I-745 Would Cost Thurston County $7.7 Millionfrom the Fiscal Policy Center, University of Washington A new study illustrates the difficult choice policymakers face if voters approve Initiative 745: make significant public transportation cuts or undertake unprecedented new spending on roads. I-745 limits non-road programs to 10 percent of total transportation funds. Transit and certain police programs subject to this limitation presently account for 25.39 percent of transportation expenditures in Thurston County. Since almost all of the public transportation funds come from voter-approved transit taxes, they cannot be shifted to road construction to bring the road percent age up to 90 percent. Local officials would be compelled to choose between reducing non-road spending by $7.7 million, or increasing road spending by $69.5 million in Fiscal Year 2002, the equivalent of a gasoline tax increase of 72.8 cents per gallon. Local option gasoline taxes are currently capped by the Legislature at 2.3 cents per gallon. Statewide spending is closer to the ratio proposed in I-745, but still well above the limit. Non-road programs are projected to be 22.86 percent of transportation expenditures, $487 million above the 10 percent limit. Maintaining public transportation spending would require $4.38 billion in new road funds -- equal to a $1.74 increase in the state gasoline tax. I-745 applies to all levels of government -- state, county, municipal and special districts like the Regional Transit Authority. Proponents have indicated that only the overall total is limited to 10 percent ; high road spending in one area can offset high non-road spending in another. However, public transportation spending is above the 10 percent limit at each level of government. If passed, the Legislature will implement the initiative, with few specific requirements. Legislators have several options: satisfy the 10 percent cap on non-road transportation costs with state resources, work in conjunction with local governments to fulfill the 90:10 ratio, or simply direct local governments to conform with the initiative. Since the initiative offers few specifics, the Legislature could phase it in over time, or even employ modified accounting or new definitions to conform on paper with initiative requirements. For example, if the Legislature reduced non-road spending by $150 million and increased road construction by roughly $3 billion, the state would reach the 90:10 ratio without any local impact. The increase in road construction would correspond to a gasoline tax increase of over a dollar, but a roughly nine cents (9 cents) increase in the state gasoline tax each year would support $3 billion a year in new 25-year bonds. In the long run such an approach -- and the cumulative tax increase -- is far from sustainable, but would buy the state time. While it is possible to achieve the 10 percent cap on a statewide basis, enforcement across state and local governments would pose administrative challenges, necessitating local involvement. Cities and counties would lose the ability to determine their own transportation budgets, or would at least need to offset every dollar in new public transportation spending with nine dollars in road construction. Given the Legislature coverage of just 40 percent of Motor Vehicle Excise Tax revenues lost under Initiative 695, local government is likely to bear the brunt of I-745 as well. Such decisions occur as the state wrestles with a transportation funding crisis. In 1995 the state transportation department identified $12.2 billion in critical unmet need over the next 20 years. Referendum 49, approved by voters in 1998, initiated $1.9 billion in new construction. Lost revenue under Initiative 695 led the Legislature to curtail authorized road construction last year. Still searching for long-term solutions to Initiative 695, local government will also be impacted by property tax limitations in Initiative 722, compounding in magnitude over time. The Fiscal Policy Center, part of the Daniel J. Evans School of Public Affairs at the University of Washington, researches state tax and spending policies as they affect low-income and vulnerable populations. Complete 2000 ballot measure analysis is available on the center's web site (depts.washington.edu/fpc). This report does not offer a recommended position on any pending ballot measure, nor should it be construed as representing an official position by the Fiscal Policy Center, the Evans School, or the University of Washington.
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