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Budget Official Paves Way For More Road Funding Shifting Motor Vehicle Tax Money To Highways Is Legal, Budget Chief Says

The governor’s budget office paved the way Tuesday for state lawmakers to shift some of the excise tax paid for vehicle license plates and tabs into a fund for major highway improvements - without affecting motorists or state spending limits.

Without embracing the concept, budget chief Dick Thompson said it would be legal to lower the portion of the motor vehicle excise tax that now goes to the general state budget - and turn around and raise the tax by an identical amount that would be dedicated to highway purposes.

If the two actions were contained in separate bills, it wouldn’t lower the state spending limit under Initiative 601, Thompson said in an advisory opinion to the Legislature.

Some lawmakers and Gov. Gary Locke have been considering such a shift as part of a transportation financing package. Republicans have suggested the shift in lieu of a gasoline tax increase; Locke has spoken of a “comprehensive” package that might include both.

The big hang-up for Locke and some lawmakers has been whether the shift could be made without affecting state spending limits. As approved by voters in 1993, Initiative 601 says that whenever money is “transferred” from the general budget to another fund, the state spending limit has to be lowered by that amount.

Locke has said he wouldn’t accept that because it would pit transportation against schools, prisons and other general government programs.

The spending-limits law delegates to Thompson’s office the authority to decide if a transaction is a transfer, meaning it would lower the spending limit, or a shift that wouldn’t affect the limit. Thompson sided with the latter - as long as it is accomplished with two separate bills.

“Our answer provides a method by which, if the Legislature wants to, it can use some of the existing surplus (of $860 million) on transportation without lowering the Initiative 601 spending limit,” Thompson said in an interview.

The state collects $1.6 billion from the vehicle excise tax in each two-year period, with about $374 million going into the state’s general treasury. It is this money that some lawmakers are targeting.

An added wrinkle, noted Thompson, is that a number of legislative Democrats are proposing cutting the tax but not taking the second step of raising it again for transportation purposes.

Thompson said he tried to keep politics out of his ruling, since it will be a precedent for other shifts.

Senate Budget Committee Chairman Jim West, R-Spokane, welcomed Thompson’s ruling.

“It opens an option that … would be a wash for the taxpayer,” he said in an interview. “We have excess revenue, and this would make it possible to reduce the tax and use it someplace else (with a second vote).”

West said the treasury could afford a permanent shift of the motor vehicle excise tax revenue to transportation, but he said he’ll resist spending too much of the state surplus.

“I’m watching to make sure we don’t reduce revenue to the point where we can’t sustain budgets in the future,” West said.

He said he personally could support either a straight cut in the motor vehicle excise tax or the two-step approach “if that’s the only solution to get some money into transportation.”

xxxx POCKETBOOK If the tax shift is adopted, the tax paid by an individual vehicle owner wouldn’t be affected. A shift simply would allow more of the taxes to be used for transportation.

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