of a court-mandated program to improve passage for fish in waterways that cross under roads. It’s one of the bigger transportation-related costs lawmakers have been grappling with.

Furloughs in Senate plan

Both bipartisan plans include the gas tax hike among a range of revenue options meant to address rising project costs due to inflation and shrinking gas tax collections as vehicles get more efficient and more drivers go electric.

The current two-year transportation budget is $14.6 billion and includes money for road maintenance, ferries, bike and pedestrian projects and more.

Monday’s proposed Senate budget is made up of $6.2 billion in operating costs and $10 billion for capital projects. The House’s is $6.1 billion for operating expenses and $8.9 billion for capital costs.

Other new funding in the Senate plan includes a proposed transfer of 0.3% of sales tax collections from the operating budget to transportation. This would add $800 million annually starting in the 2027-2029 biennium. The House plan doesn’t incorporate this sales tax switcheroo.

Senate lawmakers also want to raise fees on electric vehicle registrations by $50, impose a new tax on luxury vehicles costing over $100,000, increase the tax on rental cars and add a $10 assessment on traffic infractions, among other measures.

Even with the new revenue options, the Senate budget plan still includes 13 furlough days in fiscal year 2026 for state transportation workers, excluding Washington State Patrol troopers, employees who work on state ferries and at terminals, highway incident responders and others.

This one year of furloughs is in line with what senators proposed for other state employees in their operating budget plan, also unveiled Monday.

The House plan doesn’t use furloughs to save money.

For over a decade, some Democrats have toyed with the idea of a road usage charge that drivers have to pay per mile. A proposal from the chair of the House Transportation Committee, Rep. Jake Fey, pegs that cost at 2.6 cents per mile. This concept wasn’t included in the Senate’s proposal. Even if that system were adopted, it would take time to set up.

Liias has consistently said new transportation revenue sources need to be bipartisan. Republicans have been steadfast in their opposition to the road usage charge.

Instead, the House proposal includes an annual highway use fee charged based on a car’s fuel economy, with more efficient vehicles paying more. This could bring in $384 million over the next six years.

Rep. Andrew Barkis, R-Olympia, said he was surprised that after all the conversations over the years about a road usage charge that this model wasn’t explored sooner.

“I may be opposed to putting another fee in place at this point in time, but talk about a simplistic model that really answered a lot of the problematic issues of a road usage charge,” said Barkis, the top Republican on the House Transportation Committee.

House lawmakers also propose an increase in the additional sales tax assessment on vehicles from 0.3% to 1%, to bring in over $1.1 billion in six years. That rate goes up based on how expensive the car is.

With just their tax and fee proposals, senators are banking on an additional $3 billion in revenue over six years, while the House’s adds up to $4.4 billion.

Despite the new revenue, the House plan still would delay $1.3 billion in projects between 2025 and 2031 that haven’t yet begun.

The new transportation revenue options are separate from proposals last week in the House and Senate to raise $15 billion or more in new tax revenue over the next two budget cycles.

‘We see uncertainty’

Former Gov. Jay Inslee released a plan before he left office that had $794 million for state ferries. That was before his successor, Gov. Bob Ferguson, announced a pause on the hybrid-electric conversions of the state’s largest ferries.

The Senate’s budget takes that change into account and includes $845 million for new ferries as well as vessel and terminal preservation. The House has over $1.1 billion.

The state now expects to receive bids to build five new hybrid-electric ferries in May.

Beyond the topline tax increases, the Senate plan includes a potpourri of other changes, such as authorizing tolling across the entire State Route 520 corridor, not just the floating bridge, increasing ferry fares an additional 1.5% per year, allowing police to issue $150 tickets for cars parked with expired tabs in the public right-of-way and creating a new grant program to support infrastructure for cyclists and pedestrians.

Both budgets include about $1.3 billion in proceeds from the state’s carbon auctions under the Climate Commitment Act. That money goes toward transit and electrification projects, among other things.

In January, advisors for Inslee told lawmakers the state’s biggest transportation projects had increased in cost by more than $1.3 billion, coupled with a drop in expected revenue of over $530 million between this biennium and the next one.

The outlook has brightened slightly since then. A new forecast released last week showed projected transportation revenues up about $113 million from predictions in November for the next two-year budget, to a total of $7.1 billion. This doesn’t include money from the federal government or the portion of funding from the state’s carbon auctions earmarked for transportation.

Last week’s updated forecast shows gas consumption not falling quite as quickly as previously expected, providing that projected revenue boost.

The Senate’s proposal sets aside $500 million in unspent funding across the next three budget cycles for unexpected increased costs. The House budget includes $1 billion in reserves, Fey said.

“On costs, we see uncertainty. On the federal picture, we see just a lot of uncertainty, and we want to leave the Legislature in the future some room to maneuver,” Liias said.

The House and Senate transportation budgets are set for public hearings in committees Tuesday and committee votes Thursday.

Both chambers will likely pass their budgets quickly and then negotiate over their provisions for the next few weeks. The legislative session is scheduled to end April 27.

This story was first published by The Washington State Standard.