Sweeney Floats NJT Funding Plan with Constitutional Twist — New Amendments to Protect the Cash

John Reitmeyer | February 24, 2020 | Budget, Transportation
Constitutional amendments would dedicate $500 million annually to cash-strapped agency, preventing NJ Transit from taking a hit during budget battles
Credit: Sandman Design via Flickr
New Jersey Transit

New Jersey Transit would get $500 million in dedicated annual revenue from the state to bolster its overburdened operating budget under a plan proposed by Senate President Steve Sweeney.

A large share of the funding for Sweeney’s plan would come from top-earning businesses. They’d continue to fork over a surtax initially established by lawmakers and Gov. Phil Murphy two years ago on a temporary basis.

Revenue would continue to be diverted from the New Jersey Turnpike Authority and the state’s Clean Energy Fund under the plan floated by Sweeney (D-Gloucester) during a news conference on Friday.

Transportation advocates have long been calling on Murphy and lawmakers to come up with a dedicated source of revenue for NJ Transit that is not subject to the annual budget process, making the revenues more permanent and reliable. Under Sweeney’s plan, $500 million in dedicated annual revenue for NJ Transit operations would be written into the state constitution.

“Our goal is to make sure (NJ) Transit has the funding they need to do the job,” Sweeney told reporters inside the State House as he announced the plan.

The goal of establishing dedicated revenues for NJ Transit drew immediate praise from the agency’s executive director, who was in the State House on Friday to testify before a select committee of lawmakers who have been probing a host of issues related to NJ Transit. But it also drew some criticism from others, including the state’s leading business-lobbying groups.

Murphy administration touts its NJT plan

Meanwhile, a spokeswoman for Murphy pointed to the governor’s ongoing efforts to boost NJ Transit’s operating support when asked for a response.

Once known as one of the nation’s top transportation agencies, NJ Transit has struggled in the wake of the Great Recession as state funding has lagged increased ridership. A major audit ordered by Murphy, a Democrat who took office in 2018, also flagged the agency’s lack of predictable funding from the state budget, calling its revenue stream “inadequate, uncertain, and unsustainable.”

While Murphy and lawmakers have worked to boost the size of the state’s operating subsidy, that funding is not permanent or dedicated, and can be threatened by economic downturns. In fact, when the Great Recession hit more than a decade ago during Republican Chris Christie’s tenure, NJ Transit’s subsidy was slashed and revenue was raided from the Turnpike Authority and the Clean Energy Fund to help offset those losses.

Murphy has been critical of those diversions, but the current state budget still sends NJ Transit $129 million from the Turnpike Authority, and another $82 million from the Clean Energy Fund, which is supported by a special “societal benefits” tax that is levied on utility bills across the state. Those funds are supplementing a record $457.5 million NJ Transit operating subsidy out of the state budget in fiscal year 2020.

Under Sweeney’s plan, the state would continue diverting $125 million from the Turnpike Authority and $75 million from the Clean Energy Fund. Sweeney said he would also seek voter approval to permanently earmark those revenues to NJ Transit, although there’s some question whether the Turnpike dollars can be the source of such a dedication.

 Getting commuters out of their cars

Asked about motorists and utility customers who may object to using those revenues to prop up NJ Transit, Sweeney suggested doing so would ultimately serve both environmental and transportation policy goals by getting people out of their cars and helping NJ Transit move forward with plans to electrify its buses.

“It’s just a reality of life,” Sweeney said. “We need the funding in order to get (NJ) Transit going forward.”

In addition, Sweeney’s plan calls for another $300 million in annual revenues to come from the state corporation-business tax (CBT) under another constitutional dedication that the Senate president said he is planning to put before voters.

To help keep the CBT well-funded, he also proposed keeping in place through 2021 a 2.5% surtax on businesses that make over $1 million annually in New Jersey that was established two years ago. Under a deal struck with Murphy in 2018, that surtax is being phased out starting this year. But Sweeney is calling for the surtax to remain in place at the 2.5% rate for another two years, and then it would be replaced with a permanent, 1% surtax starting in 2022.

