$1 billion shortfall in WA transportation budget imperils projects

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Increasing construction costs and falling gas tax revenue have blown a billion dollar hole in the Washington state transportation budget, forcing lawmakers to put more money toward projects once promised as fully funded and warning that other projects may be left half built.

The biggest projects the state is currently working on — from rebuilding highways to electrifying the ferries — have grown in cost by $1.3 billion. Couple that with a new forecast predicting the state will bring in $2.2 billion less over 10 years than anticipated, and legislators are looking at $1 billion in red ink for transportation funding in the upcoming 2025-27 biennium, which begins July 1.

State Sen. Marko Liias, D-Edmonds, who leads the Senate Transportation Committee, said lawmakers are just getting started on the budget but the “early outlook is pretty devastating impacts on some of the projects that are planned.”

“To get to a billion dollar level of savings, or stability, probably means pausing projects so there’s a partially constructed piece of infrastructure,” he said.

Liias didn’t name specific projects that could be delayed, but he acknowledged the state loses “public confidence when they see a half-built bridge for five years.”

State Rep. Jake Fey, D-Tacoma, who leads the House Transportation Committee, agreed it would be “very difficult” to balance the budget with existing revenues, but he and his colleagues were looking for solutions.

“‘All of the above’ are the options,” he said, adding that he will reintroduce a bill this week to phase in a road usage charge, an idea to supplement dwindling gas tax revenue with a per-mile fee that’s been studied in Washington state since 2012 but has yet to gain traction among lawmakers.

The starting point for lawmakers is the $14.7 billion, two-year transportation budget proposal Jay Inslee handed the Legislature last month and left for his successor, Gov. Bob Ferguson.

Inslee’s budget identified the problems, but not solutions, said Erik Hansen, an Inslee transportation budget adviser.

That was done by design, Hansen told members of the Senate Transportation Committee, to give them “space and room to discuss how you would address that billion dollar shortfall.”

Ferguson, who took office this month and is still devising his spending plan, has broadly described his own budget priorities. He has called for 6% cuts to most state agencies, a $4 billion reduction in spending, and said he was going through Inslee’s budget proposal “line-by-line,” a process he said could take weeks.

The sole mention of transportation spending in Ferguson’s priorities went to the ferry system. He supported Inslee’s proposal to spend nearly $20 million on crew recruitment and retention, renewing year-round and daily sailings in the San Juan Islands, and increasing winter service on the Anacortes-San Juan Islands route.

So, the work of a yet another tough budget season begins. At stake is not just the fate of the state’s ongoing construction projects, but the very way Washington pays for such big-ticket public works.

Liias said the state would finish the “mission critical stuff” like building new ferries and the megaprojects many people rely on. His committee is digging into the operating costs of the transportation system to see what savings can be found.

“We need to get a clearer picture. Can we get halfway there? Can we get a quarter of the way there?” he said, noting that he hoped to have a better understanding by mid-February. “I don’t want to ask anybody to chip in one more nickel until we can assure them we’ve scrubbed the budget.”

Regardless, it would be hard to make up for the $1.3 billion increase in construction costs for current projects.

That increase comes from the $630 million added to the now-$1.375 billion Portage Bay Bridge and Roanoke Lid project (to be finished in 2031) and to complete Highway 520’s reconstruction from Interstate 405 in Bellevue to Interstate 5 in Seattle; $271 million needed for the new, $1.5 billion north-south highway being built in Spokane; $137 million added to the ferry terminal electrification project in Seattle and on Bainbridge Island, part of the larger $4 billion project to electrify the ferry fleet; $91 million more for widening Interstate 405 between Renton and Bellevue, originally estimated at $705 million; and more.

In a sign of things to come, state officials Monday said a $15 million increase in the first phase of the “Revive I-5” project resurfacing the deck of the I-5 Ship Canal Bridge planned to start this spring would delay the work for a year.

The overall construction cost increase — which Liias said jumped 70% from 2020 to 2024 — is something that may abate as inflation does.

The loss of revenue won’t.

For more than a century, Washington motorists have paid something of a road user fee through the gas tax.

Beginning in 1921, nine years after Washington’s first concrete road was laid in Lewis County, gas was taxed 1 cent for every gallon, initially raising $900,000 a year for the Motor Vehicle Fund. It went up to 2 cents in 1929 and was 28 cents per gallon in 2003, when the state began borrowing against future gas tax revenues to fund transportation construction projects, and at a rate below those of the 1950s and ’60s when adjusted for inflation.

But the salad days were nearing an end, as motorists switched to electric vehicles or more efficient gas-powered cars, and drove less. Though the gas tax kept creeping up — notably in 2015 when lawmakers passed the Connecting Washington transportation package and raised the gas tax 11.9-cents per gallon — the revenue it created topped out in fiscal year 2019, when it brought in $1.46 billion, according to numbers from the state Transportation Revenue Forecast Council.

Today, gas in Washington is taxed at 49.4 cents per gallon. The federal gas tax remains at 18.4 cents per gallon, unchanged since 1993.

Liias said the pandemic “supercharged” the issue of declining gas tax revenue, as fewer people took to the road. He likened COVID-19 to when “the villain steps on that injury and makes it really, really painful.”

“We went from a slow decline to a very dramatic decline,” Liias said. “The wall of bad news arrived faster than we expected. The headlights didn’t show this.”

Liias didn’t fully endorse Fey’s road usage charge plan, which would tax people on how far they drive, rather than how much gas they use. But he included it in a slate of ideas to replace the gas tax, along with toll roads or fees on package deliveries.

Fey said the state could no longer wait to replace the “diminishing resource” of the gas tax, but knew it would be hard, considering the stiff resistance the road use fee has faced in past sessions.

“For me, it’s getting something reliable, can endure and be adjusted over time,” he said. “We’re not like a water or electric utility. They raise the rates periodically to keep up. We have to pass a bill.”

Liias was still searching for some “novel solutions,” and said Julie Meredith — Ferguson’s choice to lead the Washington State Department of Transportation — may be able to offer them.

“She helped get Big Bertha unstuck,” Liias said, referring to the boring machine that dug a tunnel under Seattle as part of WSDOT’s multibillion-dollar project to replace the Alaskan Way Viaduct that was delayed two years after it hit a steel pipe. “So I’m hoping she can help do the same here.”