In the midst of Washington’s budget planning, some lawmakers and environmental groups are trying to ensure that a key source of money used to pay for cleanup projects around the state is more stable in future years.
They hope to stabilize the Hazardous Substances Tax, which mainly brings in revenue from oil refineries, as it is a tax based on the wholesale value of hazardous substances brought into the state (read: mostly barrels of oil).
As of now, the tax is volatile from year to year (the most varied tax source in the state, according to the Office of Financial Management
) because it is essentially tied to the price per barrel. When oil prices are good, as they were a few years ago, the Model Toxics Control Act (MTCA) funds do well. If oil prices slump, as they have since 2014? Not so much.
How much can that impact cleanups of toxic sites?
In the 2013-15 biennium, the state had $297.5 million in capital budget appropriations for MTCA-related projects, but that dropped to $137.7 million in the 2015-17 budget, according to the OFM.
Coupled with the historic drop in prices was a change in the way the accounts are used: in 2013, the state added stormwater as an explicitly allowed area to focus on under MTCA, and at the same time, changed the way money was handled to spend the account, resulting in a more aggressive approach, says Darcy Nonemacher, legislative director for the Washington Environmental Council.
"At the time we had concerns about that, including adding stormwater explicitly without increasing the tax to account for that extra demand on the system," Nonemacher says. However, "we thought cash management was a good approach at the time — how can you argue against getting more money spent and out the door quicker for cleanup? But at the time, we didn't see the rapid and historic decline in oil prices that started the year after this passed. That was sort of an unfortunate coincidence."
Switching the way the account was handled was risky: under the old model, a project would be approved, and its funding would sit in the account until the expenses were actually incurred. Under the new model, rather than letting the money sit there for years, the legislature allowed new projects to get started in the meantime.
But that meant if (and in this case, when) the revenue declined, "the account
could become unstable because cash balances are not available for previously committed projects," according to the OFM's November 2016 report on MTCA's stability.
Essentially, when times were good, the legislature overspent the account. Even after oil prices started to decline in 2014, they overspent the account again, believing that oil prices would rebound.