Battle Lines Being Drawn over Competing Plans for Transportation Trust Fund

John Reitmeyer | June 20, 2016 | Transportation
Some conservatives argue Sarlo-Oroho gas-tax hike untenable. Some liberals worry tax cuts will mean less for safety-net programs. The TTF goes broke in less than two weeks

Sen. Jennifer Beck (R-Monmouth) looks on as Sen. Mike Doherty (R-Warren) speaks during a recent news conference held to oppose a proposed gas-tax hike.
With New Jersey’s Transportation Trust Fund about to run dry, state lawmakers on both sides of the aisle find themselves facing a difficult dilemma as they search for a solution. Do they stick to deeply held political positions at all costs or accept some unwanted policy changes in the name of compromise?

Forcing the issue is the emergence this month of a bipartisan proposal that would renew state transportation funding as part of a broader overhaul of state tax policies. Right now, that sweeping proposal includes both a sizable gas-tax hike sought by Democrats and a series of offsetting tax cuts favored by Republicans, including a phase out of New Jersey’s estate tax.

The sponsors of the bipartisan plan say it’s time to put the goal of problem-solving above politics because the trust fund’s five-year finance plan is set to run out of cash in less than two weeks. And doing nothing, they say, would bring most work on state road, bridge and rail-network projects to a halt just as the summer tourism season is heating up.

But others are pushing back, including some on the right who firmly oppose a gas-tax hike under any circumstances, as well as some on the left who fear getting rid of the estate tax will rob safety-net programs of much-needed state revenue. It’s unclear right now whether compromise or division will win out as the issue comes down to the wire in State House, but with a vote on the bipartisan deal expected soon, supporters on both sides of the debate have been working hard to rally their colleagues.

Leading the way on the compromise side is Sen. Steve Oroho, a Republican from Sussex County who represents one of the state’s most conservative legislative districts. The plan he’s cosponsoring with Sen. Paul Sarlo (D-Bergen) would increase the state’s gas tax by 23 cents and hike taxes on diesel and jet fuel as well. Since the trust fund right now is deep in debt, those increases would help bring in more than $1 billion in annual revenue to renew the fund for another 10 years.

But there’s more to the bipartisan plan than just the fuel-tax hikes. It would also phase out the estate tax, lift state income-tax exemptions on pensions and other sources of retirement income, and create a new state income-tax deduction for contributions made to in-state social-service charities. The state’s Earned Income Tax Credit for low-wage workers would also be boosted for the second time in just the past year, and a new gasoline-tax credit would be offered for those who would be affected the most by the proposed gas-tax hike.

Asked about his support for the plan, Oroho points to how the tax cuts would help New Jersey residents, particularly seniors on fixed incomes and homeowners facing the crush of high property-tax bills. And raising the gas tax will ensure out-of-state motorists pay their fair share to improve the state’s infrastructure, he said.

But Oroho, a certified financial planner, said he also views the issue not from a political point of view, but from a financial one.

“You find a problem and fix it. Get in a room and fix it,” Oroho said during a recent news conference in the State House.

That attitude has drawn praise from some unlikely sources, including construction-worker unions and Democratic Senate President Stephen Sweeney, who also supports the bipartisan plan.

“This is leadership,” Sweeney (D-Gloucester) said of Oroho’s work on the plan during a recent meeting with NJ Spotlight editors and reporters.

But opponents of the plan have also been busy organizing resistance as they work to prevent leaders like Sweeney from getting the votes that will be needed to pass it.

A group of Republicans held their own public event in the State House last week to speak out against the bipartisan deal. And while they like the call to ease the estate tax burden, it’s the proposed gas-tax increase that’s a nonstarter.

Right now, New Jersey’s 14.5-cent per-gallon gas tax is the second-lowest in the country behind only Alaska. But if the proposed fuel-tax hikes that are part of the broader proposal go through, the total would rise to 37.5 cents per-gallon, which would be the seventh-highest tax in the country.

Sen. Jennifer Beck (R-Monmouth) has been holding a series of rallies around the state with the conservative Americans For Prosperity organization to oppose that proposed hike under any circumstances. She favors her own transportation-fund renewal plan, which would rely on new borrowing, expected revenue growth, and some repurposing of current spending by cutting employee healthcare plans and reorganizing transportation agencies to extend the fund for another seven years.

Beck said her main concern with the Sarlo-Oroho plan is how a gas-tax hike would impact New Jersey’s nearly seven million motorists.

“The underscore here is the broad-based nature of this particular tax,” Beck said.

Sen. Mike Doherty (R-Warren) also questioned whether the state is doing a good enough job of controlling how existing transportation dollars are being spent. He called the compromise proposal “a scam” because it wouldn’t lead to any transportation-spending reforms that he says are much-needed.

“Before we ask the people of New Jersey to pay one more penny in a higher gas tax we need to find out why we’re spending so much on transportation projects,” Doherty said.

Meanwhile, financial concerns of a different nature are coming from the left in response to the bipartisan plan.

Assemblyman John Wisniewski (D-Middlesex) is a longtime leader of the Assembly’s Transportation and Independent Authorities Committee and someone who has personally called for a gas-tax increase to fix the trust fund’s broken finances.

But he fears the inclusion in the overall deal of a phase out of New Jersey’s estate tax, which generates more than $400 million in annual revenue for the state budget, will have too big of an impact on the budget for him to support the deal. That’s because the deal calls for revenue from the proposed fuel-tax hikes to be dedicated to only funding transportation projects, while money lost to the tax cuts would impact the general fund, which pays for things like education and safety net programs.

“Where will the money come from? There is no fairy dust, there is no magic wand,” Wisniewski said during a news conference that was held in the same room in the State House as Oroho’s.

He was backed up by Sen. Ray Lesniak (D-Union) and representatives of a number of different groups sharing a similar concern, including advocates for the environment and public-employee labor unions.

“This proposal is not tax fairness,” Lesniak said. “This compromise is not a compromise, it’s a capitulation.”