Senate approves hazardous waste tax hike

Senate approves hazardous tax hike
A Senate bill would raise a tax on fuel producers that currently goes into the Model Toxic Control Act (MTCA) accounts to fund toxic site cleanups and then shift that money toward new accounts.

After extensive debate on April 25, the Washington Senate voted 27-22 to increase the Hazardous Substance Tax that currently funds the Model Toxic Control Act (MTCA) accounts and then divert that money to new accounts, including the Public Works Assistance Account that provides loans for local infrastructure projects.

SB 5993 sponsored by Sen. David Frockt (D-46) shifts the substance tax from a $.07 wholesale value rate on “hazardous substances” to a volumetric rate of $1.09 per barrel. The bill originally called for a $2.52 per barrel tax.

Nevertheless, concerns over the economic impacts inspired several amendments proposal by Sen. John Braun (R-20) to make the Model Toxics Control Operating Account subject to the four-year outlook used with the operating budget, as well as an amendment to create a performance statement ensuring the tax increase hasn’t adversely impacted the state economy. Both were rejected, along with nine other proposed amendments made by Senate Republicans.

While Frockt touted the bill as a way to reform how the state pays for hazardous site cleanups, Sen. Doug Ericksen (R-42) called it “an attack on working people in Washington state…because this will drive jobs out of Washington State. This is a job killer, particularly for people in the unions.”

The hazardous waste tax was created after voters approved Initiative 97 in 1988 establishing the Model Toxic Control Act; that law has been amended 23 times since 1989, the most recent in 2013. The tax has generated more than $2.6 billion, which was originally meant to pay for hazardous site cleanup but since the 2007-2009 biennium has permanently covered other projects normally paid for through the state’s general fund.

As a result, during the most recent biennium the MTCA accounts faced an $89 million shortfall that led to a delay of cleanup projects. To cover that gap, the legislature authorized $70 million in bonds, while the Department of Ecology (DOE) slashed $11 million in spending by delaying projects and staff hires. It’s not known how much of hazardous waste tax money has paid for site cleanup, because that data is not tracked by DOE.

Under the current rate, the hazardous waste tax will generate $1 billion through the 2023-25 biennium. If enacted, SB 5993 will increase that to roughly $1.8 billion. The MTCA accounts would then be replaced with operating, capital and stormwater accounts. The operating and capital accounts would each receive 45 percent of the revenue, with the remaining 15 percent dedicated to the stormwater account. Through 2025, $150 million of hazardous waste tax revenue would be transferred to the motor vehicle fund to pay for stormwater projects.

The revised bill also includes an intent section opposing transfer from the MTCA accounts to the operating budget in the current biennium.

Among the accounts to receive a portion of that revenue is the Public Works Assistance Account, which funds a low-interest revolving loan account to pay for local infrastructure projects. Along with loan repayments, it also receives a percentage of the state’s real estate excise tax revenue. However, that account has had billions either taken directly from the account by the legislature or diverted to other accounts. During the most recent biennium, state lawmakers authorized bonds to cover new loans through the program.

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