New Jersey motorists will have to wait until the end of the month to find out whether they face another hike in the gas tax.
The state’s top budget officials had until Thursday to crunch the latest gas-tax revenue figures as part of a required review that was part of an overhaul several years ago in the way New Jersey levies taxes on motor fuels to pay for road improvements.
Treasury officials said the deadline was met, but they won’t issue an official ruling on whether the current rate — 41.4 cents a gallon — needs to be changed until the end of the month. If deemed necessary, the adjustment would go into effect on Oct. 1.
New Jersey motorists for decades enjoyed one of the lowest gas-tax rates of any U.S. state, but that all changed in 2016 when Democratic legislative leaders worked with former Republican Gov. Chris Christie to increase the per-gallon rate by 22.6 cents. The hike was enacted to replenish the Transportation Trust Fund, a capital account that pays for road, bridge, and mass-transit projects across the state.
The bipartisan compromise extended the TTF for another eight years after it ran dry in the middle of 2016, and it also boosted spending on transportation projects, from $1.6 billion a year to $2 billion.
A general reluctance to hike taxes to keep up with annual transportation spending by prior governors and lawmakers set the stage for the 2016 tax hike, while also putting the TTF deep in debt.
In response, Christie and lawmakers inserted language into the renewal legislation that calls for automatic gas-tax hikes if fuel consumption doesn’t produce enough revenue to keep the TTF’s $2 billion annual spending plan in balance. The law also allows for rate reductions if consumption exceeds that level.
Meanwhile, other language written into the TTF law requires the state treasurer to meet every year “on or before August 15” with the top budget official from the nonpartisan Office of Legislative Services to determine whether revenue collections have met the minimum amount needed to avoid running a deficit.
A tax hike the first time around
The first automatic rate adjustment occurred last year after the administration of Gov. Phil Murphy calculated a nearly $170-million shortfall in revenues. Murphy officials also suggested the Christie administration left behind inflated projections to make sure another tax hike didn’t occur before he left office in early 2018. The resulting 4.3-cent rate hike pushed the per-gallon levy up from 37.1 cents to 41.4 cents, an increase of more than 11 percent.
“We’re now reviewing the latest numbers and expect to make a final determination relatively soon on whether the rate must be changed in accordance with the requirements of the law,” Treasury spokesman William Skaggs said Thursday. “An official announcement will be made by the end of August.”
Earlier this year, updated revenue forecasts released by both Treasury and officials from the OLS somewhat eased concerns that another tax hike was looming. That was good news not only for motorists, but for members of the state Assembly, who are all up for re-election in November and likely hoping to not have to face voters a month after a tax hike is enacted.
But it remains to be seen whether the summer driving season helped generate enough revenue to prevent an increase.
Potentially helping matters was the recent decision by lawmakers to boost the operating subsidy for New Jersey Transit in the state budget rather than raiding the TTF’s capital reserves. Such fund raids, the last of which occurred last year, narrow the margin of error for the TTF and typically put more pressure on gas-tax revenues.