As election day nears, climate repeal turns up the heat on WA’s transportation budget crisis

On a late summer morning in Federal Way, cars were lining up at a gas station where the price per gallon was an eye-popping low: $2.99.

A lot of people who pulled in thought the sign was broken. It wasn’t. This was a publicity stunt.

Energized volunteers, about a dozen of them, weaved between vehicles, chatting with the pleasantly perplexed drivers fueling up on cheap gas before the promotion ended. These campaigners worked with Let’s Go Washington, the group behind a ballot measure that will let voters decide on the fate of the state’s signature climate law.

Washington Initiative 2117, or I-2117, one of several initiatives that will appear on ballots in November, would eliminate the state’s carbon credit market, or “cap and invest” program, which forces big companies to pay the state for their greenhouse gas emissions and reduce those emissions over time.

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Millionaire hedge fund manager Brian Heywood, the main financial supporter behind this year’s slate of Republican-backed initiatives – and several recent events offering discounted gasoline around Washington – was also at the Federal Way fuel station. Heywood says the carbon market is an inefficient money waster, calling the program a “hidden gas tax” that’s too burdensome for Washingtonians to pay.

“Vote for 2117,” he said, as passing drivers honked to signal their support. “‘Vote yes, and you pay less,’ is the message we’re trying to get out.”

It’s true that the carbon credits – created by the state’s Climate Commitment Act – have contributed to rising gas prices. Estimates vary, anywhere between 20 to 40 cents per gallon at the pump, and there is a chance gas prices will go down some if the repeal initiative passes.

But there’s more to the story.

While voters weigh whether to dismantle the state’s climate legislation, the transportation budget is in crisis. And that budget is deeply entwined with revenue from the carbon market.

The outcome of this year’s election will determine how the state moves forward with paying for programs aimed at reducing reliance on gas-powered personal vehicles – things like free bus rides for kids statewide, grants to help local communities build bike lanes, and installation of electric vehicle charging stations along major roads. Funding from the carbon market is also earmarked to help pay for critical transit projects, like new hybrid electric ferries, light rail expansion, and electric buses.

RELATED: WA dems make the case to keep signature environmental law

“There is no free choice,” said Sen. Marko Liias (D-Edmonds), who chairs the state’s Senate Transportation Committee. “It’s either pay one way or cut investments – those are the things we’re going to have to face.”

It’s worth noting that the carbon market is one of many factors that help determine the cost of a gallon of fuel, and prices are constantly changing. Data shows Washington gas prices have been among the highest in the nation throughout the past decade – the carbon market started just last year.

According to data from AAA, even if the state's average price for a gallon of unleaded fuel (which was around $4.15 at the time this story was published) drops by a full 40 cents, Washington would still have the fifth highest average price of gas in the country, along with neighboring Oregon.

It’s also true that repealing the “hidden gas tax” could prompt lawmakers to raise the state’s actual gas tax – which they did most recently in 2015, when Republicans controlled the state Senate and Democrats led the House. That’s because the state’s previous three major transportation plans have come with gas tax increases.

Democrats did approve increases to some vehicle fees along with their latest multibillion dollar long term transportation plan, approved in 2022 without any Republican support. The carbon market is supposed to pay for about a third of that plan – about $5.4 billion over the next 15 years – in addition to climate-focused spending in other areas of the budget.

There are limits to how the carbon market money is spent. The Climate Commitment Act specifically forbids the use of carbon credit funding for “highway purposes.” Simply put, it means the carbon credits can’t pay for construction of roads or bridges meant for cars.

But if the carbon funds disappear, Liias said lawmakers will have to reprioritize the entire transportation plan, not just climate-related projects.

“For the proponents [of I-2117] to think we’re not going to touch any of the other spending if we lose a third of our money is foolish,” Liias said.

RELATED: Washington holds first carbon auction of 2024, with program's future in doubt

Transportation is among several issues in the Washington Legislature that are not particularly divisive, but there are certainly differences of opinion.

Liias’s Republican counterpart on the transportation committee, Sen. Curtis King (R-Yakima), supports repealing the carbon market. King acknowledges that passing I-2117 will add to the list of challenges plaguing the transportation budget – like rising costs and diminishing revenue – but he welcomes the hard conversations it will demand.

“I think it’s a challenge that we need to address and determine: how are we going to fund our transportation system going forward?” King said. “We cannot keep punishing cars and trucks in the name of emissions.”

King and other Republicans say they want the state to spend less, but that they also have a solution. They want to move tax money collected from the sales of cars and trucks into the transportation budget. Right now, those tax dollars go into the state’s main operating budget that funds things like schools, public safety, and health programs. It would mean shifting more than $2 billion out of the state’s two-year operating plan, which is nearly $72 billion in the current budget cycle.

“We can work our way into that, so it’s not a hit to the budget,” King said.

But making that change is not a winning idea among Democrats, who currently hold the majority in the Legislature.

“It’s choices, right?” said Sen. June Robinson (D-Everett), who is the Democrats’ lead budget writer in the Senate. “If we give a billion dollars a year that currently goes to operating and move that over to transportation, then that’s a billion dollars less that we have to spend on K-12 education, on behavioral health.”

RELATED: The 6 voter initiatives likely heading to Washington ballots this fall, explained

What’s more, the operating budget also includes money from the carbon credit market to support other, non-transportation climate programs and projects across the state. Some cuts would be inevitable if the carbon credits go away, but Robinson said “all options will be on the table” to find revenue that can address critical gaps.

For now, it’s unclear whether I-2117 will pass. A recent Cascade PBS/Elway poll shows diminishing support for the measure among respondents compared to earlier this year. And the other unknowns heading into the election – like the makeup of the next Legislature and who the next governor will be – will also affect how lawmakers tackle funding issues next year.

At the first gubernatorial debate of this year’s general election season, Republican candidate for governor Dave Reichert promised to veto any proposed tax measures should he win the position – his Democrat opponent, Attorney General Bob Ferguson, has made no such promises.

Regardless, initiative leader Heywood said he would run another initiative to repeal whatever tax increases Democrats might try to put in place anyway.

Ballots will be mailed to voters by Oct. 18.