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Christie’s Borrowing Binge Makes Transportation Trust Fund Run Dry

Sidamon-Eristoff yesterday blamed budget constraints caused by the need to fund soaring pension and retiree health-benefit costs over the past several years for the administration’s failure to provide the promised pay-as-you-go funding for the Transportation Trust Fund out of general revenues and out of Turnpike toll revenues originally earmarked for the cancelled ARC Tunnel.

“As a result of our not having the flexibility to do pay-go, we will use our carry-forward authorization, and we will be coming to the Legislature six months earlier to seek authorization for the next four- or five-year capital plan,” Sidamon Eristoff told the Assembly Budget Committee. “We have a lot to do over the summer.”

For Christie, finding a way to provide $2 billion to $3 billion in pay-as-you-go financing for the next Transportation Trust Fund will not be easy:

  • The FY16, FY17, and FY18 state budgets – the last three budgets Christie and Sidamon-Eristoff will prepare -- will not have the extra revenue needed to provide significant pay-as-you-go funding for TTF because the state has to set aside an estimated $550 million in revenue growth each of those three years to complete the seven-year ramp-up to full actuarial funding of New Jersey’s underfunded pension plan.

  • Christie, whose appointees control the New Jersey Turnpike Authority Board, may be able to find some legal justification to continue to provide the state with the $324 million a year in New Jersey Turnpike toll revenue that was earmarked for the ARC Tunnel, but Christie is already using that money to fund New Jersey Transit operations.

  • Christie has absolutely ruled out an increase in the gas tax to pay for TTF because it would violate his “no new taxes” pledge and cripple his quest for the 2016 Republican presidential nomination, which he is continuing to pursue despite the political fallout from Bridgegate and other scandals under investigation by the U.S. Attorney’s Office and the Legislature’s Joint Committee on Investigations.

  • The $343 million to $375 million in annual Port Authority toll revenue originally earmarked for ARC that Christie is currently using to pay for reconstruction of the Pulaski Skyway and other New Jersey projects -- despite questions raised by Port Authority staff over the legality of using Port Authority toll money for projects not directly related to the Port Authority’s mission -- is set to expire after FY 2016. However, Christie, with some support from New York Democratic Gov. Andrew Cuomo, has suggested dismantling the Port Authority, which would theoretically give New Jersey control over more than $1.3 billion a year in Port Authority toll revenue and potentially provide a solution for TTF.

Whatever Christie and Sidamon-Eristoff come up with, Democratic legislative leaders are going to demand better guarantees than they received in 2011, when Christie promised to put more than $4 billion in pay-as-you-go funding into the current Transportation Trust Fund.

“This governor promised a new way of budgeting that would be more responsible than in the past,” Schaer noted. “It seems to me we have been kicking the can down the road for the past 20 years, and this can keeps getting heavier and harder to kick. We are driving 75 miles an hour and heading directly for a brick wall. The question fundamentally is ‘Where is this whole enterprise of state going?’”

Schaer was irritated that Sidamon-Eristoff could not provide him with an answer on how much money the state had borrowed for the Transportation Trust Fund.

That’s just one of the questions that NJ Spotlight has been asking the Treasury Department, the Department of Transportation, and the governor’s office repeatedly since March 2.

The fact that the Christie administration was going to run out of borrowing capacity has been clear to transportation advocates for months. The only question was whether the carry-forward money Sidamon-Eristoff was authorized to borrow in advance from the FY2016 TTF debt limit would be enough to get him through FY2015.

Chernetz, the Tristate Transportation Campaign analyst, reported on February 28 -- just three days after Christie’s FY2015 budget was released -- that the state was going to run out of borrowing capacity and would not be able to provide the full $8 million transportation capital program Christie had promised by the end of FY2016.

Plugging a Hole

With the planned FY15 pay-as-you-go funding allocation going “to plug part of the general fund deficit,” Chernetz noted, “it is expected that Gov. Christie will look for more bonding to pay for transportation projects but where that bonding authority will come from remains unknown, especially, according to the Transportation Trust Fund Authority, since it appears the TTF does not have enough bonding authority to take out more debt.

“Under current statutes, the TTFA ‘allows up to 30 percent of the Transportation Program Bonds that are permitted to be issued in a given year to be issued instead in a preceding fiscal year.’ This means that TTFA would only be able to bond $1.023 billion in this fiscal year leaving a $300 million gap in this year’s transportation program, while at the same time putting additional pressure on funding next year’s plan,” Chernetz concluded.

Transportation finance experts consulted by New Jersey Spotlight confirmed the validity of Chernetz’s analysis, which was based on the $3.458 billion cap on debt issuance by the Transportation Trust Fund Authority set in the enabling legislation: $1.247 billion in FY2013, $849.2 million in FY2014, $735.3 million in FY2015 and $626.8 million in FY2016.

The decreasing borrowing limits set in the TTF bill reflected the assumption that Christie would keep his promise to increase pay-as-you-go funding each year. But the governor eliminated pay-as-you-go funding as a result of budget constraints in FY2013, and three years of revenue shortfalls that forced midyear budget cuts eliminated any possibility that the TTF pay-as-you-go funding would be restored.

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