Coming off a year where motorists were hit with toll hikes and a gas tax increase, all amid a pandemic, lawmakers peppered the state’s top transportation officials with questions about road, bridge and rail spending during a lengthy budget hearing on Thursday.
For starters, several lawmakers wanted to know whether motorists should expect to see another gas tax hike later this year, especially as some economic restrictions remain in place a full year after the onset of the coronavirus pandemic.
But it’s too soon to know because the next full analysis of the latest fuel-consumption trends that help influence the state’s per-gallon gas tax rate is still months away, Department of Transportation commissioner Diane Gutierrez-Scaccetti told members of the Senate Budget and Appropriations Committee.
“I think at this point it will be interesting to see what those gasoline sales are,” the commissioner said. Meanwhile, New Jersey Transit customers won’t face any fare hikes, at least through the end of June 2022, said agency executive director Kevin Corbett. NJ Transit also plans to scale back by $100 million a much-criticized practice of cannibalizing capital resources to help cover operating expenses, he said.
Still no dedicated funding for NJ Transit
Still, Gov. Phil Murphy’s budget plan for the fiscal year that begins July 1 did not include a long-sought permanent source of dedicated funding for NJ Transit. That means the agency will continue to rely on several other sources of funding — including New Jersey’s Clean Energy Fund — to supplement revenue raised through rider fares, even while receiving COVID-19 aid dollars from the federal government.
“Having that predictable, dedicated funding stream is the ‘golden fleece,’” Corbett told lawmakers during the hearing.
Under a 2016 law enacted by former Gov. Chris Christie, New Jersey’s per-gallon gas tax rate must be changed whenever state gas tax collections miss what’s known as the “Highway Fuels Revenue Target.” The law was passed as part of a broader renewal of the state Transportation Trust Fund, which uses revenue from the gas tax to finance road, bridge and rail network improvements across the state.
Last year, after a shortfall of more than $150 million opened as fuel consumption dropped amid the pandemic, the TTF law required the Murphy administration to enact a 9.3-cent increase; that pushed the per-gallon gas tax rate above 50 cents.
The next formal analysis of gas consumption and fuel revenues required under the TTF law will occur in August, and any rate adjustments would likely be announced by the Department of Treasury weeks later.
“I can’t speculate on what will happen in August, (but) as I said, traffic is performing well,” Gutierrez-Scaccetti said in response to lawmakers’ questions on Thursday.
“We’ll see what happens, and we’ll see how (much) people are driving,” she said.
Gutierrez-Scaccetti also discussed how the increasing popularity of electric vehicles could impact the funding stream for the Transportation Trust Fund in future years. Currently, electric-vehicle drivers effectively get a free pass from gas taxes and some transportation-policy experts have discussed the likelihood of a mileage-based fee eventually being enacted in New Jersey and other states.
“With electric vehicles, we’re going to have to look at how we deal with that as the numbers go up,” she said. “It’s something that we’re thinking about at the department.”
For its part, NJ Transit will be able to sustain a roughly 9% year-over-year spending increase under Murphy’s overall $44.8 billion state budget plan for the 2022 fiscal year, which begins on July 1.
Corbett credited an increase in funding his agency is due to receive from the New Jersey Turnpike Authority — which last year increased tolls on both the Garden State Parkway and the turnpike as part of a new, long-term capital plan — as he discussed the goal of establishing “more consistent, sustainable and reliable funding for NJ Transit.”
Murphy, a first-term Democrat, had sought in prior years to scale back the transit agency’s reliance on turnpike funding while at the same time boosting the size of NJ Transit’s General Fund budget subsidy. But the contribution from the turnpike authority is scheduled to increase from $129 million to $350 million in the next fiscal year, and then go up again to over $500 million in future years, according to budget documents.
Gutierrez-Scaccetti and other transportation officials have defended the funding transfers as in the best interest of the toll roads since a well-performing transit system eases highway congestion.
Murphy’s budget also calls for the continued diversion of $82 million from New Jersey’s Clean Energy Fund to NJ Transit. That practice has been criticized by environmentalists, who say revenue generated from utility bills for the fund is by law supposed to be used for other purposes, including helping low-income residents reduce their energy costs.
Diversion: ‘That’s a really negative word’
But Gutierrez-Scaccetti, who serves as chair of NJ Transit’s board of directors, defended the practice, saying the Murphy administration is using the Clean Energy Funds to support green-technology initiatives like a planned transition to electric buses.
“I would not use the word ‘diversion.’ That’s a really negative word,” she said. “Clean Energy funds are appropriately used at (NJ) Transit to help support what will be the operation of electric buses, (and) perhaps, electrification of the train system.”
“I would argue today that’s not a diversion at all. It’s an appropriate use of funds meant for environmental protection, which is what the Clean Energy Fund is,” she said.
Asked about NJ Transit eventually facing a fiscal cliff once federal aid dollars run dry, Corbett agreed it was a concern, but also said he was “much more optimistic” about the direction the agency’s finances are going during Murphy’s tenure. As an example, he cited the planned reduction of the capital-to-operating raid, from $460 million to $360 million in the 2022 fiscal year.
And at other times during the hearing, Corbett pointed to the hiring of more engineers and the meeting of a federal deadline for the installation of new safety equipment as signs of progress.
“We certainly are in much better shape than we were three years ago,” he said.