Campaign News

As noted in last week’s email blast: “we’ve been working hard to update our fiscal estimates for I-732. We plan to post some updated spreadsheets in the weeks ahead, but for now we are delighted to report that our current analysis is that I-732 will (as intended) be very close to revenue-neutral.”

This post contains the promised spreadsheets and other analysis. Please note that these are still works in progress and that all files referenced in this post can be found in this Dropbox folder.

A summary of where we stand is in this Revenue Forecast document. Some comments on the Summary tab for FY2019, the first year for which the carbon tax is at $25/ton:

1. Overall the tax reductions (WFTE, sales tax, and B&O tax) are very close to the numbers currently estimated by state analysts, I think the only major difference is that for some reason they have a significantly larger number for the WFTE for FY2018, which is odd because it should be about 15/25ths of the number for FY2019 because of the WFTE phase-in.
2. Because of economic growth and the structure of B&O taxes for the commercial aircraft industry, our estimate of the value of B&O tax reduction has gone up to $450m for FY2019.
3. Just above “Revenue Gain from Carbon Tax” is a calculation of what taxable carbon emissions would need to be in order to maintain revenue-neutrality. (Note that these are taxable emissions, which are (for reasons described in part below) different from the Department of Ecology’s emissions inventories.
4. Under “Revenue Gain from Carbon Tax” there are a bunch of revenue estimates, most of which also show the net gain (or loss) to the state budget when combined with the Total Revenue Loss line.

Regarding the files in this Dropbox folder:

• “3-1a1-for-web-original” is the original CTAM analysis, which you can also download from the CTAM website.
• “3-1a2-carbon-tax” builds off 3-1a0-for-web-original and is my effort to replicate an older analysis done by our team (included for archival purposes as “3-1a2-old” that shows a 4-year revenue loss of about $770m. (See the “current dollars” numbers on the Revenue tab.) The revenue results are dollar-for-dollar the same in the two documents, but there may be  slight differences elsewhere.
• “3-1a3-gas-tax” builds off 3-1a2 and incorporates the just-enacted 11.9-cent gas-and-diesel tax. Note that the net revenue loss climbs by over $100m/year (!). This is because of a mistake in CTAM in Revenue tab, row 55: Distillate Fuel Oil references Ramps row 19 (“Distillate fuel”) when it should actually be referencing Ramps row 18 (“Onroad distillate fuel”). This spreadsheet shows a 4-year revenue loss of $1.3 billion.
• “3-1a4-gas-tax-fix0” builds off 3-1a3 by fixing the mistake in CTAM. The 4-year net revenue loss falls back to $770m.
• “3-1a5-fuel-mix-fix1” builds off 3-1a4 by updating the Fuel Mix Disclosure Report for 2013. In brief: The FMDR for 2013 was updated with new numbers for the Northwest Power Pool, and CTAM uses the old numbers, not the new numbers. This is important because CTAM uses the 2009-2013 average fuel mix percentages (i.e., % coal, % natural gas, % hydro, etc) to estimate baseline emissions in the future. The updated FMDR numbers for 2013 show a moderately higher % of coal, so this fix reduces the 4-year net revenue loss to $670m. (Note that these numbers are contained in a second CTAM spreadsheet. The original is “Energy-Forecast vers 3.1”, which can also be found on the CTAM website. The updated numbers are in “Energy-Forecast vers 3.1 Fix 1”.  (The changes need to be made in cells P9-P21 on the “FMD Historical” tab, and then you need to copy and paste-as-values the “consumption forecast” tab of this spreadsheet into the “consumption scenario A” tab of the main CTAM spreadsheet.)
• “3-1a6-fuel-mix-fix2” builds off 3-1a5 (or in fact directly off 3-1a4) by updating CTAM to account for the fact that I-732 treats all “unspecified” electricity as coal, whereas CTAM treats it as equal to the Northwest Power Pool (which is roughly 50% coal and 50% hydro). This is important for the same reason noted above: CTAM uses the 2009-2013 average fuel mix percentages (i.e., % coal, % natural gas, % hydro, etc) to estimate baseline emissions in the future. Treating all “unspecified” electricity as coal shows a significantly higher % of coal, so this fix (the updated numbers are in “Energy-Forecast vers 3.1 Fix2”) changes the 4-year revenue loss to a 4-year revenue gain of $44m.

Okay, that’s enough for one update, but note that this is not the end of the story because there are more details to work through. In addition, state budget numbers can change over time, e.g., the state’s revenue estimate for the current biennium went up by over $100 million between September and November 2015. And of course remember that in context $100 million is not all that much: the Citizen’s Guide to the Budget shows a state budget of over $40 billion a year, and the sales tax exemption for grocery store food is valued at over $1 billion a year.

Bottom line: Our current analysis is that I-732 will (as intended) be very close to revenue-neutral. If that changes in the months ahead we’ll let you know!