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Democratic Legislative Leaders Look to Craft Veto-Proof ‘Tax-Fairness’ Plan

With Christie unenthusiastic about gas-tax hike and cuts to estate tax, lawmakers hope to make an end-run around the governor -- and his veto

sweeney nj transit tour
Sen. Paul Sarlo (left) with Senate President Stephen Sweeney, and Dennis Martin, NJ Transit interim executive director, talk with NJ Transit machinist/technician Steve Carey.

With Gov. Chris Christie not yet embracing ideas that lawmakers have floated for renewing New Jersey’s going-broke Transportation Trust Fund -- including hiking the state’s gas tax -- legislative leaders may now be looking to go around him altogether.

Bipartisan talks underway in the Senate are focusing on a broad “tax-fairness” plan that would involve swapping a gas-tax hike that maintains transportation spending for several tax cuts sought by Republicans. Whipping up enough bipartisan support to withstand a possible Christie veto seems to be emerging as the ultimate goal.

“We’re looking at it from just a very pragmatic sense,” said Senate President Stephen Sweeney (D-Gloucester), following a tour yesterday of a New Jersey Transit facility in Kearny.

Moments later he added: “We need to be able to get 27 and 54.”

The numbers are key because it takes 27 votes in the 40-member Senate and 54 votes in the 80-member Assembly to override a veto. Since Democrats don’t hold veto-proof majorities in either house on their own, they will have to get cooperation from Republicans if they end up needing to override the governor to enact a broad plan that includes renewing the trust fund.

The politics of such a scenario also make a lot of sense for all involved as the state moves closer to June 30, the date the current five-year $8 billion Transportation Trust Fund financing plan will expire.

Republican lawmakers have been reluctant to vote to override Christie, a second-term Republican, since he took office in early 2010. In fact, the only example of either house holding a successful override vote on legislation came last year when the Senate acted to override Christie’s veto of a mental-health gun bill. But Christie’s veto survived after the Assembly couldn’t match that effort several weeks later.

With both houses facing elections next year and Christie’s popularity hovering at record lows, Republicans could show in a very high-profile way that they’re willing to act with independence by voting to override Christie if he were to veto a gas-tax increase that becomes part of a bipartisan tax-fairness plan. The veto-override would also give the Democrats the transportation-funding renewal they’re seeking to stimulate the state economy, while allowing Christie to maintain his own record of not increasing major taxes.

When asked about that scenario yesterday, Christie’s spokesmen referred to comments the governor made on the subject earlier this month at Union County College.

“It’s not incumbent upon the governor to do this. We can’t do anything without the Legislature,” Christie said. “All they keep saying is it’s in crisis. OK, so what’s your solution? Show some leadership.”

Sweeney toured the 600-employee New Jersey Transit facility yesterday with Sen. Paul Sarlo (D-Bergen). Several agency executives, including interim executive director Dennis Martin, ushered the senators and several reporters and photographers through different shops in the facility to demonstrate just how much repair and maintenance work is performed in-house by NJ Transit employees.

“You don’t understand how much work goes on, on the back end,” Sweeney said while touring the facility. “We all just expect to get on (a train) and go.”

During the tour, longtime NJ Transit machinist Steve Carey walked the senators through a computerized air-brake test. But he also pulled them aside and pressed them for the latest on the transportation-funding issue.

“That’s why we’re here,” Sweeney said in response.

Right now, New Jersey spends well over $3 billion each year on transportation projects, counting federal dollars. The state itself has been putting up roughly $1.6 billion annually over the past five years. That money has come from taxes levied on gasoline, other fuels, the state sales tax, and borrowing. Revenue from outside agencies like the New Jersey Turnpike Authority and the Port Authority has also been used to help the state reach the $1.6 billion figure in recent years.

But because of the trust fund’s heavy interest payments there will be no more money available for new projects after June 30 unless a new source of revenue can be found.

Sarlo, who chairs the Senate Budget and Appropriations Committee, laid out the framework for a potential bipartisan deal to renew the transportation funding last week as his committee prepared to review the latest funding request for the state Department of Transportation and NJ Transit.

He said a combination of revenue from a gas-tax increase and new borrowing could be used to replenish the trust fund for up to a decade at $2 billion per year. Lawmakers would also continue to support a proposed phase-out of New Jersey’s estate tax and a lifting over several years of the current state income-tax exemptions for sources of retirement income like pensions and 401(k)s.

A state income tax deduction for charitable contributions like the one now available for federal taxes would also be created, in the proposed bipartisan deal, Sarlo said.

But some concerns have already been raised about the impact the tax cuts would have on the state budget, which has become extremely tight in recent years as the state has only slowly recovered from the last recession.

The Transportation Trust Fund is a separate, off-budget account, so even though a gas-tax hike would bring in new revenue, it would be dedicated only to funding transportation. The proposed tax cuts, meanwhile, would impact the state budget’s general fund, potentially taking money away from safety-net initiatives and other programs unless the transportation investments stimulate enough economic activity to offset the revenue losses.

Still, there already have been some signs of bipartisan compromise, with Sarlo and Sen. Steve Oroho (R-Sussex) co-sponsoring a bill that would phase out New Jersey’s estate tax over five years. Oroho has also talked about how at least a third of the revenue generated by the gas tax -- which is 14.5 cents per gallon, the second-lowest state gas tax in the country -- now comes from motorists who are just passing through the state on its many highways.

“I’ve read as high as a third is paid by out-of-staters,” he said while questioning state transportation officials during last week’s committee hearing.

Christie has also not closed the door, at least publicly, on a gas-tax increase. But when asked about the issue by a caller during his monthly radio show on NJ 101.5 FM last week, he said he would be “unlikely” to do so.

He also said he was not impressed with the Sarlo-Oroho estate tax bill because it did not get rid of the estate tax, which applies to estates worth $675,000 or more in New Jersey, fast enough.

Speaking yesterday after the NJ Transit facility tour with Sweeney, Sarlo said again that lawmakers are trying to find something that Democrats and Republicans alike can support.

“We’re trying to come up with a comprehensive bipartisan tax-fairness plan that will benefit all New Jerseyans,” Sarlo said.

But both lawmakers declined to offer any more specifics, saying they’re negotiating with their Senate colleagues privately and not through the media.

“Stay tuned,” Sarlo said.

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