Gov. Jay Inslee’s proposed tax on carbon polluters would send more money than originally expected to education. The money most likely would go toward complying with a 2012 Washington Supreme Court ruling to improve teacher-student ratios in grades K-3.
Until recently, the proposed carbon tax was estimated to raise $1 billion a year, with $380 million going to education. The new estimate is that $1.3 billion will be raised annually, with $517 million going to education.
Finding money to comply with the state Supreme Court's McCleary ruling on funding education has stymied the Legislature for the past three years. The Supreme Court is unhappy with the Legislature's slow progress toward providing constitutionally adequate funding, threatening sanctions if the Legislature fails to come up with a plan by this summer to meet a 2018-2019 deadline.
Right now, Republican legislators are pondering allocating $750 million or more to McCleary work in 2015-2017, which would likely trigger Supreme Court sanctions if their minimum figure is adopted. Democratic legislators are thinking about $1.3 billion or more, with questions on whether their minimum figure might also lead to sanctions. Neither party has yet publicly identified where it will find the extra McCleary money for the 2015-2017 budget biennium.
The Inslee administration's plan for the roughly $1.3 billion in annual revenue would be $517 million going to education. Of the rest, $400 million would go to transportation projects to head off a potential 11.7-cents-er-gallon gas tax hike. Another $196 million would go to working family tax credits for roughly 500,000 families, affordable housing programs and helping Washington industries deal with competitors not facing the carbon emissions tax. Finally, $178 million would go to clean energy programs, a huge increase from what was envisioned in the earlier $1 billion package.
Chris Davis, Inslee's adviser on carbon markets and energy, and two state economists provided the financial information at a Thursday hearing on Inslee's plan before Washington House Appropriations Committee. Inslee's plan is in a bill sponsored by Rep. Joe Fitzgibbon, D-Des Moines.
Inslee and Fitzgibbon's plan calls for Washington’s 80 to 90 biggest polluters to pay for the right to produce specific amounts of carbon emissions, which scientists have linked to global warming. If Inslee’s proposed system is installed, polluters would be allowed to trade or sell their pollution quotas to other businesses. During the program’s first year, the affected business would divide up the same amount of carbon emissions as they produced in the previous year. Then the state would trim that total slightly each subsequent year.
Inslee hopes to reduce statewide carbon emissions to achieve greenhouse-gas limits that the Legislature set in a 2008 law. The state’s greenhouse emissions are supposed to reach 1990 levels by 2020, with further trimming of emissions later.
State economists briefed the committee on the predicted economic effects of Inslee's plan. The Office of Financial Management's calculations show that a carbon tax of $12 per metric ton of emissions — the most commonly cited figure in the past several months — would lead to generally modest annual increases in families’ costs for gasoline and other activities that directly link to carbon emissions. The overall expected increases in costs range from $362 a year for families among the top 20 percent in incomes down to $144 a year for the bottom 20 percent. But the effect would hit harder among lower-income families, taking higher percents of their overall spending.
Inslee's plans calls for a working family tax credit rebate -- a check of $233 -- to go to eligible families. Jeff Johnson, president of the Washington State Labor Council, and other speakers at the hearing said this feature is vital, because it would counter the estimated $144 annual burden on the poorest families.
The state economists predicted small effects on Washington's overall economy from the carbon tax through 2035, with a very slight expected increase in jobs.
Kris Johnson, president of the Association of Washington Business, said the organization recently finished its own analysis the impacts of Inslee's plan. The AWB's analysis agreed that the tax would raise at least $1 billion annually, and it agreed with the OFM report projection that it would increase gas prices by 12 cents a gallon in the first year.
However, Johnson said the association's study shows significant job losses due to the carbon emissions tax. He did not cite actual figures, but said the AWB would provide the report to the committee.
Committee member Rep. Cary Condotta, R-East Wenatchee, noted that his district is home to an Alcoa aluminum plant struggling with high operating costs. "Any additional cost will put them over the edge," he said. That plant employs 465 people. Rep. Steve Tharinger, D-Dungeness, wondered if industrial mills in his district would suffer ill effects from the carbon tax.
Fitzgibbon said several states plus British Columbia -- which has a much higher carbon tax than proposed for Washington -- have charged polluters for carbon emission with no major ill effects. He said British Columbia's economy is stronger than that of any other Canadian province. "The potential devastating impacts have not been borne out in other jurisdictions," Fitzgibbon said.
Supporters said global warming threatens water supplies for agriculture and Washington's quality of life. Before the hearing, Tukwila City Council Member De'Sean Quinn said the public understands the problems with unchecked global warming. "People are connecting the dots," he said.
At the hearing, Quinn testified that communities of color living in areas near polluters have suffered a disproportionate number of cases of asthma and other lung problems. He said, "These are the hidden costs of carbon pollution."
Opponents of the bill predicted ripple effects as companies facing emissions charges pass on their increased costs to other businesses. An increase in natural gas prices was cited, which agrees with the OFM report unveiled Wednesday. Terry Willis, a Grays Harbor County farmer, said, "Small businesses, like our family farm, will foot the bill."
"This bill will create a substantial competitive disadvantage for us," said Patrick Jablonski, representing Nucor Steel of Seattle.