Despite revenue losses triggered by the coronavirus pandemic, Gov. Phil Murphy’s administration has turbocharged spending on transportation projects this year. To do so, fine print in the state budget was quietly rewritten with help from lawmakers to reach deeper into New Jersey’s Transportation Trust Fund for extra dollars.
Murphy and fellow Democrats who control the Legislature added more than half a billion dollars to the line item for transportation projects for the current fiscal year with a little-noticed tweak that they approved in September, according to budget documents.
The extra funding covers more than three dozen “shovel-ready” projects administered by the Department of Transportation, including bridge and road repairs, waterway dredging, and congestion-relief initiatives, among others, according to a list provided by the Murphy administration.
The increase pushed the state’s annual appropriation for transportation investment to $2.6 billion, the most such spending for one year since the trust fund was reauthorized in 2016.
The transportation commissioner and other officials have pitched the increase as much-needed stimulus for a state still reeling from the economic effects of the ongoing pandemic, including revenue losses and persistently high unemployment.
Republicans suspicious of timing
But Republican lawmakers have raised concerns about the timing of the increase, which comes just as Murphy is getting ready to run for reelection next year. They’re also calling out the Murphy administration after preliminary documents for an upcoming $1.5 billion bond sale that will raise more revenue for the transportation fund suggested principal payments won’t be required until 2035, meaning the bulk of the bill wouldn’t come due until long after Murphy leaves office.
“You’re going to create this big bubble that you’re not going to be able to pay off,” warned Sen. Steve Oroho (R-Sussex), a certified financial planner who sits on the Senate Budget and Appropriations Committee.
The Transportation Trust Fund, or TTF, is an off-budget account that relies on funds generated through borrowing and the state’s gas tax, among other resources, to pay for road, bridge and rail projects across New Jersey. The state’s annual investments also generate federal matching funds that help further stretch state TTF dollars.
The TTF was last reauthorized in 2016, when the per-gallon gas tax was hiked by nearly 23 cents to help generate new cash for the fund. At the same time, $12 billion in new TTF borrowing was also authorized to support an overall eight-year, $16 billion finance plan.
For several years, roughly $2 billion has been appropriated annually from the fund to support the state capital program for transportation infrastructure projects. But this year’s spending increase — enacted using what’s known as a budget resolution — pushed the annual appropriation to a record $2.6 billion, according to DOT records.
No change in NJ Transit allocation
As a result, the allocation for DOT projects could be increased, from $810 million to $1.41 billion. The allocations for New Jersey Transit and for local transportation aid stayed as originally planned, at $760 million and $430 million, respectively, according to the DOT records.
Stephen Schapiro, a spokesman for the transportation department, cited “favorable market conditions, and a desire to move additional projects into construction,” among the reasons for advancing the additional funding into fiscal year 2021.
“There are projects that are ready to go to construction but for which funding was not available in the traditional annual funding amounts,” Schapiro said. “This additional funding falls within the 2016 Reauthorization of $16 billion for capital projects and no more than $12 billion of transportation bond issuances.”
During a public event last week, Murphy said maintaining good transportation infrastructure is sound economic-development strategy for New Jersey, given its location along the Eastern Seaboard.
“We know that safe and modern transportation infrastructure is key to our future economic health and success,” Murphy said during the event at Port Newark.
The increased transportation spending is praised by Robert Briant, chief executive officer of the Utility and Transportation Contractors Association of New Jersey. He predicted it would deliver a “huge return” on the state’s TTF investment.
“The materials that will be used in construction — like asphalt, concrete and stone — are all made here in New Jersey,” said Briant, who is also a member of the state Transportation Trust Fund Authority.
“The people we are putting to work mostly live here in New Jersey and will be buying meals and materials here, shopping here, getting ready for the holidays here, etc.,” he added.
But the $600 million increase also comes at a time when the Murphy administration has already faced criticism for its handling of transportation-related spending and the issuance of debt.
Regina Egea, who was an official in the Department of the Treasury during Republican Gov. Chris Christie’s tenure, has faulted the Murphy administration for not advancing capital projects more effectively, by using resources already authorized in previous years but not spent. She argues this is especially troubling, given the mandatory gas-tax hike that was enacted last month to help sustain the current TTF finance plan. Egea noted in a recent interview that a significant share of the existing $12 billion borrowing cap remains untapped.
All existing funds have not been used
“Why advance more authorization when they have plenty of capacity to award contracts already at their fingertips?” asked Egea, who now serves as president of Garden State Initiative, a conservative-leaning think tank based in Morristown.
Related concerns also are being raised about the administration’s handling of state debt, including the backloading of debt instead of using what’s known as level-pay financing, where payments are spread out evenly until the bonds are retired.
Earlier this year, the Murphy administration sold $500 million in bonds to help New Jersey Transit purchase new buses and locomotives, and bond documents indicate the state is scheduled to make interest-only payments for the first 10 years of the 25-year debt issue.
Roughly $4 billion in borrowing that is being used to help finance the state budget during the health crisis was finalized by the administration last week; it was structured so that no principal payments would be made in the first two years of a 12-year repayment schedule.
The preliminary documents for the upcoming Transportation Trust Fund bond sale indicate the state is at least considering a financing structure that would defer all principal payments on a proposed $1.5 billion debt issue until 2035.
Oroho: ‘Irresponsible’ approach to debt
Oroho, a prime sponsor of the 2016 legislation that reauthorized the fund, used words like “ridiculous” and “irresponsible” to describe the Murphy administration’s handling of the recent bond issues. He also said deferring debt payments while building up a surplus in the short term allows Murphy to become a “candy man during his election year.”
“That’s something I just don’t agree with,” Oroho said.
Asked for a response to those kinds of concerns, Department of Treasury spokeswoman Jennifer Sciortino highlighted ways the recent debt issues fit within the administration’s long-term planning for debt service.
“The previous administration had front-loaded a lot of bonds, giving us room on the backend,” Sciortino said. “With a flat yield curve, we are not paying a significant penalty for postponing principal payment.”
The way this year’s increased transportation spending was inserted into the state budget has also raised eyebrows since it was not part of the comprehensive budget plan Murphy put forward in late August.
Instead, it was added mid-September, using a budget resolution submitted to lawmakers under a process they’ve established that permits late additions to the annual spending bill, allowing them to fly well under the radar in the State House.
Asked why the increase was enacted using a budget resolution, Murphy spokesman Darryl Isherwood pointed to unusual circumstances the governor and lawmakers had to work under this year due to the health crisis. These included using borrowing to support annual spending and moving a budget proposal from introduction to adoption in just one month.
“Due to this year’s borrowing actions and compressed timeline, the administration took additional time to determine whether projects were ready and whether this effort was appropriate as part of the overall borrowing strategy,” Isherwood said.