Last week, Jay Inslee announced a $12 billion transportation spending plan. He also announced that he wants to “impose a $4.8 billion cap and trade scheme, take on $3.1 billion in new debt, and impose $2.9 billion in “other fees” on people.” And, Inslee put together his transportation plan without first consulting the State Treasurer.
The Washington Policy Center (WPC) recently wrote that the Treasurer’s financial staff did not see the details of Inslee’s plan prior to its public release. However, Inslee’s plans to borrow against current gas revenue, “because the Governor’s proposed cap and trade tax has no track record,” means that “the bond markets would likely demand super-high interest rates before lending Washington state more money.” The WPC,
The Treasurer’s Office would likely object to the financial maneuver. The gas tax is already heavily bonded, and according to the Treasurer, “continued growth in the issuance of fuel tax bonds has the potential to negatively affect Washington’s strong credit rating,” and could increase borrowing costs. Just last week the Treasurer sent a letter to the Governor and to legislative leadership expressing his growing concern over increased borrowing using gas taxes.
Additionally, there is “another risk to fully leveraging current gas taxes.” The WPC,
Currently, what gas tax revenues remain after paying debt service are used to maintain the state’s road network. It’s a stable, well-known revenue source. Governor Inslee wants to use his new cap and trade scheme, a volatile and unreliable revenue source, to maintain state roads, and shift the more stable gas tax revenue to risky megaprojects; ones like the stuck Bertha tunneling project in Seattle.
The volatility of Inslee’s cap-and-tax scheme shrouds future funding for transportation projects in a cloud of uncertainty. If it fails to produce the needed revenue, the state may be forced to “delay projects or divert money from the General Fund to pay for road maintenance.” In other words, contrary to Inslee’s claims of increasing sustainability, his cap-and-tax scheme threatens to derail every future state budget.