Ferries and the Transportation Budget

Adapted from a comment on a story about a candidate forum in MyEdmondsNews.com

During a candidate forum hosted by the Edmonds Chamber of Commerce, I responded to two questions by talking about ferries and the transportation budget. My comments centered on raising fares to make the ferries self-supporting, at least with regard to operating costs.

Here’s some background data.

The Executive Summary of the Department of Transportation’s (WSDOT) 2015-17 Budget Request says, “The four primary transportation accounts that support WSDOT expenditures are projected to have an aggregate 2015-17 deficit of approximately $72 million…” (page 2). Looking further, at the Operating Budget, WSDOT is requesting $498M in operating funds for our ferry system (page 6). The revenue forecast for the ferries is about $356M (according page 38 of the Transportation Revenue Forecast Council’s February 2014 report). That means a deficit of approximately $142M — nearly double the amount of the hole in the transportation accounts.

In November 2000, the Blue Ribbon Commission on Transportation issued its Final Recommendations to the Governor and Legislature. Among these recommendations (number 16) was “Seek to achieve a 20-year goal of 90% to 100% farebox recovery [of operational costs].” In 2000, farebox recovery was 64.8% (according to a WSDOT report issued in 2010 – see Table 4.5). When the head of Washington State Ferries (WSF), David Moseley, retired earlier this year, he proudly claimed WSF had a farebox recovery rate of about 70%. In fourteen years, farebox recovery has made little progress toward the Commission’s recommended goal. But if we could close the half of the farebox recovery gap — increasing it to 85%, we would close the $72M hole.

That comparison report also says (just below Table 4.5), “a 2008 survey of 13,000 riders found rates to be relatively elastic, with ferry ridership estimated to decrease just 4% if a 10% rate increase were imposed in the future, further implying that non-discretionary trips were less price-sensitive than discretionary trips.”

We need not impose large fare increases across the system. The Edmonds-Kingston route is pretty close to self-sustaining. According to WSF’s route statements, that route recovered 95.5% of costs at the farebox in 2012, and had an overall revenue recovery ratio of 97.0%. In 2004, this route had farebox recovery of 120.4% — it was subsidizing other parts of the system. The Mukilteo-Clinton route also does pretty well, with 88.3% farebox recovery.

On the other hand, the Port Townsend-Coupeville route has long been the most subsidized route in the system, with farebox recovery in 2012 of only 39.3%. That route has much higher utilization — WSF recommends you make reservations — so why are we subsidizing 60% of it’s costs?

How is the two-thirds legislative majority good for Washington?

A voter sent me an e-mail. Here’s the question, and my response. (Footnotes with links to source material are at the bottom.)

WM wrote:

I would like to know how creating a more difficult legislative hurdle for raising taxes is good for Washington. States trying to hamstring taxation, Wisconsin and Kansas, have seen their economies perform worse than average and suffer from weak or non existent job growth. I would like you to concatenate making tax votes more difficult with economic growth.

I replied:

Thanks for your e-mail. This is an important question, and it deserves a serious answer.

First, I don’t think you can draw a simple cause-and-effect relationship between the difficulty of increasing taxation and either economic growth or job growth. Economies the size of Washington state are complex and have many factors that lead to growth or stagnation. As of March 2011, sixteen states had some kind of supermajority voting requirement (SMVR) for tax increases.[1] Their economic outcomes vary widely[2]; nine had GDP growth in 2013 higher than average; the other seven were below average. Eight had higher-than-average job growth between December 2012 and December 2013; eight had lower-than-average growth[3]. I don’t think you can pin economic outcomes solely on the SMVR.

In addition, a recent study concludes that while SMVRs curb tax rates in the short run, the effect diminishes over time.[4]

So, if the economic data is mixed, why would I support such a change to the Washington state constitution?

First, the voters have spoken very clearly on the issue: they have approved the 2/3 majority six times in the past twenty years.

Second, I believe that our legislators have too frequently turned to tax increases rather than spending reductions to solve budget deficits. Government should, like doctors, first vow to do no harm. Tax increases very often harm the very people our legislators are trying to help. For example, the proposed 10.5 cent increase in the gas tax during the last legislative session would have a disproportionate impact on those least able to bear that cost – the working poor.

Third, total budgeted spending in the 2013-15 biennium is just above $80 billion. In the 2003-05 biennium, that figure was $53 billion. Spending has gone up 50% in the past ten years. We do not have a revenue problem, we have a spending problem.

Finally, I believe that government spending is less economically efficient than leaving money in the hands of the people who earned it. If you let people keep their money, they either spend it or invest it. Either way, 100 percent of every dollar contributes to economic growth. If you tax it, some portion of it is wasted in administration and red tape. By definition, less than 100 percent of every dollar contributes to economic growth.

I realize that we may disagree; if so, you may find that one of my opponents is a better fit for you. I hope that you’ll consider this information and come to conclusions similar to those I’ve reached. If so, I would deeply appreciate your vote. If not, then, please vote your conscience.

Thanks again for writing, and for taking the time to carefully consider these important issues.

[1] The states are: Arizona, Arkansas, California, Colorado, Delaware, Florida, Kentucky, Louisiana, Michigan, Missouri Mississippi, Nevada, Oklahoma, Oregon, South Dakota, and Washington. See this website.

[2] US economic growth was 1.8% for 2013. See this website.

[3] US average job growth was 1.71% from Dec. 2012 to Dec 2013; see this website and look at the Total Nonfarm job sector, with a Same Month Prev. Year data set for the month of December 2013.

[4] See this website.


Do you support or oppose the two-thirds legislative majority to increase taxes?

I support it. So the voters of the 21st District, pretty emphatically. In 2010, I-1053 passed with 61.9% of the vote in the district, and in 2012, I-1185 passed with 62.9% of the vote in the district. Both measures were popular in nearly every part of the state. Of course, neither initiative is in effect today, because eleven House Democrats filed suit against the state to overturn these initiatives.

Think of it: Our representatives sued us to make it easier for them to raise taxes. That’s one of the main reasons I’m running.

K-12 Education

How should the legislature comply with the court order to provide full financial support for basic public education?

Our state’s spending has skyrocketed. We spent $53.4 billion in the 2003-05 biennium. The budget for 2013-15 is $80.5 billion. That’s an increase of more than 50% in just ten years. (Data from the state’s Fiscal Information website.)

We have enough money, but we don’t prioritize properly. I support funding schools first. We can pull K-12 education out of the General and Capital funds and put it into a separate budget. We can insist that budget must be passed before the legislature can act on other spending. Republicans have proposed this (HB 1174), but the Democrats killed it in the Appropriations committee.