He said the same corporations who pay that state surtax have enjoyed a windfall thanks to federal tax changes that were enacted by President Donald Trump in 2017.

“We’re going to have businesses participate in funding transportation because they’re the benefactors of transportation,” Sweeney said. “That’s the beauty of this plan, in my mind.”

Business lobbyists give plan thumbs down

But Sweeney’s plan drew an immediate response from business-lobbying groups, who praised the idea of dedicating revenues to help NJ Transit but also faulted the Senate leader for relying on higher taxes to do so. One of their chief objections is that the state gas tax was increased substantially in 2016 to fund more investment in transportation-infrastructure projects.

“Investing in transportation, whether it’s our roads and bridges and highways, or if it’s our train infrastructure, airports, whatever it might be, is important for our business community and important for our business climate,” said Christopher Emigholz, vice president of government affairs for the New Jersey Business & Industry Association. “But can we figure out a way to focus on transportation without new money?”

“Can we look at reducing spending, can we get back to (public-worker) pension and benefit reform, can we get back to tax reform?” Emigholz said.

Tom Bracken, president of the state Chamber of Commerce, also faulted Sweeney for reversing his commitment to keep the surtax in place on a temporary basis made in 2018 when it was first established to help balance the state’s fiscal 2019 spending plan.

“The larger issue with Senate President Sweeney’s proposal is that this additional tax compounds New Jersey’s ongoing issues with affordability and competitiveness,” Bracken said.

Don’t raid Clean Energy Fund

Jeff Tittel, state director of the Sierra Club, also bristled at the part of the proposal that calls for continuing to divert funds generated by the societal benefits charge on utility bills. That fee is supposed to partially underwrite programs that help finance cleaner renewable energies and energy conservation programs.

“I think there are other things we could look at,” Tittel said.

But he also praised Sweeney for coming up with an overall plan to dedicate revenues for NJ Transit, which has for years been diverting millions of dollars in revenue that is supposed to be earmarked for capital investment to instead support its operating budget — a practice that has continued during Murphy’s tenure.

“I think this is a very good first step,” Tittel said. “I think it’s long overdue.”

Sweeney put forward his proposal just days before Murphy is planning to unveil his proposed spending plan for fiscal year 2021, which begins July 1.

Murphy has also highlighted the need for dedicated revenues for NJ Transit, including while running for office in 2017. But he has yet to put forward any formal proposal to do so. And while Murphy is widely expected to renew his call for a millionaires tax in this week’s budget address, none of those dollars can be used to fund mass transit because the state Constitution dedicates all income-tax revenue to funding property-tax relief, which has been defined both as direct-property tax relief and as funding for public education and teacher pensions.

Sweeney has for the past several years opposed Murphy’s plan to hike the millionaires tax, but NJ.com reported on Sunday that he is willing to budge from his position if Murphy commits to a significant increase in public-worker pension funding.

Asked for a response to Sweeney’s NJ Transit funding plan, Murphy press secretary Alyana Alfaro said the administration looks forward to “assessing all the Legislature’s proposals as part of budget discussions over the next few months and working collaboratively to continue the historic investments Gov. Murphy has made in NJ Transit.”

In his own response, Kevin Corbett, NJ Transit’s executive director, didn’t weigh in directly on Sweeney’s plan, but said the talk of generating a dedicated revenue stream for his agency is “totally music to my ears.”

Kevin McArdle, a spokesman for Assembly Speaker Craig Coughlin (D-Middlesex), who would also have to sign off on the funding plan, said the speaker agrees that “more must be done to address multiple areas of concern at NJ Transit.”

“The speaker has and continues to partner with Assembly Transportation Committee Chairman Daniel Benson and his committee, along with Senate President Sweeney, Gov. Murphy, NJ Transit and other stakeholders to address the issues at hand and continue the progress made in recent years,” McArdle said.