OLYMPIA, Aug. 30.—The Washington Supreme Court dealt a major blow Thursday to the big-money gas-tax deals that have been negotiated between Indian tribes and the Gregoire Administration, ruling that citizens have a right to challenge the governor’s office even when tribes are involved.
The 5-4 decision means that a lawsuit filed by a scrappy service-station association may proceed, and there are many indications that the tribal gas-tax compacts could be in deep trouble.
Starting in 2007, the governor’s office began making deals with tribes that give them a big cut of the gas taxes from fuel sold at tribally-owned gas stations – worth $28 million in 2010 and rising every year. The idea was that the compacts would keep the tribes, which are considered “sovereign nations,” from getting into the refining business themselves and selling fuel without charging state gas taxes. The governor’s office argued that the 37.5-cent-a-gallon advantage would give the tribes the ability to undercut the market. Under the compacts, most tribes get 75 percent of the tax revenue from sales at their stations. Some 23 tribes have taken the deal.
The service station operators call it a sweetheart deal with a major political campaign contributor that has allowed the tribes to undercut local gas dealers and drive them out of business. The deals don’t allow state audits or public inspection of records, so there’s no telling whether the tribes are plowing the money back into gas sales, which would be a violation of their agreements. It never was clear that Indian refining operations posed a serious threat, the station operators say, but sales are booming at the tribal stations, they usually beat the market by at least a few cents, and nearby non-Indian dealers have trouble competing. A projection by the state Department of Transportation last year indicated that at the then-current rate of growth, the tribal distributions would total $427 million in a decade. That could increase if the tribes get into the truck-stop business.
Called Raid on Public Gas-Tax Money
The governor’s office had no comment on the decision Thursday, but Tim Hamilton, director of the Automotive United Trades Organization, the McCleary, Wash. trade association that filed the suit, calls the compacts a flagrant violation of the state constitution. “Our biggest question was whether we were going to be able to try the issues on those facts, and the Supreme Court said you may, so it is a great day for the citizens of the state of Washington, and we have now averted a constitutional crisis over the largest raid on the treasury in the history of this state. We now have the right to challenge a deal made behind closed doors between the governor and an Indian tribe.”
The 2007 legislation allowing the governor to negotiate with the tribes didn’t stipulate what the terms would be. So AUTO contends the compacts violate the constitutional rule that an appropriation must be made when money is spent from state accounts. But the big issue is the 18th Amendment, which stipulates that all fuel-tax money must be spent for highway purposes. In the sketchy accountings the tribes have given the state for their use of the money, officials acknowledge that at least some of it has been used for boat launches, landscaping, parking lots and other purposes not permitted by the constitution.
The lawsuit filed by Hamilton’s organization doesn’t attack the compacts themselves, but rather says that fuel-tax money can’t be used to pay the tribes. At a time when the state general fund budget is already expected to run short next year by at least $1 billion, lawmakers might find it hard to justify cutting state programs to pay the tribes.
State Says No Right to Sue
The question before the state Supreme Court was whether Hamilton’s group had the right to sue in the first place. The state argued that the tribes were an “indispensable party” to the case, and because the tribes enjoy “sovereign immunity” and can’t be sued, the whole suit had to be thrown out. A Grays Harbor Superior Court judge ruled for the state, paving the way for the Supreme Court challenge. The high court disagreed.
The ruling agrees that the tribes are a necessary party to the suit, but says that is trumped by the citizens’ right to sue the state over potential violations of the constitution. “Sovereign immunity is meant to be raised as a shield by the tribe, not wielded as a sword by the state,” it declares.
The suit has been watched closely by many in the business community. Among the organizations filing friend of the court briefs on behalf of Hamilton’s organization are the Association of Washington Business, the Associated General Contractors, the Washington Food Industry Association, the National Federation of Independent Business and the Washington Oil Marketers Association. Michael Ennis of the Washington Policy Center, another organization lending its support, called the decision a sharp rebuke to the state. “Based on our research, I have zero doubt tribes are using the gas tax exemption to undercut private operators,” he said. “And the law allows them to spend the money on non-highway purposes. If the state got its way, there would be no legal recourse to challenge any of these issues because they touch Indian tribes, no matter how egregious the crime, which in this case is a clear violation of the 18th Amendment.”