Driving the budget gap is a combination of decreased gas tax revenue, rising project costs, and potential new spending

TJ Martinell
The Center Square Washington

As the state Legislature grapples with a disputed estimate of $14 billion of an operating budget overspend over the next four years, the Washington State Department of Transportation faces its own budget imbalance that could ultimately get as high as $7 billion by the 2029-31 biennium.

Driving the budget gap is a combination of decreased gas tax revenue, rising project costs, and potential new spending.

Although the Legislature passed a balanced transportation budget for the current biennium and expects to maintain that for the 2025-2027 budget, the state agency has previously warned it faced a potential $900 million budget shortfall by the 2029-31 biennium.

However, the latest figures from the state Economic and Revenue Forecast Council as well as the Office of Program Research revealed that deficit has increased.

Mark Matteson with OPR told legislators at the House Transportation Committee’s Dec. 9 meeting that since the Legislature enacted the supplemental budget earlier this year, “additional challenges have arisen. The transportation revenue forecast dropped significantly. Continuing shift to more fuel-efficient vehicles.”

He added that transportation construction projects have “experienced significant cost escalation. This is reflective of a national trend in escalating highway construction costs. According to national data, across the nation, project costs have gone up by two-thirds in just over three years.”

As a result, WSDOT faces an estimated $2 billion budget gap by the end of the 2029-31 biennium.

But that difference gets even higher, $3.2 billion, when maintenance spending increases and project cost updates are accounted for, Matteson said.

That deficit could climb even higher depending on the additional updated cost of certain projects that could add $2.5 billion to the deficit. Additionally, the proposed collective bargaining agreements could add a further $700 million through the 2031 fiscal year, Matteson said.

The largest potential contributor to the increased deficit is the fish passage barrier replacements needed to comply with a federal court ruling; according to the ruling, all culverts located on WSDOT property must have all fish barriers removed by 2030.

While cost estimates have varied, Matteson said the fish barrier removal could add a further $4 billion to the agency’s budget deficit.

“This has become more challenging and expensive to address,” Matteson said.

He added “these possible increases could more than double what was shown…to a deficit of like $7 billion or so.”

Partly responsible for budget deficit is a decline in revenue from the state gas tax, which is a primary source of funding for the transportation budget. It is constitutionally protected so that it can only be spent on state highways.

According to a new report from ERFC, gas tax revenue forecast decreased by $185 million for the 2023-2025 biennium compared what was forecasted in February. At the same time, ERFC lower its forecast for gas tax revenue in the 2025-2027 biennium by $353 million.

It’s not a situation ERFC Executive Director Dave Reich expects to change. “We think gas consumption will be declining going forward.”

One cause for the decline in gas tax revenue is the transition for many Washington drivers away from gasoline vehicles and toward electric. While that means they’re paying the state electrical vehicle registration fees, the ERFC report states that those fees will only “partially offset” the loss of gas tax revenue.

This report was first published by The Center Square Washington.