Explainer: Coming Up to Speed on the Transportation Trust Fund
Over-reliance on borrowing for TTF exacerbates state’s long-term debt burden
The New Jersey Transportation Trust Fund is how the state raises money to finance highway, bridge, and mass-transit construction projects that often take years to complete and span multiple budgets, and for state aid to counties and municipalities for their transportation capital projects. Created under Gov. Thomas Kean in 1984, the TTF was supposed to combine dedicated tax and fee receipts with bond issues, thus ensuring a stable and predictable source of funding. Over the past several years, however, an almost total reliance on bonding and borrowing for transportation projects has exacerbated New Jersey’s state tax-supported debt burden, which was already among the heaviest in the nation.
What It Provides
The Transportation Trust Fund will generate $4.9 billion in state funding for transportation projects for Fiscal Years 2012 to 2016. Combined with $1.8 billion provided by the Port Authority of New York and New Jersey and $1.3 billion in pay-as-you-go funding taken from New Jersey Turnpike Authority tolls, the $8 billion in state and Port Authority funds will be matched by $8 billion in federal transportation aid to provide a total of $16 billion for the state’s current five-year transportation capital program.
How It Works
An independent Transportation Trust Fund Authority was created by the 1984 legislation to finance transportation capital projects through a combination of regular state budget appropriations and through the issuance of long-term bonds. Unlike general obligation bonds such as the higher education bond issue approved by voters last fall, the authority was given the power to issue bonds without voter approval.
The state contract debt issued by the Transportation Trust Fund Authority originally was backed by just 2.5 cents from the existing 8-cent per gallon gas tax, plus a motor fuels surcharge on heavy trucks. Over the years, New Jersey voters agreed to constitutionally dedicate 10.5 cents from the 14.5-cent gas tax that provided $540 million to the Transportation Trust Fund in Fiscal Year 2013, a petroleum products gross receipts tax worth $228 million, and a minimum of $200 million from the state sales tax. “Good driver” registration surcharge fees and heavy truck taxes also are dedicated by legislative statute.
Over-Reliance on Borrowing
Over the years, the Transportation Trust Fund Authority has relied increasingly on borrowing and less on ongoing state appropriations for “pay as you go” capital. By 2012, when the four-year program authorized under then-Gov. Jon Corzine expired, all of the dedicated revenue would be going to pay off the principal and interest on previous TTF bond issues, leaving no funding for new projects for the next four years.
As they had urged Corzine four years earlier, transportation advocates and some Democratic legislators called on Gov. Chris Christie to increase New Jersey’s 14.5-cent per gallon gasoline tax -- which is the third-lowest in the country and far below New York’s 43-cent tax and Pennsylvania’s 39-cent tax -- to put the Transportation Trust Fund back on a stable footing.
The Current TTF Plan
Christie, who had taken a “no new taxes” pledge, found another solution in the fall of 2010 when he pulled out of New Jersey’s commitment to build the $8.7 billion Access to the Region’s Core (ARC) rail passenger tunnel to New York that was the largest combined federal-state construction project in the nation, citing fears that New Jersey could be stuck with billions of dollars of cost overruns. Cancelling the ARC project not only freed up $1.8 billion in Port Authority funds for other New Jersey projects, but also another $1.3 billion in New Jersey Turnpike Authority toll increases that were supposed to go to the tunnel.
Using the $3.1 billion in the Port Authority and New Jersey Turnpike funds, Christie announced in January 2011 that he would come up with the remaining $4.9 billion needed to fund the Transportation Trust Fund through FY2016 by issuing almost $4.4 billion in bonds and by dedicating $500 million in state tax revenues for pay-as-you-go financing in the last three years of the program.
For the first three years of the program, however, Christie has relied more heavily on borrowing than he originally promised. He diverted $261 million in Turnpike toll revenue that was supposed to go into Transportation Trust Fund pay-as-you-go financing in FY2013 to help plug a budget deficit instead, and used $250 million in bond premium financing and other maneuvers to avert the need for $375 million in pay-as-you-go financing in FY2014, the first year in which state tax revenues were supposed to go into the Transportation Trust Fund.
Because of these maneuvers, New Jersey ended up borrowing 97.4 percent of all transportation capital costs in the first four years of the Christie administration -- a higher percentage and higher dollar amount than any previous four years. As a result, New Jersey’s tax-supported debt, which ranked among the highest in the nation at $3,964 per capita, according to a State Budget Crisis Task Force report issued last summer, continues to grow faster than other states.
A new Transportation Trust Fund plan will need to be approved by the spring of 2016.