When the legislative session began in January, Gov. Chris Gregoire urged Washington lawmakers to take bold action to find funding for the struggling state ferry system, not to "patch together" money for it once again.
But when the House and Senate released their versions of a two-year transportation budget last week, it became clear that they weren’t going to take her advice.
Transportation leaders in both houses and both parties said new money will have to come from somewhere soon, but in the midst of an economic downturn, they weren’t ready to ask voters.
“This was not the year for a new revenue package for transportation,” said Rep. Mike Armstrong of Wenatchee, the ranking Republican on the House Transportation Committee. “We felt this year was a year for efficiencies, to show the citizens of Washington state that we are being more efficient with their money and their transportation system.”
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So far this session, both houses of the Legislature have rejected ideas for developing new funding sources for the ferries, which face a $900 million revenue shortfall over the next decade. Instead, lawmakers announced in their transportation budget proposals that they intend to pay ferry costs this biennium much like they have in the past – by transferring money into the system from other Transportation Department accounts.
The House budget would transfer in about $81 million and the Senate would transfer about $82 million, mainly from gas-tax money that would have gone to the state highway fund.
That approach to funding the system won’t work much longer, though, according to the Office of Financial Management, which predicted in January that the accounts that have traditionally been used to bail out the ferry system will begin to run out of money in the 2013-15 biennium.
“I certainly understand the dilemma that the Legislature faces with looking for a new revenue source in the face of this economy,” said David Moseley, the Transportation Department assistant secretary in charge of Washington State Ferries. “But at some point, and very soon, we are going to need to make a choice about what we want our ferry system to look like.”
The state ferries’ financial problems began in 1999 when voters approved Initiative 695, which repealed the state’s motor vehicle excise tax, making all license tab fees $30.
The initiative was later thrown out by the Washington Supreme Court, but the Legislature responded by passing a law to the same effect.
That money was a major dedicated source of funding for the system, and, according to the governor’s office, it would have brought in about $1.2 billion for the ferries over the last ten years.
Without excise tax funding, the ferries get money from the state gas tax and through licenses, permits and fees. Because that isn’t enough to pay for all the operating and capital expenses the ferries generate, the Legislature has transferred about $452 million into the ferry account from other transportation funds since the 2001-03 biennium, and, on top of that, the debt service for all ferry bonds is paid out of the state’s highway fund.
Finding new sources of money for the system has been a big political challenge this session.
Legislators in both houses were quick to oppose the governor’s proposal, announced in January, that would have turned the ferry system over to local governments in the Puget Sound region and required that they find a way to fund it through local taxes.
“We made a decision that the governor’s sub-regional plan didn’t fit with the iconic, statewide ferry system,” said Rep. Judy Clibborn, chairwoman of the House Transportation Committee.
Another idea that hasn’t gained much traction this session would have repealed the sales tax exemption for out-of-state residents who buy products in Washington counties that are not adjacent to other states and used that money to fund the ferry system.
According to their fiscal notes Senate Bill 5698 and House Bill 1352 would bring in about $60 million in the upcoming biennium, but neither has been scheduled for a hearing.
Clibborn and Sen. Mary Margaret Haugen, chairwoman of the Senate Transportation Committee, said they would probably propose a new funding package for transportation next year, and the most likely way they would do that would be to add a ballot measure in 2012 or soon after that would raise gas taxes and fees to fund the ferries.
Haugen, a Democrat from Camano Island, said she thought Washington voters would approve a tax-increase to fund the ferry system.
“When it gets to the ballot, I think people are going to understand that they’re going to have to step up,” she said.
FLOATING NEW BOATS
Reema Griffith, the executive director of the state Transportation Commission said one of the biggest funding gaps the ferry system faces is in its capital budget – the money that goes to building boats and terminals.
Moseley agreed, saying the system will probably have to replace about nine of its vessels over the next 20 to 25 years.
Riders already pay between 65 percent and 70 percent of the day-to-day operating costs of the ferries through fares, Griffith said, but if the commission tried to raise fares enough to pay for the capital costs, ferries would get so expensive that no one would ride them.
The commission had suggested that the state could reinstate the vehicle excise tax at a lower rate than before or increasing the flat rate fee people pay for their license tabs to $60 to $70, Griffith said.
“It really isn’t a daunting, heavy lift,” she said, referring to the tax increases it would take to fully fund the ferry system. “When you take it statewide, it really isn’t a great amount of money for every individual to pay.”
Haugen cautioned that the excise tax had been very unpopular and she was confident it would not return.
Some more modest ideas for adding money to the ferry system have made progress this session, including Senate Bill 5251, which would add a $100 annual licensing fee to electric vehicles because they do not pay the state gas tax and Senate bill 5742, which would add a 25-cent fee to all ferry fares to fund the construction of new boats.
The money those proposals would raise, along with $21.8 million in savings from a tentative agreement between the governor and ferry-worker unions, was already incorporated into the Senate version of the transportation budget.
The Senate also has a bill on the calendar for a floor vote, Senate Bill 5405 that would limit the benefits that ferry workers can negotiate through collective bargaining.
Savings it could generate were not included in the budget, though there is some overlap between that proposal and the agreement the governor announced with ferry-worker unions earlier this month.
Katie Schmidt: 360-786-1826 katie.schmidt @thenewstribune.com