Trenton Turns Its Attention to Next Crisis, the Ailing Transportation Trust Fund

One solution envisions a gas-tax hike offset by cuts to other taxes. The competing scheme wants to hold steady on the gas tax and institute a pay-as-you approach to transportation spending

Sen. Jennifer Beck
With a crisis in Atlantic City apparently averted, Trenton’s attention will turn — after the Memorial Day weekend — to the virtually exhausted Transportation Trust Fund.

With competing schemes to revive the fund being floated, there will be plenty to argue about. And just to keep things interesting, lawmakers will also be pushing to wrap up a new state budget by the June 30 deadline.

The trust fund pays for more than $3 billion in annual road, bridge, and rail-network improvements, with money that comes from federal matching funds and New Jersey’s 10.5-cent per-gallon tax on gasoline and the its 4-cent per-gallon tax on the gross receipts of petroleum products. Revenue from the sales tax and highway tolls also help subsidize annual state spending of about $1.6 billion under a five-year financing plan that Christie put forward in 2011.

But money from the gas tax will be enough to service only the fund’s extensive debt starting July 1.

Up for debate: whether to create a new “tax-fairness package” that makes tax cuts impacting the general budget to offset a gas-tax hike that would raise new revenue to be set aside of for transportation projects.

The alternative? A largely pay-as-you go system that also relies on new borrowing, trims some existing budget lines, but also relies on an expectation of tax revenue to grow each year.

The pay-as-you-go folks, led by Sen. Jennifer Beck (R-Monmouth), dug in yesterday, launching a petition drive that’s intended to push back against the bipartisan tax-fairness package, which has gained momentum in the State House in recent weeks.

Gov. Chris Christie will also have a say, and over the next month the issue will likely put to a test two of his longest-standing records. He’s yet to approve a major tax increase since he took office early in 2010, and he’s yet to be overridden by a Legislature that’s controlled by Democrats, but not with veto-proof majorities.

Many in Trenton expect the issue will eventually be resolved with a bipartisan deal that will involve hiking either the 10.5-cent tax on gasoline, the 4-cent tax on petroleum products, or some combination of increases that will affect both levies. New Jersey has the second-lowest gas tax in the nation, which was last raised in 1988.

Democrats have been working diligently behind the scenes to secure votes for a gas-tax increase – which they’ve yet to define publicly – by offering up a series of tax cuts to entice Republicans into endorsing what’s being described as a broader “tax fairness” deal. They include proposals to phase out the estate tax over five years; increase current state income tax exemptions for retirement income like pensions and annuities; create a state income tax deduction for charitable contributions; and increase the state version of the Earned Income Tax Credit.

“The TTF is something that has to be fixed,” Senate President Stephen Sweeney (D-Gloucester) said yesterday after his house cleared two bills to help Atlantic City.

He also said it may take winning enough support from Republicans for a broad package that could sustain a veto from Christie.

“We’re going to need the administration to work with us or get enough votes from Republicans to move forward,” Sweeney said.

For his part, Christie hasn’t ruled out a gas-tax increase, but he also hasn’t clearly defined what he would like to see in any deal that could win his support. When asked about the issue by a woman calling into his monthly radio show on NJ 101.5 FM radio earlier this week, Christie said he expects to hear more from lawmakers now that they’ve resolved their differences on the Atlantic City rescue.

But Beck, the Monmouth County senator, has been clear in her opposition to a gas-tax increase. She’s launched an online petition to rally opposition that a recent Quinnipiac University poll measured to be 54 percent of New Jersey’s registered voters.

As part of a trust fund renewal plan that she’s put forward, Beck introduced two bills yesterday that are designed to help free up cash in the annual budget to pay for $1.6 billion in transportation upgrades each year through the 2023 fiscal year.

One bill seeks to save about $50 million annually by consolidating several state transportation agencies like New Jersey Transit and the New Jersey Turnpike Authority. But the bulk of the new revenue would come from another, more controversial measure that would reduce healthcare benefits for public workers at all levels and then repurpose most of the savings for transportation projects.

Beck’s plan is also relying on some new borrowing and at least 3 percent growth in annual revenues. She would also raise additional funds by increasing motor-vehicle fines and diverting more money from the state’s Clean Energy Fund.

“We can implement a seven-year Transportation Trust Fund renewal plan with no gas-tax increase,” Beck stressed during a State House news conference yesterday.

Her efforts drew support from the New Jersey chapter of the conservative Americans for Prosperity organization, which has been making phone calls to stoke grassroots opposition to a gas-tax hike.

“Quite frankly, Trenton has taken the trust out of the Transportation Trust Fund,” said Erica Jednyak, the organization’s state director.

But transportation advocates and public-worker unions roundly criticized Beck’s proposal yesterday, questioning whether her revenue sources and forecasts are realistic.

Projections for 3 percent annual growth over seven years comes as the Christie administration was just forced to scale back its own tax-collection forecasts by a combined $1 billion for the current budget and the fiscal year that will begin on July 1. Growth has also been slow over the last decade, with revenues up just over 6 percent, from $31.2 billion during the 2007 fiscal year to a projected $33.2 billion for the current fiscal year.

“This is not a fiscally sound plan, it is a fairytale at best and a nightmare at worst,” Greg Lalevee, chairman of the Engineers Labor-Employer Cooperative, said yesterday about Beck’s transportation-funding proposal.

Anthony Attanasio, a former state Department of Transportation assistant commissioner who now serves as executive director of the New Jersey Utility & Transportation Contractors Association, also questioned what would happen to the funds set aside for transportation under Beck’s plan if the state has to deal with another revenue shortfall in the future.

Christie during his first term called for funding transportation projects with annual revenue as well, but later used those dollars for other purposes.

“This is more politics than policy,” Attanasio said of Beck’s plan. “You need dedicated funding that can’t be raided.”

And Steve Baker, a spokesman for the New Jersey Education Association, also offered harsh criticism of a plan that he said effectively asks public workers to bail out the state’s transportation fund.

“It’s unacceptable, and it shows she’s not serious about dealing with the state’s fiscal failures,” Baker said.