State lawmakers have yet to strike a deal with Gov. Chris Christie on a plan to replenish New Jersey’s dwindling Transportation Trust Fund, but a potential bipartisan pact featuring a gas-tax increase and several new tax cuts is beginning to take form in Trenton.
What’s less clear right now — and getting far less attention as the debate over the gas tax continues to unfold — is exactly how much New Jersey should be spending in state dollars each year on road, bridge, and rail-network improvements.
Democrats who control the Legislature say the total should be a robust $2 billion. That would allow the state to make more of an overall investment in transportation, they argue, including boosting the dollars that go to local governments to maintain roads that otherwise would be repaired using money raised from property taxes.
New Jersey also gets nearly $2 billion in transportation dollars from the federal government, though it’s not a hard dollar-for-dollar match.
But on the other side of the discussion, many Republican lawmakers say $1.6 billion — the same amount the state has been spending on transportation projects each year — is the more appropriate figure. They cite the state’s tight budget and a tax burden that consistently ranks among the highest in the country as a reason to show restraint.
What number is eventually agreed to as part of any bipartisan deal is important because it will help determine exactly how the state will finance future transportation improvements — and how much the gas tax may ultimately need to be increased by.
Right now, New Jersey spends well over $3 billion each year on transportation projects counting the 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 the current, five-year Transportation Trust Fund financing plan is coming to an end on June 30. And so far neither Gov. Chris Christie nor lawmakers have laid out a specific plan to renew the fund.
The biggest sticking point so far has been Democratic legislative leaders’ insistence that a renewal plan include a blend of revenue from new borrowing and an increase in New Jersey’s 14.5-cent gasoline tax. Christie, a second-term Republican, has not yet embraced a gas-tax hike, saying lawmakers should also be considering cuts that would give New Jersey residents more overall “tax fairness.”
Time is of the essence since the trust fund is already deep in debt, and all of the revenue coming in from the gas tax will be needed to pay off borrowing that’s already occurred, leaving no state money for new projects after June 30.
During a Senate Budget and Appropriations Committee meeting yesterday, Chairman Paul Sarlo (D-Bergen) formally announced he is backing a broad tax-reform plan that would involve a gas-tax increase, but also a reduction of the estate tax and the state income tax levied on retirement income like pensions and 401(k) plans. Sarlo also said he would favor a new state income-tax deduction for charitable contributions in a broader deal.
“I’ve laid out a framework that I believe the Senate could get to,” he said.
Still, the plan outlined by Sarlo drew immediate criticism from liberal groups and others who question how the tax cuts that are being offered up will eventually impact the overall state budget. That’s because the trust fund is a separate, off-budget account. So even though a gas-tax hike will bring in new revenue, it will be dedicated only to funding transportation.
But the proposed tax cuts 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.
Sarlo also made the case during the meeting yesterday that any transportation-fund renewal plan should increase annual state spending on transportation projects up to $2 billion. That would help the state give more money to local governments that are in charge of maintaining much of New Jersey’s overall roadway miles, said Sarlo, who also serves as the mayor of Wood-Ridge.
Right now, however, local governments receive only a small portion of the state’s total funds each year, roughly $280 million, for road repairs.
“We believe that should be doubled, in excess of the $400 million mark,” he said.
The state should also be spending more to keep pace with an inflation in construction costs that’s occurred over the last decade, Sarlo said. And during the meeting he also pressed Richard Hammer, the state’s acting transportation commissioner, on whether $1.6 billion in annual state spending is really enough.
Hammer, in response, said the state has been making a lot of progress in recent years in maintaining and fixing infrastructure, but he never directly answered Sarlo’s question.
“A $1.6 billion program certainly allows us to continue down the path that we’re on, of progress,” Hammer said.
He also told Sarlo that the agency is working on cutting its own costs by doing more work in-house, including using DOT staff for more bridge inspections and construction-project design and management.
“It’s very important that we have this work done in-house,” Hammer said.
Later, Sen. Jennifer Beck (R-Monmouth) also weighed in, suggesting $1.6 billion is the more appropriate transportation-spending goal given the state’s budget constraints and her concerns about increasing the gas tax.
Beck has already laid out her own plan to renew the trust fund, a proposal that doesn’t include any new revenue from a gas-tax hike. Instead, she would combine money raised from new borrowing with revenues from higher fees on things like drunken driving and driving-while-texting.
“My concern with the gas tax is it is the most regressive tax you can impose on your citizens,” Beck said during the budget hearing yesterday.
Beck said her own transportation-funding plan — which Christie has praised and said deserves consideration — leaves the annual spending at $1.6 billion.
“I would love to do $2 billion, if we could afford to do $2 billion,” Beck said. “I’m not so sure we can.”