Joseph Krist

Publisher

CLIMATE TAXES

Hawaii was the first state to impose a tax on tourists which was designed to generate revenues to address climate related issues in the state. (MCN 1.5.26) Those efforts were challenged in court, but the State succeeded in defending them. This has emboldened legislators in another state to undertake efforts to generate revenues from visitors to fund climate related projects.

In Oregon, the 1% for Wildlife bill, sponsored on a bipartisan basis, would increase the state’s current hotel and lodging taxes by 1.25 percent, creating a new revenue stream for the Oregon Department of Fish and Wildlife to support long-neglected habitat conservation programs. Last session, the bill passed the House, but two Republicans blocked it in the Senate. Oregon’s Fish and Wildlife Department receives some state funding, most of its budget comes from hunting and fishing licenses and federal taxes on guns and ammunition.  

If the bill passes, Oregon’s statewide hotel tax rate would be 2.5 percent—the third-lowest rate in the US. The current 1.5 percent tourism tax funds the $45 million annual budget of Travel Oregon, which promotes the state’s tourism industry. 

CLIMATE LEGISLATION

In Oklahoma, a newly introduced bill would bar most civil lawsuits against oil companies over their role in the climate crisis, unless plaintiffs allege violations of specific environmental or labor laws. A similar proposal in Utah would block lawsuits over climate-warming emissions, unless a court finds the defendant violated a statute or permit. Oklahoma’s bill seeks to block claims alleging fraud, misrepresentation, deception, failure to warn or deceptive marketing, all of which are central to existing climate lawsuits against oil companies. Utah’s proposal is narrower, targeting only emissions-based claims.

In Florida, SB 1628 provides a legislative finding that net-zero policies, carbon taxes or assessments, and carbon emissions trading programs are detrimental to the state’s energy security and economic interests. The bill prohibits governmental entities from adopting net-zero policies, including through comprehensive plans, land development regulations, transportation plans, or any other government policy or procedure.

WESTERN WATER

The current rules governing the Colorado River expire at the end of the year, and the Department of Interior faces an Oct.1 deadline to set water deliveries for 2027. If the states don’t reach an agreement by that point, Interior will have to decide for itself how to divide up the shrinking volumes of water. Snowpack in the river’s headwaters, which provides the lion’s share of the waterway’s flows, is off to a dismal start this winter, with temperatures in Utah, Wyoming and Colorado averaging more than 10 degrees Fahrenheit above their 20th century average for the month of December, according to the National Oceanic and Atmospheric Administration.

Snowpack above Lake Powell in Utah and Arizona is currently at 65 percent of median level — a situation that could be expected to produce just 50 percent of the typical runoff in the spring and summer. Interior’s latest projections for the Colorado River show that water levels behind Glen Canyon dam at Lake Powell could fall low enough to endanger hydropower production and downstream water deliveries as soon as September.

In Colorado, the snowpack is “the lowest on record for this point in the season,”. In Utah, “We’re in uncharted territory right now, and we’re headed toward the lowest snowpack we’ve ever had on Feb. 1,”. The snowpack in California  is in better shape, particularly in the southern Sierras, where several basins have above-average accumulations.

BAY AREA TRANSIT LIFELINE

The Office of Governor Newsom, the California Department of Finance and the Metropolitan Transportation Commission (MTC) announced an agreement on a $590 million loan for Bay Area transit agencies that will avert major service cuts at AC Transit, BART, Caltrain and San Francisco Muni during the 2026-27 fiscal year that begins July 1. The state loan provides a fiscal bridge until the sales tax dollars potentially could be available.

A regional funding measure authorized by the Legislature last year via state Senate Bill 63, authored by senators Scott Wiener of San Francisco and Jesse Arreguín of Berkeley, may appear on the November 2026 ballot in Alameda, Contra Costa, San Francisco, San Mateo and Santa Clara counties. If the measure qualifies for the ballot and is approved by voters, it would establish a temporary 14-year sales tax to support transit operations. But these funds would not begin flowing until around July 1, 2027.

The loan agreement includes a clearly defined repayment structure, a guaranteed revenue source to secure the loan and an agreed-upon interest rate: 12-year repayment term, with interest-only payments during the first two years. Repayment secured by the “revenue-based” portion of State Transit Assistance (STA) that goes directly to the transit agencies. Variable interest rate tied to the state’s Surplus Money Investment Fund, ensuring the state is fully repaid at the same rate it would have earned had the funds remained in state accounts. 

