State Supreme Court justices had pointed questions Tuesday for both sides of a lawsuit challenging the state’s payment of more than $30 million a year in gas-tax proceeds to Indian tribes.
The Legislature authorized governors to sign agreements with Indian tribes on gas taxes. Compacts signed over the past decade provided tribes refunds equal to 75 percent of the tax on fuel bought by tribal gas stations.
Nontribal gas station owners who sued the state say the refunds are unconstitutional because the Legislature hasn’t specifically approved the spending with safeguards on its use and because the tribes pay the tax only indirectly, when it’s passed on by fuel suppliers.
State assistant attorney general Rene Tomisser told justices the compacts benefit state government because they provide incentive against — although not a ban on — a tribe becoming a fuel supplier, which would trigger tribal immunity from taxation. The state argues the Legislature can give refunds for such public-policy reasons, not just for erroneous payments.
Could the Legislature give gas-tax refunds to Seattle to build a basketball stadium, wondered Justice Charlie Wiggins?
Chief Justice Barbara Madsen chimed in on that hypothetical, wondering if “the Legislature could authorize the governor to establish tax exemptions for entities and then give them a refund, and then we have a stadium?”
No, Tomisser said: “We’re not advancing the proposition that the Legislature can simply tell the governor, well, you have carte blanche to grant exemptions as you see fit. That’s not what happened here.”
The Legislature in 1995 specifically approved refunds to tribes on terms that required tribes to show they bought tax-burdened gas, Tomisser said.
“The problem you’ve got is a slippery-slope problem,” Wiggins said.
“Once you confine the definition of refund to such rudimentary and uninformed terms, it seems like there’s really no limit on what can be done with refunds of gas-tax money, which would draw a great big hole in the whole gas tax regime and in the 18th Amendment (to the state constitution), which was intended to limit these gas taxes to highway purposes.”
Tribes are required to spend the gas-tax money on transportation and public safety, including roads, bridges, boat ramps, transit and policing.
Phil Talmadge, attorney for the gas stations, said there’s no enforcement of those requirements.
They are subject to third-party audits, as Justice Steven Gonzales pointed out. But details of how the money is spent are shielded from public view, so people don’t have a way to challenge the spending, Talmadge said.
“But the government does, if they feel that the contract has been breached,” Justice Sheryl Gordon McCloud said, “and the people vote for their elected officials, so there is an indirect check.”
Talmadge said it’s too indirect: “You have audit reports that don’t audit anything, audit reports that are secret, audit reports that are only provided in summary form to the Legislature,” he said.
It could be months before justices decide the case.