A long-awaited legislative compromise to replenish a depleted Transportation Trust Fund and reverse a three-month infrastructure project shutdown hit a minor roadblock on its way to final approval yesterday, when lawmakers delayed a vote on a bill that would tank up the fund with $16 billion over the next eight years.
The legislation, announced by Gov. Chris Christie and leaders of both houses late last week, is still expected to pass at a rescheduled Friday voting session, and new amendments to a previous version of the bill were approved by the Senate on Wednesday. But an emergency resolution that would have allowed lawmakers to take final action on the legislation and thereby end a months-long impasse that much sooner was tabled, as opponents spoke out against what they called an unfair and rushed deal.
“Here we go, we’re going to ramrod these tax increases through,” state Senator Ray Lesniak (D-Essex), who was one of a few Democrats opposing the bill, said prior to the session. “These are bad taxes increases, they’re giveaways for the wealthiest people in the state of New Jersey. It does not have to happen, and it’s not going to happen.”
Lesniak and other critics of the deal seized on the delay yesterday, driving home their grievances and working to drum up opposition to a measure they said has been rammed through in “the dark of night” by legislative leaders and has not received a thorough vetting or enough input from the public. Their concerns reinforced just how politically thorny a topic funding the TTF, which pays for road and bridge improvement projects across the state, has been — and continues to be.
Lawmakers had struggled fruitlessly over the past several months to see eye-to-eye on the problem, which bloomed into full-blown crisis in June when the fund’s last five-year finance plan expired. Democrats in the Senate, led by Senate President Steve Sweeney (D-Gloucester), sought an increase in the state’s gas tax coupled with a phase-out of the estate tax and a handful of other, more targeted cuts, while many Republicans, led by Christie, demanded that any increase at the pumps be offset by a decrease in the state’s sales tax, a trade-off they argued would maintain “tax-fairness” for New Jersey residents.
There were flashes of progress amid the gridlock, including Assembly Speaker Vince Prieto’s (D-Hudson) siding with Christie to pass an early version of a compromise bill just before the end of the 2016 fiscal year, but ultimately not enough to avoid what has become a costly road and bridge project shutdown across the state, which Christie ordered amid the political squabbling in July.
Both proposals finally came together last week, when all three leaders announced at a last-minute press conference that they had struck a deal to renew the fund with a plan that now features both a 23-cent gas-tax increase and a series of tax cuts that will total more than $1 billion. Under the legislation, the final details of which were released yesterday, the TTF would be topped off with $16 billion in state funds over the next eight years, boosting annual spending on the state’s road, bridge, and rail infrastructure by $400 million.
“We have an obligation. We need to get this done. We need to invest in our economy,” said state Sen. Paul Sarlo (D-Bergen), one of the bill’s sponsors.
But the bipartisan compromise has not persuaded more hardened opponents of the legislation, who argue it either hurts the working class by raising taxes too much or benefits the wealthy by cutting them in the wrong places. Those concerns were on full display yesterday, as a select number of both Democrats and Republicans railed against the details of the bill and ultimately prevented its sponsors from garnering enough votes for an emergency resolution, which would have expedited its passage by advancing the bill from second and third reading on the same day.
Amendments to the tax bill passed with 22 votes in the affirmative and 10 in the negative, but lawmakers in the Senate could not muster the 30 votes needed for the emergency measure. They will reconvene tomorrow, when the bill is posted for a regular vote and will only require a simple majority — just 21 votes — to pass.
Lesniak, who is expected to launch a gubernatorial bid for the 2017 Democratic nomination in the coming weeks, argued yesterday that the tax cuts included in the bill represent a “giveaway” for the state’s wealthiest residents. Among the biggest cuts called for is a phase-out of the estate tax, first by lifting the current exemption of $675,000 to $2 million at the beginning of 2017, and then eliminating it totally on January 1, 2018. The move would reduce the state budget by $116 million the first year and by $562 million annually when fully phased in.
The legislation also calls for the sales tax to be slashed by 0.375 percent, from 7 percent to 6.875 percent at the start of 2017 and from there to 6.625 percent at the beginning of 2018. That would reduce annual revenue in the state by $382 million in the first year and by $593 million by 2019.
All told, the cuts — when paired with the tax breaks for the working poor, veterans, and retirees living off pensions and other sources of fixed income also included in the plan — would cost the state $1 billion in revenue by the 2019 fiscal year and about $1.3 billion in fiscal 2020, according to the nonpartisan Office of Legislative Services.
Lesniak said not only are such cuts bad for New Jersey residents, the also run contrary to “national Democratic tradition of not giving tax breaks to the one percent.” He called the vote “close,” and said there’s still time to change course on the issue.
Other Democrats who voted against the resolution included state Sen. Nia Gill (D-Bergen) and Shirley Turner (D-Mercer).