IMMIGRATION AND MUNICIPAL FINANCE

A group of chief financial officers from 16 states sent a letter to President Trump highlighting the negative economic and fiscal impact of federal immigration enforcement policies on state and local government. The letter focused only on fiscal issues. The message was clear.

“The economy fundamentally depends on people producing goods, providing services, and participating in commerce as workers, consumers, and business owners. For an economy to function, people must feel safe to go to work, operate businesses, travel to commercial districts, and engage in everyday economic activity. When fear disrupts these basic conditions, production slows, consumption declines, and the economic system that supports public revenues begins to break down.”

The letter comes as data begins to slowly emerge regarding the costs of immigration policies in the Biden administration. the Congressional Budget Office estimates how the surge in immigration that began in 2021 affected state and local budgets in 2023. In addition to estimating the direct effects of the surge, CBO calculated an alternative measure that includes the potential broader or longer-term effects and costs that were borne without adding to spending—such as crowding in public schools and public transportation systems. By either measure, the surge imposed a net cost.

The surge led to a direct increase in revenues of $10.1 billion, primarily from sales taxes, and a direct increase in spending of $19.3 billion, chiefly for public elementary and secondary education, shelter and related services, and border security. The result was a direct net cost of $9.2 billion in 2023, amounting to 0.3 percent of state and local spending (net of federal grants-in-aid).

In addition to those direct effects, CBO’s alternative measure accounts for expected increases in property tax revenues, additional tax revenues from greater economic activity, and nonbudgetary costs associated with greater demand for government services. By that measure, the surge in immigration had the potential to increase revenues by $18.8 billion and spending by $28.6 billion, resulting in a potential net cost to state and local governments of $9.8 billion in 2023.

POLICY REALITIES

Money from the Federal Transit Administration’s rural ferry program pays for almost half of the Alaska Marine Highway System’s operating expenses, but the Trump administration failed to open its annual grant process in fiscal year 2025, which ended Sept. 30. The ferry system’s budget runs according to the calendar year. Last spring, the Alaska Legislature and Gov. Mike Dunleavy budgeted $171 million for the 2026 ferry budget. Of that, almost $78 million was supposed to come from the rural ferry program.

Now, Alaska’s state ferry system is at risk of a partial or total shutdown this summer due to the failure of the federal government to issue make that annual grant. Alaska, secured almost $1 billion in the 2021 Infrastructure Investment and Jobs Act bill for the rural ferry program, which was written in a way to steer much of the money to Alaska. That billion dollars was to be spread across five years, and the program disbursed more than $252 million nationwide in FY22, $170 million in FY23 and $194 million in FY24. Alaska received more than five-sixths of the total distribution in that time

TRI STATE CAN’T WIN

Last week, the cooperative utilities Tri-State Generation and Transmission Association and Platte River Power Authority filed a petition asking the Department of Energy to reconsider its December order demanding that they keep running Craig Generating Station’s Unit 1, a jointly owned coal plant in Colorado, for the next 90 days. Forcing them to operate it past December will require their members to bear unnecessary costs, which constitutes an ​“uncompensated taking” of their property in violation of the Constitution, the petition argues.

Keeping Craig Unit 1 running for 90 days has been estimated to have a cost at least $20 million, and that running it for a year could add up to $85 million to $150 million. It will also disrupt the use of long-planned replacement resources that can provide power more cheaply and reliably than Craig Unit 1 — including the 145-megawatt Axial Basin solar farm, which may be forced to curtail its electricity generation because of grid congestion due to keeping the coal plant online.

The cooperative structure which historically allowed rural utilities to capture benefits of large scale resources is now working against them through no fault of their own. The petition from Tri-State and Platte River marks the first time a utility has publicly contested a Trump administration must-run order. There is no other end user or owner to pass the excess imposed costs to. The rate base must absorb it all.

NUCLEAR

The Trump administration has created an exclusion for new experimental reactors being built at sites around the U.S. from a major environmental law. The Department of Energy announced it would begin excluding advanced nuclear reactors from major requirements of the National Environmental Policy Act (NEPA). 

The Energy Department cited the inherent safety of the advanced reactor designs as the reason they could be excluded from environmental reviews. “Advanced reactor projects in this category typically employ inherent safety features and passive safety systems,”. The Energy Department’s Reactor Pilot Program is seeking to begin operations of at least three advanced test reactors by July 4 of this year.  

Some 15 sites across 5 states are under consideration for these developments.

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