The argument that I-732 will not be revenue neutral has been thoroughly debunked by the respected independent sustainability think tank, Sightline Institute. Even if you take the OFM’s faulty analysis at face value, I-732 is still revenue-neutral with a margin of error of +/- 1%.
- The only true budget is the one passed by the legislature and signed into law by the Governor for the two years of the current fiscal biennium. Beyond that, the state is required to estimate the following biennium’s budget, based entirely on forecasted tax revenues and expenditures. The farther out they look, the more inaccurate and unreliable those forecasts become.
- In the case of I-732, these inherent estimating errors are compounded by OFM’s misinterpretation of the intent and language of I-732, all vetted in Sightline Institute’s rigorous and fact-based analysis of I-732.
- According to Sightline:
- “I-732 is revenue-neutral to the best of anyone’s’ ability to forecast it… We conservatively estimate I-732 will reduce state tax revenues by about $80 million per year in early years; but the limitation of forecasting mean that, for all anyone knows, I-732 could very well generate an $80 million surplus for the state budget.”
- As an argument against I-732 therefore, the “revenue hole” case is a red herring.”
To learn more about the errors in the OFM report, please see State fiscal office miscalculates carbon initiative’s revenue stream.
Correcting OFM’s reporting errors restores $960 million in state revenues and transforms OFM’s estimated $797 million general fund shortfall into a projected $164 million revenue surplus. That represents zero point one percent (0.1%) of the expected six-year general fund revenue and is about as close to revenue neutral as this type of tax swap could ever be.
The bottom line: I-732 is revenue neutral.