“We’ll have a real shot at stopping this if we have the time to get the public involved,” Lesniak said yesterday. “Through social media, we’re going to get thousands of people to call their legislators, to contact them, Twitter, email, Facebook. It’s amazing what the public can do these days to stop government from ramrodding this down the throat of the people.”
“In politics, one day is plenty,” he added.
But Democrats aren’t the only ones who questioned the plan yesterday. A cadre of Republicans, including Senate Minority Leader Tom Kean Jr. (R-Morris), said lawmakers need more time to review the legislation, which would add “transparency” to the process. State Sen. Jennifer Beck (R-Monmouth) openly criticized the bill, calling the proposed gas tax “incredibly regressive” and proposing that some of the cuts be phased in over time.
Under the bill, the Earned Income Tax Credit, which benefits low-income workers, would increase from 30 percent of the federal level to 35 percent, reducing revenue by $62 million annually. And state income-tax exemptions for pensions, 401(k) plans, and other sources of retirement income would rise over the next four years from $20,000 for joint filers and $15,000 for individuals to $100,000 and $75,000, respectively, reducing the budget by $107 million when fully phased in.
The state’s 14.5 cent gas tax — the second-lowest in the nation — would rise to 37.5 cents in November, resulting in annual tax revenues of $1.2 billion that, when combined with new borrowing, would provide $2 billion in annual spending on transportation projects.
“If you’re a single person and you make $15,000 a year, you get no earned income tax credit,” Beck said, noting that the gas tax could fall hard on low-income workers in the state. “So there will be a lot of people that are struggling to make it that will be negatively impacted.”
Last year, when lawmakers had just started talking seriously about addressing a depleted TTF, Beck proposed her own seven-year renewal plan, one that she said would maintain current spending levels without hiking any taxes — including the one at the pumps. That plan relied on a combination of borrowing — up to $5.4 billion over the seven-year term — and the “repurposing” of funds earmarked for things like clean energy to get the state the $1.6 billion it spends annually on transportation projects.
She called that plan “doable” then, and suggested yesterday that by also phasing in tax cuts it might still be a viable option for lawmakers in lieu of the current proposal.
“By phasing in those four tax cuts, you really are only absorbing $600 billion, and that would mean we would have something like $900 million to dedicate to transportation projects with existing revenue, without burdening people with a gas tax increase. They have essentially, without knowing it, supported my original plan that I unveiled in 2015, which was a lot less aggressive than what they’re putting forward here,” she said.
The New Jersey Sierra Club, in a statement following yesterday’s vote, called the bill a “bad deal” for New Jerseyeans that gives “billionaires tax breaks and everyone else sold out.”
“They didn’t have the votes today for an emergency, which is a good thing,” said the organization’s director, Jeff Tittel. “Anytime we can slow it down it buys us more time to fight this sell-out of a deal. The Legislature is trying push through this dirty deal as quickly as possible. They don’t want the public to know what they’re doing and they’re trying to sell us out as fast as they can.”
Still, lawmakers are almost sure to have enough votes to pass the present legislation tomorrow and bring to a close the drawn-out drama of funding the TTF. Sarlo, speaking to the press following the vote yesterday, acknowledged that the vote is “not easy” but that he is “confident” the bill will pass on Friday. From there it will head to the Assembly, where it’s also likely to see passage.
In a statement, Tom Hester, communications director for the Assembly Majority Office, said the state’s lower house “now stands ready to act on Friday to put people back to work and ensure public safety.”
Other organizations, including The New Jersey Business & Industry Association and the Engineers Labor-Employer Cooperative, praised the progress the Senate made yesterday, saying that it brings the state that much closer to fixing the TTF crisis and that the new amendments include much-needed tax cuts.
“The bill on the table is one that will fund the TTF for years to come and bring New Jersey’s disastrous $3.5 billion transportation shutdown to an end,” said Greg Lalevee, chairman of the Engineers Cooperative. “Like any bipartisan bill, neither side of the aisle got completely what they wanted, but real progress was made, which is exactly what political compromise is all about.”
“In a bipartisan manner, the Senate took the next needed step in moving forward a tax reform package that balances important infrastructure investment with long-awaited relief on the estate tax and the income tax on retirement, two taxes that have been driving residents and businesses out of state,” added NJBIA President & CEO Michele Siekerka.
For his part, Sweeney, a potential gubernatorial candidate who saw his prospects in that race take a hit while he deliberated in Trenton yesterday, said he’s “not overjoyed” with the legislation because of the impact it will have on the state’s budget, but that the problem is too great to delay further. The Democrat’s own bill, which was developed with the participation of some legislative Republicans but would not include the sales tax cut demanded by Christie, would have been comparatively gentler, costing the state closer to $900 million over several years.
“We have to fix our roads and bridges, and we don’t have a magic wand.” he said. “We clearly have a serious problem with our infrastructure, and that’s how roads and bridges are paid for.”