Money is all around us

No tax increase needed to fund new transportation projects

The American Legislative Exchange Council (ALEC) is a membership organization for some 3000 state legislators. They commissioned me to prepare a white paper on Y2K and the states for presentation at their annual conference which was held August 18-22, 1998 in Chicago.

Governor Gary Locke has proposed raising $17.2 billion in new state and regional revenue for transportation over the next ten years. Of this amount, $9.4 billion is new state revenue. That comes to roughly $940 million per year. He proposes to raise that money through a 7-cent per gallon gas tax hike, a 2% increase in sales tax for new and used cars, and a 50% increase on gross weight fees for commercial trucks.

Governor’s Revenue Sources - State ($ in millions)

Source	Estimated Revenue (10-year)
Gas tax increase	$2,174
Sales tax increase on vehicle purchases	$2,010
Gross weight fee increase	$591
Bonds	$5,000
Debt service	($1,408)
New federal revenue	$995
Total	$9,362

Many of our elected leaders seem to think a tax increase is the only way to solve our traffic congestion. But before they come to us and ask for more of our hard-earned money, the governor and lawmakers should consider these alternative funding sources for transportation. (Note: all figures are estimates.)

Alternative Revenue Sources ($ in millions)

Source	Estimated Revenue (10-year)
Transfer of sales tax on vehicle purchases from general fund to transportation	$6,000
Privatizing ferries	$2,500
BRCT recommendations	$20,000
FTE reductions	$83 +
Privatizing Sea-Tac airport (one-time source)	$2,000
Total	$30,583 +

1) Transferring the sales tax on vehicle purchases to transportation -- $1.2 billion

This ongoing biennial revenue source should not be placed in the general fund. It is more logical to use it for transportation purposes. It is also an elastic revenue source because it grows with the economy. To offset the loss to the general fund, lawmakers must take a hard look at state spending, particularly in higher education and health care.

2) Complete privatization of the ferry system -- $500 million

The state proposes to spend over $500 million on the ferry system for the 2001-03 biennium. Opponents of privatizing ferries argue that it is not a viable business venture for private operators. That is true because of three very restrictive state laws: 1) Ten-mile rule, 2) Assumption of labor agreement obligations, 3) Contracting out prohibition. Eliminate these three laws and private companies would be interested in providing ferry service in Puget Sound.

3) Avoided costs as estimated by the Blue Ribbon Commission -- $40 billion

Through a list of reforms including permit streamlining, administrative efficiencies, and allowing private sector provision of services, the commission estimated the state can avoid $40-50 billion in excess costs over the next twenty years. That translates to roughly $2 billion per year. Why haven’t our elected leaders adopted many of the commission’s ideas?

4) Eliminating unnecessary FTEs from the transportation bureaucracy -- $83 million

When Michigan conducted a thorough review of its transportation department, it eliminated 21% of FTEs. A similar review of our transportation system could result in a reduction of 1,657 FTEs. Considering that 468 government entities are involved in transportation, there is duplication of work among the different agencies. Based on the 2000 average state employee salary and benefits package, we could save $50,956 per year for each FTE eliminated.

5) Full privatization of Sea-Tac Airport -- $2 billion

This is a one-time revenue source that would provide an immediate cash infusion into our transportation system. The value of Sea-Tac Airport is based primarily on the number of passengers that board a plane at the airport each year since passengers provide airport revenues through landings, food and retail sales, parking fees, car rentals, ticket taxes, etc. All revenue from the sale of the airport should be used by the Port of Seattle for congestion relief projects in that area.

Based on these figures, the state can raise more money without a tax increase than Governor Locke is proposing with one. This underscores the point that our elected leaders have not tried hard enough to find ways to do more with the money they already have. If these potential solutions do not raise enough revenue, then voters would be more receptive to proposals for a tax increase.

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org