"Heartburn" over roads: State fears $1.5B shortfall

OLYMPIA — Washington could fall about $1.5 billion short of what's needed to pay for state transportation projects over the next 16 years because drivers are expected to buy less gasoline than the state had forecast.

New state projections indicate rising gas prices will temper demand for fuel, and that in turn means less revenue from state and federal gas taxes. The trend is not expected to improve over time.

Ultimately, it could lead the state to tap new sources of money, such as tolls, to help pay for transportation needs, or force a choice between maintaining existing roads and building new ones.

"This really does create a problem. This gives me heartburn," said state Sen. Mary Margaret Haugen, chairwoman of the Senate Transportation Committee. "I think this will have a big impact on our budget."

Her committee held a hearing on the new projections last week.

Demand for gasoline is expected to increase over the years, but not by as much as previously predicted, because of higher prices. Forecasters blame a number of factors for the more pessimistic outlook on prices, including volatility in world markets.

The state uses such forecasts to project how much tax revenue it can expect in the future.

There's debate over the accuracy of the projections, and whether rising gas prices would really lighten demand. But many state analysts expect the forecast to bear out in the long run. State gas-tax collections in recent months have been slightly lower than were projected.

In Washington, gasoline averaged $1.37 a gallon in 2002. The price has averaged $2.73 this year.

Washington isn't the only state facing the tax-revenue problem. The same thing is happening nationally.

During the next 16 years, the state plans to use gas taxes to pay for about $25 billion in transportation needs that range from repaving roads to helping replace the Alaskan Way Viaduct and the Highway 520 floating bridge.

While the projected $1.5 billion shortfall is a relatively small portion of the overall spending plan, state officials say there's no slack in the budget.

The shortfall includes both state gas taxes and federal gas-tax revenue collected in Washington and later returned to the state.

Rep. Judy Clibborn, D-Mercer Island, chairwoman of the House Transportation Committee, said the state can handle a short-term decline in revenue without much trouble, but "the long-range issue is big."

Lawmakers earlier this year had to deal with an unexpected $2 billion increase in materials costs for projects already planned or under way. The Legislature handled the problem in part by borrowing more money.

The state charges 36 cents a gallon in gas tax. That will increase to 37.5 cents next summer because of 2005 legislation. The federal government collects 18.4 cents a gallon.

The Legislature has dedicated more than a third of the state gas tax to pay off bonds being sold to finance new transportation projects. The rest goes to maintain state and local roads.

Clibborn and other state officials said they hope the federal government will eventually make up a chunk of the projected revenue gap, but there are no guarantees.

Haugen, D-Camano Island, said she's not counting on any federal help.

That means lawmakers could face a choice between using money earmarked for road maintenance to pay off new projects, or canceling some of the planned improvements.

Another option would be to find a different source of money to take up the slack in gas-tax revenues.

Several state lawmakers say the problem will increase pressure to start collecting tolls on area highways.

"It moves us further and further toward tolling," Haugen said. "Some of us have had some heartburn about tolling, particularly on highways. But I think we're going to have to be looking at things differently."

State Sen. Ed Murray, a vice chairman of the Senate Transportation Committee, agreed.

"Almost worldwide after the end of World War II, gas tax was a way that transportation was funded. We are now moving into a period of time where we have to explore what is going to ... replace the gas tax," he said.

Murray, D-Seattle, said the state needs to look at tolls to fill the gap but added, "That's going to be a long debate."

The state is discussing tolls on the Highway 520 bridge to raise money to help finance replacement of the structure.

Eric Meale, an economic-analysis manager for the state Department of Transportation, said the bad news on gas-tax revenue stems from an emerging consensus that world market conditions aren't going to improve.

"It's basically the feeling that the pressures are mounting to keep the price [of gas] up," he said. "It's like every time you turn the newspaper page you get another story of something raising the price of gas again."

The expectation, he said, is that "the higher prices will basically push people into making more decisions to find ways to reduce their fuel consumption."

Andrew Garber: 360-943-9882 or agarber@seattletimes.com