The conventional wisdom in Trenton over the last several months has been that hiking the gas tax is the only real option lawmakers have for replenishing the state fund that pays for road, bridge and rail projects.
With the state Transportation Trust Fund on course to run out of money for new projects by the middle of next year, Democrats who control the Senate and Assembly have talked openly about the need to raise the gas tax, and even Gov. Chris Christie has refused to rule out a tax hike.
But a Republican lawmaker from Monmouth County is now countering that notion with a detailed plan that calls for a seven-year renewal of the trust fund that would maintain current spending levels without hiking any taxes, including the current 14.5-cent tax on gasoline. What’s more, she says her approach wouldn’t cut into Christie’s latest plan for funding the public-employee pension system or require other steep spending cuts.
“We clearly can move forward with this concept,” said Sen. Jennifer Beck (R-Monmouth) while proposing her trust-fund renewal plan along with Sen. Mike Doherty (R-Warren) during a State House news conference yesterday.
Beck put forward her plan on the same day that Senate Democrats formally called for $2 billion in annual spending on transportation projects as part of their broader “New Jersey: Investing In You” initiative.
Other components of the Democratic plan include phasing in an increase of the state income-tax exemption on retirement income from $20,000 up to $100,000, a commitment of about $62 million to fund the first year of a program to expand early childhood education in 17 school districts, and the creation of more generous funding programs to entice New Jersey high school students to attend county colleges and in-state four-year colleges.
“These are small investments that should yield big returns,” said Senate President Stephen Sweeney (D-Gloucester) during a news conference also held in the State House yesterday.
But both Beck’s proposal for transportation funding and the Senate Democrats’ broader budget plans are counting on roughly 3 percent annual revenue growth.
Similar projections have tripped up previous plans to address the state’s fiscal challenges, including the bipartisan deal Christie and lawmakers struck in 2011 to address the grossly underfunded pensions system. And Christie was also never able to come up with the ambitious “pay-as-you-go” budget funding spelled out in his original five-year, $8 billion plan for the transportation fund that’s expiring on June 30, 2016, forcing the state to rely more heavily on borrowing.
In addition to the annual revenue growth of more than 3 percent, Beck’s plan also depends on several other new sources of revenue, including increased fines for motor-vehicle offenses like drunken driving and texting while driving.
Savings generated by forcing state employees to accept a new round of health-benefit cuts and a “repurposing” of funds earmarked for promoting clean energy would also be used to help the state spend $1.6 billion annually on transportation projects, roughly the same amount that’s been spent each year for the last decade.
The state would also borrow up to $5.4 billion over the seven-year term, accounting for roughly 40 percent of the total $11.2 billion that would be raised for transportation projects through the 2023 fiscal year under Beck’s plan.
“My sense is it is doable,” said Beck, who serves on the Senate’s Budget and Appropriations Committee.
And the key is that the gas tax would remain at 14.5 cents, something she said the residents of her legislative district favor more than anything else.
“My folks drive. They drive to work, they drive their kids to school. This is a difficult tax (increase) for them to absorb,” she said.
The Democrats, meanwhile, did not say yesterday exactly how they would fund the proposed $2 billion in annual spending needed to renew the trust fund under their proposal, which calls for an expansion of light rail into Bergen and Gloucester counties. When asked if it would be a mix of some new revenue from a tax hike and some new borrowing, Sweeney said those details are still up for discussion with Assembly leaders.
“We’re trying to get on the same page,” Sweeney said.
Also left undefined by the Democrats is the specific source of funding for all of the new programs they’re proposing in the investment initiative, which add up to $174 million not counting the Transportation Trust Fund money.
Sweeney, meanwhile, is also supporting a constitutional amendment designed to address the underfunded pension system, more than doubling the state’s annual contribution by the 2018 fiscal year to $3 billion, then increasing that amount by roughly $600 million annually through the 2022 fiscal year.
Though an increase in the state’s income-tax rate on earnings over $1 million is widely expected to be supported by Sweeney and other Democrats to bring in more revenue, it is unlikely to produce enough cash on its own to fully fund increased pension payments as well as the spending on the new initiatives proposed yesterday.
Beck said expecting more than 3 percent growth annually over the life of her seven-year trust fund renewal plan is a “conservative approach,” given that the state has averaged that amount of growth over the last six fiscal years.
But that window excludes the down years of the last recession, including the 2009 fiscal year, when the state’s revenues dropped by more than 10 percent. Over the last 10 fiscal years, according to state budget records, state revenues have increased by less than 1 percent annually, from $31.2 billion during the 2007 fiscal year to the $33.8 billion projection for the current fiscal year budget.
Governors and lawmakers in Trenton also have a history of spending down revenue windfalls in the short-term — including Christie’s deposit earlier this year of an unexpected $200 million in tax collections into the pension system – instead of socking the money away for rainy days.
New Jersey also came in among the worst of all states for maintaining a healthy budget surplus compared to the size of its annual spending, according to data released earlier this year by The Pew Charitable Trusts.
And it was just last year that Christie was forced to renege on his 2011 deal with Sweeney and other Democrats to ramp up state funding of the pension system over a seven-year term to help turn around an unfunded liability that measures at least $40 billion. Christie at the time blamed slow economic growth for his turnaround.
Sweeney, when pressed by reporters on whether it’s wise to once again bank on regular economic growth to pay for things like the pension system and other key priorities, said tax collections should growing robustly when the state starts investing in its economy again.
“How do you pay for it? Growth,” he said.
And Beck, asked how her plan for the Transportation Trust Fund would fare in a recession, pointed to a building up of $780 million in additional borrowing capacity over the seven-year term that could be tapped to make up for any down years.
“This is a very, very conservative plan,” she said.