May 10, 2023 - Politics

Explainer: A look back at the "alt-fuels fiasco"

Jeremy Duda

Illustration of an electric vehicle plugged in, the charging wire has dollar bill signs running inside of it towards the car. — Illustration: Aïda Amer/Axios

Democrats have repeatedly compared the explosive growth of the Empowerment Scholarship Accounts (ESA) program to an infamous tax credit known as the "alt-fuels fiasco." But what was alt-fuels and why was it such a fiasco?

Flashback: In 2000, then-House Speaker Jeff Groscost sponsored legislation that provided people with subsidies to purchase vehicles that could use alternative fuels. The program was touted for its ability to reduce air pollution and lessen Arizonans' oil dependence.

Legislative budget staff estimated the program would cost the state as much as $10 million annually.

Yes, but: It was immediately more popular than lawmakers and Gov. Jane Hull realized.

In some cases, the subsidies amounted to about half the price of a new vehicle, and consumers quickly realized how much money they could save.
After the program was implemented, it became clear it would cost hundreds of millions more than anticipated and threatened to become a massive drain on state finances.

The bottom line: By the time Hull and lawmakers suspended and dialed back the program, it cost about $140 million.

Since then, lawmakers consistently invoke the term "alt-fuels" when they worry about the specter of runaway state spending.

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Explainer: A look back at the "alt-fuels fiasco"

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