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Backers of Public Question #2 Say It’s Only Way to Make Sure Gas Tax Goes to TTF

Opponents say voting it down will send strong message to Trenton, impact plans to borrow billions to complete transportation projects

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Over the past three decades New Jersey voters have approved several ballot questions that have protected revenue raised from state fuel taxes from being used for anything other than transportation projects. Now, in the wake of the unpopular 23-cent gas-tax increase that went into effect today, voters are being asked to do so again.

One of two public questions that will appear on Election Day ballots throughout the state next week will ask voters if they want every penny from the newly hiked fuel taxes to be constitutionally dedicated to one purpose — paying for the upkeep and expansion of the state’s roads, bridges, and mass-transit system.

Supporters of the constitutional dedication say it’s the only way to make sure the money isn’t diverted away from the state’s more than 30-year-old Transportation Trust Fund since governors from both political parties have a long history of raiding funds that haven’t been earmarked with such an ironclad protection.

But in recent weeks the proposed fuel-tax dedication has become a source of controversy as opponents of the 23-cent increase – including Lt. Gov. Kim Guadagno in a rare break from Gov. Chris Christie — have directed their efforts towards rallying opposition toward what will appear on the ballot as “Public Question #2.” (Public Question #1 will ask voters if they want to allow casino gambling in northern New Jersey).

To be clear, the gas-tax increase itself is not on the ballot and can’t be reversed with a “no” vote. But opponents of the fuel-tax ballot question contend that voting it down will still send a strong message to Trenton while also impacting plans to borrow for transportation projects that are part of an 8-year, $16 billion reauthorization of the TTF approved by Christie and lawmakers last month along with the gas-tax increase. However, new information provided to NJ Spotlight from the Department of Treasury suggests the state’s ability to borrow for transportation projects won’t be hindered even if the ballot question doesn’t pass.

"Regardless of the outcome of the ballot question, the Legislature could still authorize more than the $12 billion currently being contemplated,” Treasury spokesman Willem Rijksen said.

The way New Jersey assesses fuel taxes right now is rather complicated. There is a 10.5-cent per-gallon tax on the sale of gasoline, and all revenue from that tax is dedicated to funding transportation projects via the TTF, which is a separate spending account walled off from the budget’s general fund. The state also levies a 13.5-cent per-gallon tax on diesel fuel, with 10.5 cents currently dedicated to the TTF. Lastly, the state also charges a tax on the gross receipts of petroleum products at the wholesale level, with at least $200 million required to be set aside for the TTF under a ballot question approved by voters in 2000.

Up until today, the gross-receipts tax – which is generally passed along to motorists buying gas at the pump – was a 4-cent per-gallon charge. But Christie and lawmakers decided to increase the gross-receipts tax in a deal that was struck last month, effectively taking it from 4 cents up to 27 cents. That change went into effect just after midnight this morning.

Public Question #2 specifically asks voters if, going forward, they want to dedicate all of the revenue generated from the gross-receipts tax to the TTF, as well as the remaining three cents of the diesel tax that right now is not dedicated to the trust fund.

Those proposed constitutional dedications have drawn widespread support, with the Republican Christie and Democratic leaders in the Legislature all backing it. Other groups in favor of the new fuel-tax dedications include business groups and construction unions. Without the constitutional “lock box,” the gas-tax revenue could be diverted into the state budget’s general fund, where it could be used for other purposes or simply to plug budget holes. That used to happen on a regular basis to New Jersey’s Unemployment Insurance Trust Fund, which was raided so frequently before the Great Recession that the state ended up having to borrow billions of dollars from the federal government to cover unemployment benefits after New Jersey’s jobless rolls swelled. It took the passage of a ballot question in 2010 that created an ironclad constitutional dedication to prevent such raids from impacting the unemployment fund again, and now it is operating with a surplus.

Christie, in more recent years, has also diverted about $1 billion from the Clean Energy Fund, which by law is supposed to set aside revenue generated from a fee levied on energy bills to support programs that reduce energy use or promote clean energy like solar.

“We simply can’t risk letting Trenton misuse our hard-earned tax dollars,” said Greg Lalevee, chairman of the Engineers-Labor Cooperative, in a statement calling for passage of Public Question #2.

But Guadagno and other opponents of the ballot question have pointed to language that’s missing from the question’s language or its official interpretative statement as a reason to vote “no” on the issue next week. They maintain the TTF reauthorization bill that was signed into law by Christie last month links $12 billion in planned new borrowing for transportation project to the passage of Public Question #2.

Under that bill, the state would spend $2 billion annually on transportation projects over the next eight years, with about $1.5 billion raised from new borrowing and the remaining $500 million coming from the increased gas tax. The $2 billion represents an annual increase of $400 million over the $1.6 billion that has been spent by the state on transportation each year for the last decade. New Jersey’s transportation spending also draws a roughly equal match from the federal government, stretching the state’s dollars further.

The reason the state can’t spend all of the new revenue from the gas-tax increase on new projects is rooted in the way the TTF has been financed over the last few decades. Governors and lawmakers from both parties have continuously shied away from hiking the gas tax since it was last increased in 1988, relying instead on heavy borrowing that has left the trust fund deep in debt. For example, former Gov. Jon Corzine refinanced debt over longer terms to prevent a gas-tax increase when he was in office, and Christie has previously used money provided by the Port Authority of New York and New Jersey and the New Jersey Turnpike Authority. But those funds are no longer available, and all similar stopgap measures have been exhausted, meaning much of the new gas-tax revenue will go toward the hefty payments that have come due for borrowing that’s already occurred.

Still, the opponents of the gas-tax hike have maintained that since new borrowing would indirectly be authorized if Public Question #2 prevails voters should roundly reject it.

“The only reason the governor and Democratic leadership are pushing the ballot question is to enable borrowing against the new tax increases, which will exhaust all of the new revenue in eight short years and will require future tax increases,” said Assemblyman Erik Peterson (R-Hunterdon).

Many of the opponents are also upset that the new revenue from the gas-tax increase, which they opposed, will be used to expand the mass-transit system, including the long-planned expansion of the Hudson-Bergen Light Rail Line, instead of roads and bridges.

But state fuel-tax revenue has traditionally been used to pay for mass-transit projects since they ease congestion on New Jersey’s roadways. And the new statement from Rijksen, the Treasury spokesman, also indicates the fate of the ballot question won’t curtail any future state borrowing for the TTF.

He pointed to a decision by New Jersey voters in 2000 to dedicate a portion of state sales-tax revenue to transportation projects that now equals $200 million.

“This existing constitutional dedication permits the state Legislature the ability to authorize bonding authority without additional voter approval, provided that the source of repayment of these subject-to-appropriation bonds are constitutionally dedicated revenues,” Rijksen said.

The state also last week offered nearly $3 billion in bonds backed by future federal transportation dollars to raise money for the TTF.

But if the ballot question prevails, Rijksen said, the new TTF legislation “places a $12 billion cap on the Legislature's borrowing.”

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