Article by Erik Smith. Published on Thursday, August 12, 2011 EST.

Liquor Privatization Also Could Mean Big Bucks for the State – OFM Releases Reports on Initiatives Wednesday

Targeted for replacement: The Highway 520 bridge.

By Erik Smith

Staff writer/ Washington State Wire

OLYMPIA, Aug. 11.—An initiative that would place sharp restrictions on the way the state raises and spends highway toll money could force the state to return $127 million in federal funds granted for the Highway 520 bridge in King County, says the state Office of Financial Management.

            That’s the most striking new detail that shows up in the “fiscal impact statements” issued Wednesday by the state budget office on the three initiatives that appear on the November ballot. The report on I-1125, the anti-toll measure sponsored by initiative promoter Tim Eyman, raises the possibility that the state and King County might have to give back funds that already have been pumped out for the pending Lake Washington bridge project. Making things worse, most of the money has already been spent.

The reports also show that the state could make big bucks by shutting down the state liquor stores and farming out hard-liquor sales to supermarkets and big-box stores. It confirms an argument that has been made by backers of I-1183, a liquor-privatization measure backed by Costco Wholesale and a bevy of commercial trade associations in Olympia. The numbers are roughly in line with an analysis released Tuesday by the Washington Research Council, which showed the same thing.

            Speak Bureaucratic Language

Beyond that, though, the reports themselves are unlikely to sway huge numbers of voters. Although the statements are printed verbatim in the state voters’ pamphlet, they are written in a bureaucratic fashion, in the dense language spoken mainly by policy insiders at the state Capitol. So it will be up to the campaigns themselves to take the arguments and run with them, if they choose to do so.

The report on the third initiative, the SEIU-backed I-1163, demonstrates just how confusing the reports can be. That measure reenacts costly new training requirements for public and private home care workers that were first imposed by another initiative, I-1029, back in 2008. Lawmakers have been delaying the program ever since because of the state’s budget crisis, and the real question is whether the state will enact the program at all.

A “fiscal note” released earlier this year by OFM indicated that the program would cost taxpayers $55 million in the first two years alone. That’s just for the 40,000 workers employed by the state – perhaps two-thirds of the total industry. In the private sector, home care workers or their employers will have to pay the bill themselves.

But the report doesn’t say that. Instead, it just compares the initiative to the law already on the books – the one the Legislature hasn’t gotten around to funding. It doesn’t talk about federal money, just the money that would come from state taxpayers. So if you look at it that way, the impact of the initiative appears to be relatively small, about $30 million over the first five years. And that’s what the voters’ pamphlet will say about it.

            Bridge Money in Doubt

Transportation advocates have been in a froth ever since Eyman filed his anti-toll initiative, because it undermines a financing plan for major road projects that has been in the works for years. The measure, among other things, would prohibit “system tolling,” a financing plan that would allow tolls to be imposed in one place to pay for projects someplace else. That means, for instance, that tolls couldn’t be charged on the I-90 bridge across Lake Washington in order to pay for a new Highway 520 bridge a few miles north.

Certainly opponents have raised plenty of arguments against it so far. But the interesting thing about the OFM report is that it offers an argument that hasn’t been sounded before.

The report points out that the state and King County got $127 million in federal grants for the bridge-replacement project, under a Bush-Administration program. The Federal Urban Partnership Agreement grant required the state to implement a “variable tolling” program on the new bridge, meaning that tolls would vary based on the hour that the bridge is traveled.

But I-1125 prohibits the use of variable tolling. So the question becomes whether the state would have to give the money back.

And it gets dicier. The state and King County have already spent $100 million of that money.

“The question now is what happens if Eyman undoes our ability to use variable tolling,” said former state transportation secretary Doug MacDonald, an opponent of the initiative. “It becomes a crapshoot what will happen.”

It may be the first time the argument has been sounded publicly, but MacDonald said the risk has been well understood in transportation circles ever since the initiative was filed. “It’s been an issue that all of us have had in mind,” he said. “It’s a speculative issue, but one that is deeply grounded.”

            The report also cites a point made earlier by state Treasurer Jim McIntire – that the measure would confirm Washington as the only state in the union that requires tolls to be set by the Legislature. All other states – and Washington, until now – allow tolls to be set by commissions that are somewhat more isolated from the political process. By putting the decision in the hands of fickle politicians rather than hard-nosed financial types, McIntire says Washington could set itself for a big bond downgrade.

In a more detailed analysis from his office, McIntire argues that toll-backed bonds would be harder to sell, and additional interest would drive up the cost of borrowing to the point that the financing would become infeasible. That would knock a half-billion-dollar hole in the plan for the 520 bridge, not to mention other big projects on the horizon, like the downtown Seattle tunnel and a new Columbia River bridge at Vancouver.

Big Money from Booze

The report on I-1183, the liquor-privatization measure, offers another confirmation that the state would make plenty more money if it just shut down the state liquor stores. Washington is one of 18 “control states” that have sold booze through state-owned and contracted stores since the end of Prohibition. They have become a bulwark of the public employee unions – some 1,000 unionized workers are employed in the stores, and about 100 more at the state liquor warehouse in Seattle.

The state report analyzes the amount the state would save by shutting down the stores, the amount it would collect in license fees under I-1183, and the additional tax revenue that would be generated by billions of dollars in new sales.

It says state and local governments would make somewhere between $400 and $480 million in additional revenue during the first five years.

That’s in line with the industry-commissioned Washington Research Council report, issued Tuesday, which concluded state and local governments would make about $443 million over the same period.

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