If you Buy Gas in New Jersey, You Might be Paying More Before Long. Here’s Why

The gas tax must go up if revenues fall short. Top officials will be meeting to make that call
Credit: Rudy and Peter Skitterians from Pixabay
If there is a gas-tax increase this year, it would go into effect on Oct. 1.

New Jersey motorists should know within a matter of weeks whether they are going to get hit with a gas-tax increase later this year.

Some of the state’s top public-finance officials are required to meet by the middle of next month to discuss the current pace of gas-tax collections. And, if they detect a significant shortfall, a rate hike could be announced by the end of August.

The last increase came in 2018, and the latest tax-collection reports from the Department of Treasury don’t offer motorists much hope of a reprieve as revenues have been lagging last year’s totals nearly across the board, including when it comes to fuel taxes.

Treasury officials say they are “still analyzing the data” and that no final decision has been made.

If there is an increase in the gas tax this year, it would hit motorists in October, just weeks after highway tolls are due to go up across New Jersey.

State lawmakers decided to link New Jersey’s gas-tax rate to annual consumption levels in 2016, as part of a broader effort to ensure the state would have enough funds on hand to adequately maintain New Jersey’s roads, bridges and mass-transit systems.

Bipartisan compromise with Christie

At the time, the state’s Transportation Trust Fund had run dry and lawmakers and then-Gov. Chris Christie were at odds over what to do next. They eventually struck a bipartisan compromise that raised the gas tax by 22.6 cents while they also renewed the TTF for another eight years.

But largely overlooked at the time was language inserted into the TTF renewal law that allowed for additional — automatic — gas-tax hikes each year if a set amount known as the “Highway Fuels Revenue Target” is not met.

Under that language, the state treasurer must meet annually “on or before August 15” with the top budget official from the nonpartisan Office of Legislative Services to determine whether fuel-tax revenues have met the minimum amount needed to avoid running a TTF deficit; that minimum is usually around $2 billion.

Last year, although those revenues came up slightly short of the TTF target, Treasury officials announced at the end of August that the per-gallon tax rate of 41.4 cents would not be increased. However, the year before, the rate had to be increased by 4.3 cents to offset a TTF shortfall of $170 million.

It’s too soon to say what will happen this year, but the meeting between the state officials has already been scheduled, said Treasury spokeswoman Jennifer Sciortino.

“We are in the process of analyzing the data and will consult with the Legislative Budget Finance Officer as required by law,” Sciortino said.

Decline in revenues

Treasury has been projecting steep declines in most state revenues because of the coronavirus pandemic and the economic restrictions put in place by Gov. Phil Murphy to help slow the rate of new infections. As of the end of June, actual collections for the two taxes that make up what’s generally referred to as the “gas tax” in New Jersey were running behind last year’s pace for the same 12-month period, by 11.6% and 7.9%, respectively, according to Treasury’s data.

If there is a gas-tax increase this year, it would go into effect on Oct. 1.

But some have been urging the governor and lawmakers to intervene to prevent a tax increase, citing concerns that the pace of work administered by state agencies like the Department of Transportation and New Jersey Transit since the TTF was renewed in 2016  has not kept pace with the eight-year finance plan, which also authorized new bonding for capital projects.

“This administration’s failure to execute is at the root of why New Jersey’s roads and bridges continue to show near imperceptible improvement, and why thousands of jobs have not been created,” said Regina Egea, president of Garden State Initiative, a right-leaning think tank based in Morristown.

“This begs the question: Why should taxpayers pay any more when NJDOT and NJ Transit cannot keep pace with spending what they already have?” Egea said.

The Murphy administration was asked to respond to Egea, who served as a Treasury official during Christie’s tenure, but did not comment.

New Jersey motorists are already set to be hit with toll increases in mid-September. Those increases come after the respective agencies that run the Garden State Parkway, New Jersey Turnpike Authority and Atlantic City Expressway approved new capital plans earlier this year that rely on hiking tolls to maintain balanced spending.

Murphy, a first-term Democrat, officially approved those toll hikes last month. And just like the 2016 gas-tax legislation, the new highway capital plans allow for future toll hikes to be enacted automatically.