After years of using mostly borrowed money to finance major transportation projects, New Jersey is getting ready to set aside a significant amount of cash to pay for the next batch of road, bridge and mass-transit improvements.
The spending plan for the state Transportation Trust Fund during the 2019 fiscal year calls for more than $500 million in what’s known as “pay-as-you-go” financing, which is likely a record amount for New Jersey’s primary source of revenue for capital projects.
The shift in philosophy by Gov. Phil Murphy, who just celebrated his first 100 days in office, represents a reversal from the approach that was followed by prior governors, who piled up nearly $20 billion in TTF debt as they put off a gas-tax increase that eventually went into effect in 2016. It’s also a goal of the Murphy administration to stick with the effort to slow down the rate of borrowing under the current eight-year, $16 billion TTF spending plan, according to Diane Gutierrez-Scaccetti, the acting commissioner of the state Department of Transportation.
“It’s very important that we start to switch our process from full borrowing to pay-as-you-go,” she said during testimony before the Senate Budget and Appropriations Committee yesterday.
More cash-funded projects
“When you talk about things that are important to our future, it’s important for us to get on a path that allows us to do more cash-funded projects than perhaps those that are bonded,” she went on to say.
The new emphasis on pay-as-you-go TTF funding was one of several key issues that lawmakers discussed with Gutierrez-Scaccetti and other top Murphy administration officials yesterday, which was the second day of budget hearings on state transportation issues in Trenton. Others topics that drew lawmakers’ attention were a major audit of New Jersey Transit that was ordered by Murphy earlier this year; the administration’s efforts to meet an end-of-the-year deadline to install Positive Train Control safety equipment; and ways that NJ Transit is planning to use $242 million in additional general fund dollars to improve the service for commuters during fiscal 2019, which begins on July 1.
Started more than 30 years ago by former Republican Tom Kean Sr., the state’s Transportation Trust Fund uses a combination of revenues raised from the general sales tax and gas tax, and the issuance of long-term debt, to pay for major infrastructure improvements. The fund also draws matching dollars from the federal government, allowing the state to stretch its investment in road, bridge and mass-transit projects even further.
The TTF was initially set up with pay-as-you-go making up a significant portion of the overall spending pie, but over the years, governors from both parties were reluctant to raise taxes to bring in more cash as spending needs increased. Instead, the state started to rely more heavily on borrowing to keep up with the demand for transportation spending; in many cases, prior debt issues were also refinanced, meaning projects ended up costing taxpayers significantly more than they would have if they were paid for out of the annual budget.
The gas-tax deal
Former GOP Gov. Chris Christie released an ambitious plan to ease the state’s reliance on TTF borrowing in 2011, but he was unable to stick to most of the pay-go portion of that plan by the time it expired in 2016. However, Christie ultimately struck a deal with lawmakers to increase the state gas tax by 23 cents as part of the current, eight-year TTF reauthorization. It’s that $2 billion-a-year reauthorization that is allowing for the larger pay-go component that’s planned for in fiscal 2019.
Asked yesterday if the Murphy administration is planning to continue keeping a significant pay-go component in its annual TTF spending in future years as well, Gutierrez-Scaccetti said that is her goal. “When you look at the eight-year program, it actually starts to slow pay-as-you-go, but my job over the course of the next several months would be to see if we can put ourselves on a glide path to increase pay-as-you-go,” she said.
After the hearing, Committee Chair Paul Sarlo (D-Bergen) called the administration’s pay-go commitment “tremendous.” It also drew praise from some of the panel’s Republican members.
“I was very encouraged. It’s a priority of the administration – the largest (pay-go) that’s ever been done,” Sarlo said.
NJ Transit audit
Meanwhile, Sarlo also questioned Gutierrez-Scaccetti and NJ Transit executive director Kevin Corbett on what, if any, progress has been made on the audit that Murphy announced back in January, weeks after being sworn in. He was told the state has recently hired the Atlanta-based consulting firm North Highland to conduct the audit, meaning the effort is only just getting started in earnest now.
“We hope within 90 days to have at least some preliminary assessments,” Gutierrez-Scaccetti said.
Corbett also addressed the issue of a looming deadline for the Murphy administration to implement the Positive Train Control safety technology, and the concern that the state could lose significant federal mass-transit funding if it doesn’t comply with a December 2018 deadline. Though the effort started when Christie was in office, Corbett suggested the work was behind schedule when the Murphy administration took over, forcing the agency to now work extra hard to make up for lost time. Initial field testing of the equipment, which includes a system of sensors along a stretch of track that collects and sends information via radio signal to an operating station about train speed, was recently started along a six-mile portion of the Morris & Essex line between Morristown and Denville, he said, and the agency is now working closely with the Federal Railroad Administration as it supervises NJ Transit’s efforts.
But Corbett also did not rule out the possibility that NJ Transit would look for an extension of the 2018 deadline by showing it would be able to be fully compliant with the federal government’s PTC mandate by a 2020 date. “We are studying that option as well,” he said.
More engineers, bus drivers
Also up for discussion yesterday was the increased funding that NJ Transit is due to receive in Murphy’s budget proposal for fiscal 2019. The overall increase out of the budget’s general fund totals $242 million, but at the same time money diverted to NJ Transit from the New Jersey Turnpike Authority is being reduced, leaving a net increase of about $170 million. That will be enough to help the agency beef up its employee rolls, which took a hit during Christie’s tenure, allowing for the hiring of more train engineers, bus drivers, maintenance workers and other employees, Corbett said.
The agency will also be spending more money to enhance its scheduling and communication with customers, and there will also be no fare increases looming for any bus or rail customers through the end of June 2019, he said.
“I want you and NJ Transit’s customers to know that we are laser-focused on turning this agency around,” Corbett said.