Why Christie, Sweeney, and Others Agree on 23-Cent/Gallon Gas-Tax Hike

Impasse over transport fund has been years in the making, but New Jersey’s politicians face a deadline within days

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A dispute over transportation funding between Gov. Chris Christie and Senate President Stephen Sweeney has led to an ongoing shutdown of road and bridge projects across New Jersey. But throughout their feud the two leaders have not quarreled at all about how much to raise the state gas tax.

In fact, Christie and Sweeney (D-Gloucester) both support a proposed 23-cent per gallon increase of the state gas tax that’s favored by transportation advocates as the best way to renew the nearly broke Transportation Trust Fund (TTF).

Assembly Speaker Vince Prieto (D-Hudson) also backs the plan for the 23-cent gas-tax hike, and it’s only a disagreement over other proposed tax-policy changes among the three leaders that is holding up a deal. Most are tax cuts that Christie and other Republicans are seeking in order to maintain “tax fairness” and balance out the impact of raising the gas tax.

While 23 cents may seem like an odd amount to settle on, transportation advocates say that’s the exact figure needed to help the governor and lawmakers pay down the trust fund’s existing debt and also generate new cash to boost spending on new projects. Others disagree with the notion that the state needs to increase the gas-tax at all, arguing there are other ways to renew the TTF that are not being taken seriously enough by the leaders in Trenton.

There’s only enough money left in the TTF tank to get through the end of this month, adding to the pressure on Christie, Sweeney, and Prieto to settle their differences quickly.

Lawmakers have talked about increasing the gas tax for well over the last year, but the proposal to increase it by 23 cents was put forward for the first time just last month in bipartisan legislation introduced by Sens. Paul Sarlo (D-Bergen) and Steve Oroho (R-Sussex).

At 14.5 cents, New Jersey’s gas tax is the second-lowest among the states. It includes a 10.5-cent tax on gasoline purchased at the pump and a 4-cent tax levied at the wholesale level but passed along to motorists. It’s the tax levied at the wholesale level that would be increased, resulting in the overall 23-cent hike.

While the 14.5-cent levy hasn’t been increased since 1988, leaders in Trenton haven’t stopped spending on transportation projects over that same period – they’ve just borrowed more against it. That’s helped to build up the TTF’s debt to its current level of $16.5 billion.

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The gas tax produces about $50 million in revenue for every penny levied, but that’s not enough cash to keep up with the annual payments that are now needed to pay down the TTF’s significant debt. The annual debt payments have been estimated at $1.27 billion by the nonpartisan Office of Legislative Services, but the gas tax is bringing less than $800 million.

So, for the last several years, the state has been allocating revenue from the sales tax to help make up the difference. During the last fiscal year, the state provided $546 million in sales-tax revenue from the general fund to help make up the gap, according to OLS.

Christie and legislative leaders also want to boost the total amount that’s being spent annually on infrastructure improvements; that figure has been held flat for at least the last decade even as the cost of construction materials and labor has gone up. Under a plan endorsed by Christie and Prieto, annual transportation spending would increase from $1.6 billion to $2 billion over the next eight years. Sweeney, meanwhile, prefers increasing it to $2 billion annually over a 10-year period.

That annual spending level is important because state transportation dollars are matched each year by the federal government. The annual investment in New Jersey infrastructure would be able to rise to $4 billion if the state dollars go up, rather than the current $3.2 billion.

Anthony Attanasio, executive director of the Utility and Transportation Contractors Association of New Jersey, said the state has to confront the predicament of having significant TTF debt but also a good deal of infrastructure that’s in only substandard condition. A recent report released by the American Society of Civil Engineers gave New Jersey’s infrastructure a D+ grade.

“Our unique geographical positioning requires that we have world-class infrastructure,” said Attanasio, who is a former state Department of Transportation assistant commissioner. “It’s a two-pronged crisis we’re trying to address.”

Jeff Tittel, director of New Jersey’s Sierra Club organization, said the proposed 23-cent gas-tax hike would help the state make up for sins of the past. Politicians in the past were anxious to move forward on big projects like building new tunnels in Atlantic City and Trenton, so they bypassed a full federal environmental review process. But that also meant the state couldn’t qualify for federal funding that could have helped to stretch its own resources, Tittel said. He said the lack of courage among governors and lawmakers to increase the gas tax in prior years led to more borrowing and refinancing issues, even for shorter-term projects.

“We have roads that we’ve repaved with bonds that are back-loaded,” Tittel said. “That’s why, it’s that kind of irresponsibility.”

Not everyone has been convinced that the gas tax needs to go up, let alone by 23 cents. A survey of New Jersey voters taken by Quinnipiac University in May found opposition to the gas-tax hike at 54 percent to 42 percent.

Sweeney and a bipartisan group of senators have proposed pairing the gas-tax hike with several new tax cuts, including a phase-out of New Jersey’s estate tax. But Quinnipiac’s poll found voters also oppose that trade-off. Christie and Prieto, meanwhile, have proposed swapping the 23-cent gas-tax increase for a one percent reduction of the sales tax.

It’s that disagreement that’s at the root of the current impasse, with Sweeney refusing to put the sales-tax cut up for a vote over concerns that it would blow a $1.6 billion hole in the state budget. Christie and Prieto, meanwhile, are so far refusing to bend to Sweeney’s demands to support the Senate bill. Christie last week also ordered a shutdown of state-funded road, bridge, and rail projects to help preserve resources for only essential projects until a compromise is reached.

Sen. Jen Beck (R-Monmouth) has also put forward a TTF renewal plan, one that doesn’t rely on any new revenue from a gas-tax hike.

Beck would renew the trust fund for another seven years at $1.6 billion per year by earmarking expected revenue growth and money raised from increasing motor-vehicle fines. Her plan would also use new borrowing and free up more cash by changing public-employee healthcare plans and consolidating state transportation agencies. But her plan so far hasn’t been put up in either house for a vote.

“If we had the fiscal discipline and the leadership in the Legislature we could absolutely fund a seven-year Transportation Trust Fund plan without a gas-tax (increase),” Beck said during an interview yesterday.

Her plan has been loudly opposed by construction-worker unions who question whether her revenue projections are realistic. Beck said she has her own set of questions for those who support the 23-cent increase. For example, they’ve claimed it would only cost the average motorist about $150 more a year, a figure she said is far too low. Supporters of the increase have also claimed roughly 30 percent of the bill would be covered by out-of-state drivers, but no research has been produced to back up that estimate.

If the state can afford to sacrifice $1.6 billion annually to a sales-tax cut, Beck wondered whether that revenue could instead just be earmarked for transportation projects, leaving the gas tax exactly where it is.

“I’m not clear why we need to raise the gas tax at all,” she said.