Car-tab fallout dominates as transportation leaders return to Olympia

Despite an ongoing legal challenge attempting to undo Initiative 976, state lawmakers returned to Olympia this week pledging to write a transportation budget as if the tax-slashing measure is taking effect.

Transportation committees met Monday and Tuesday to begin weighing cuts, delays and other budget maneuvers to balance the state’s transportation budget after voters passed I-976 to cut vehicle registration fees. I-976 is expected to reduce state transportation revenue by about $454 million between 2019 and 2021.

While Gov. Jay Inslee attempts to make addressing homelessness and climate change cornerstones of this election-year legislative session, backfilling financial losses from I-976 will likely dominate transportation debates in the state House and Senate for much of the 60-day session.

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“It’s a policy Rubik’s cube that I’m in,” Senate Transportation Chair Sen. Steve Hobbs, D-Lake Stevens, said in an interview before the session.

I-976 attempted to lower many vehicle registration fees to $30, repeal local car-tab taxes and roll back car-tab taxes that fund Sound Transit. In a lawsuit arguing the measure is unconstitutional, opponents sued and won a temporary halt to the measure. A final ruling — and likely an appeal after that — is still to come.

Facing uncertainty about the measure’s fate, state lawmakers say they have to budget as if the cuts will take effect.

Legislators’ starting place is Inslee’s proposed transportation budget, which would pause road, transit and rail projects across the state, shift costs among state transportation accounts and sell about $110 million to $120 million in bonds backed by gas-tax revenue.

That strategy is already drawing skepticism from lawmakers.

“I keep looking at that word bonding and I’m just worried and worried,” Rep. Jim Walsh, R-Aberdeen, said Monday as he questioned state staff about the details.

“I think we can all agree that’s probably not the right thing to do,” Hobbs told colleagues in a committee meeting Tuesday, “and we’re going to have to make that [missing revenue] up.”

Inslee’s budget would also shift some transportation revenues and costs among different state accounts in an attempt to stave off severe cuts to the state’s multimodal account, which can fund non-roads projects like transit.

For example, about $45 million to fund Washington State Ferries would come from the state’s motor vehicle account (which is funded in part by gas taxes) instead of from the multimodal account. Sales taxes paid on some state transportation construction projects would also be directed to the multimodal account to backfill lost funding.

Lawmakers may consider shifting money from capital costs like buying new buses to operating costs, said House Transportation Committee Chair Rep. Jake Fey, D-Tacoma. “That creates some harm, but it is not as damaging as having to cut service for special needs transportation.”

They may also consider “triggering language” that would reset transportation spending if the Supreme Court throws out I-976, Hobbs said.

Democrats, who hold majorities in both the House and Senate, are likely to dominate the budget debate and have said protecting transit service for people with disabilities is a top priority.

But Republicans began the session emphasizing what they view as a public mandate to address car-tab taxes and fees.

“If it isn’t this initiative, it might be another one, so we should be doing something,” Senate Minority Leader Mark Schoesler, R-Ritzville, told reporters Tuesday.

Republicans have proposed directing revenue from sales taxes on vehicle purchases to fund transportation costs. Inslee slammed that idea as a “total nonstarter” that would strip money from other state needs like education.

Republican lawmakers have also filed bills to enact I-976 in full and nullify some Sound Transit taxes. They could also revive attempts to revamp the controversial way Sound Transit calculates car-tab taxes, which overvalues many vehicles compared to Kelley Blue Book.

Democrats have floated some new funding sources, but acknowledge those could take more than one session to pass.

A bill sponsored by Rep. Bill Ramos, D-Issaquah would allow local governments to pass new utility and sales taxes for certain transportation projects. Ramos said the bill was in the works before I-976 and is an effort to “give local folks the opportunity to solve their own problems.”

Sen. Rebecca Saldaña, D-Seattle, said she is considering proposing new fees on yacht and private plane purchases and an “air quality surcharge” to be based on new vehicles’ projected emissions, but acknowledged those proposals could become part of a yearslong debate on a new transportation funding package.