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Trio of Proposed Ballot Questions Could Reshape NJ’s Financial Future

Constitutional amendments in committee would beef up Transportation Trust Fund, make required payments to state-employee pensions, and extend gambling across NJ

vincent prieto
Assembly Speaker Vincent Prieto (D-Hudson)

New Jersey voters could play a big role next year in determining what the state’s fiscal landscape will look like for the next several decades, thanks to a flurry of proposed ballot questions that Democratic legislative leaders have introduced.

At stake if three proposed constitutional amendments all pass legislative hurdles in the coming months is funding for the state Transportation Trust Fund and the public-employee pension system, as well as the future of Atlantic City’s in-state monopoly on legalized gambling.

Taken together, the three issues represent arguably the biggest problems left unresolved by Gov. Chris Christie during his two terms in office -- the soon to be broke transportation fund, the grossly underfunded pension system, and the economic collapse of Atlantic City.

They could also send a clear message just a year before the next gubernatorial election about whether New Jersey voters want to simply maintain the status quo or lay the groundwork for major structural changes going forward.

Under current plans, voters would be asked to weigh in on all three topics next November, which is now shaping up to be a busy election with a presidential contest already on the 2016 ballot.

The three proposed referendums won’t need approval from Christie, a Republican now seeking the GOP’s 2016 presidential nomination, to get on that ballot next year. Instead, they would need to pass each house of the Democratic-controlled Legislature with a simple majority before the current legislative session ends on January 11, and again during the first half of the new session that begins on January 12.

Lawmakers, meanwhile, have also talked about asking voters about a fourth issue, an expansion of voting rights though a resolution seeking a referendum to get around a veto Christie issued earlier this year that has yet to be submitted.

But taking on the state’s most immediate fiscal concern is the constitutional amendment proposed on Friday by Assembly Speaker Vincent Prieto (D-Hudson) that would ask voters next year to approve a dedication of all revenue raised by fuel taxes in New Jersey solely for the Transportation Trust Fund.

The trust fund pays for road, bridge and rail projects throughout the state, but it’s on course right now to run out of money for new projects by the middle of next year.

New Jersey levies taxes on gasoline, diesel fuel, and the gross receipts of petroleum products, with most of the revenue raised by those taxes already dedicated to the trust fund. But due to the fund’s significant debt, there will only be enough money coming in to pay off the credit-card bill as of June 30, 2016.

In the short term, approval of Prieto’s constitutional amendment would produce, according to legislative estimates, an additional $40 million from the fuel taxes for the trust fund, which already spends more than $1.5 billion annually and also generates matching federal dollars.

But more importantly, it would lay the groundwork for significantly more dedicated revenue coming in for transportation projects if any of the state’s fuel taxes are increased in the future, something many are expecting could occur within the coming months. And it would also ensure that any new revenues from a fuel-tax increase couldn’t be raided for other purposes by governors or lawmakers.

“Taxpayers must be confident every cent raised by these taxes goes to the right purpose -- rebuilding and maintaining our roads and bridges,” Prieto said. “This is something we can all agree upon.”

Lawmakers in recent weeks have talked about a bipartisan deal that would increase the state’s gasoline tax in response to cuts to other taxes, like the estate tax, though a formal plan has yet to be put forward. Such a plan would also need approval from Christie. His office did not respond to a request for comment on Prieto’s proposed referendum on Friday.

Still, Tom Bracken, chair of Forward New Jersey, a coalition of business, labor, and other groups that has been advocating for more than a year for a renewal of the trust fund, called Prieto’s constitutional-amendment proposal “an important step.”

“We are hopeful that our leaders in Trenton will resolve the reliable and long-term parts as soon as possible,” Bracken said. “Having all of these components in place will give New Jersey the kind of TTF it needs.”

But from a pure budgeting perspective, the constitutional amendment proposed early last week by Senate President Stephen Sweeney (D-Gloucester) that seeks to ramp up funding for the pension system and eventually prohibit the state from skipping out on the full contributions that are estimated by actuaries each year has the potential for the biggest impact on state finances.

That’s because, if it’s approved by voters, Sweeney’s proposed amendment would mandate a nearly tripling of the current, $1.3 billion contribution to the pension system just two fiscal years from now. And the state pension payment would also jump to over $5 billion by the 2022 fiscal year under Sweeney’s plan.

Christie has said there’s no way the state could afford to make the bigger pension contributions without significant tax hikes. He’s also called for new benefit cuts instead.

But Sweeney -- a likely candidate in New Jersey’s next gubernatorial election in 2017 -- countered during a news conference last week that the state can no longer afford to keep digging a hole for a pension system that’s already at least $40 billion in debt by not making full payments. Christie has yet to do so during his nearly six years in office.

“That’s why we’re in this situation,” Sweeney said Thursday, the same day his proposal won initial approval from the Senate Budget and Appropriations Committee.

He also suggested that normal economic growth and additional revenue from an increase of the state’s income tax on earnings over $1 million could help fund the bigger state pension-contributions that his amendment would require.

But the state could also in a few years be tapping a new source of revenue if voters decide to end Atlantic City’s longstanding monopoly on legalized casino gambling in New Jersey. Under another constitutional amendment that Sweeney proposed along with other Democratic Senate leaders on Friday, two new casinos would be allowed to open in New Jersey as long as they would be located in different counties at least 75 miles from the troubled seaside resort.

The goal of expanding casino gambling outside of Atlantic City would be to recapture revenue that’s currently being lost to casinos that have opened in neighboring states like New York and Pennsylvania. Those casinos have helped to erode Atlantic City’s revenue base. And under the expansion proposal, some revenue from North Jersey casinos would be dedicated to helping the ongoing efforts to revive Atlantic City.

Though no early revenue estimates from expanded casino gambling have been put forward, Senate Budget and Appropriations Committee Chairman Paul Sarlo (D-Bergen) predicted such a change could produce “thousands of construction jobs and generate billions of dollars in economic activity.”

“The gaming industry has changed dramatically in recent years with competition from other states damaging New Jersey’s casino sector,” said Sarlo, who is sponsoring the ballot question.

“It’s time to expand gaming to North Jersey where we are accessible to a large population and so that we can compete effectively with the casinos now operating in New York State and Connecticut,” he said.

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