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Analysis: Transportation Funding Fix Now Appears To Be On Fast Track

High-level talks, new DOT chief, and Christie’s own political calculus augur well for agreement on a long-term solution for Transportation Trust Fund

gas pump fuel pump

With the Transportation Trust Fund scheduled to run out of money a year early, Gov. Chris Christie and Democratic legislative leaders are looking to reach agreement on a long-term solution to the state’s transportation funding crisis that is likely to include increased taxes on motor fuels.

High-level talks involving Christie and legislative leaders, Christie’s nomination of Democratic dealmaker Jamie Fox to be his new transportation commissioner, and the governor’s surprising declaration last week that he was now open to the possibility of a tax increase to refinance the Transportation Trust Fund raised the hopes of transportation advocates that the state might finally be close to providing a stable source of funding for highway, bridge, and mass-transit projects.

Transportation advocates believe the state needs to raise $800 million to $1.1 billion a year in pay-as-you-go financing to support a $1.6 billion- to $2 billion-a-year capital program. That would require an increase in the gas tax of 15 cents to 20 cents or an equivalent increase in the petroleum products gross receipts tax, which is paid by refineries or distributors and then passed along to motorists.

“We may be closer to a solution than we have been any time since 2003,” said Martin Robins, director emeritus of Rutgers University’s Alan M. Voorhees Transportation Policy Institute. Robins who served on the blue-ribbon commission that recommended a 12.5-cent gas tax increase -- only to have their proposal rejected by Democratic Gov. Jim McGreevey.

McGreevey’s chief of staff at the time was Fox, who -- like many former high-ranking state officials from both parties -- later regretted his failure to fight for a stable source of funding for the Transportation Trust Fund. Fox’s unanimous confirmation by the state Senate yesterday gives him a second chance, and he has already begun reaching out to key leaders for ideas and support.

Fox told the Senate Judiciary Committee yesterday that it would be a “terrible mistake” to rely primarily on borrowing -- as the Christie administration has done over the past four years -- and that the state should fund transportation capital projects as much as possible on a pay-as-you-go basis, which would undoubtedly require a tax increase.

Christie’s outspoken opposition to a gas tax increase had been the biggest roadblock to enactment of a new five-year Transportation Trust Fund plan, with most political observers assuming that the governor would do anything possible to avert an increase in motor-fuels taxes as he prepares to run for the Republican presidential nomination in 2016.

But Christie evidently has decided that it makes sense to push through a long-range transportation funding solution now -- more than a year before he would have to begin to face GOP primary voters -- rather than push through a short-term borrowing fix now and have to deal with a long-term solution while he is campaigning in Iowa and New Hampshire. That would be one more indication that Christie has decided to remain in office while he runs for president, and not resign early -- as some Democrats had both predicted and hoped.

Christie also is undoubtedly aware that most states have raised their existing gasoline excise taxes or petroleum products gross receipts taxes or imposed sales taxes on gasoline within the past decade, including swing states like Pennsylvania and Michigan, and such Republican bastions as Indiana, North Carolina and Wyoming.

And Christie’s willingness to nominate Fox, who served as chief of staff to both McGreevey and former U.S. Sen. Robert Torricelli (D-NJ), further underscores Christie’s intention to run in the Republican primaries on the theme of bipartisanship in problem solving he has been espousing to national GOP audiences since his first year in office.

That doesn’t mean this will be an easy decision for Christie to make politically, which is one reason that some insiders believe the governor is more likely to prefer an increase in the petroleum products gross receipts tax levied at the refinery level and other first points of sale, rather than an increase in the gasoline excise tax which is paid at the pump.

For motorists, there is little difference: The current 4-cent-a-gallon petroleum products gross-receipts tax that is levied on gasoline is passed along directly to motorists along with the 10.5-cent gasoline tax. The American Petroleum Institute, the lobbying organization for the nation’s oil and gas industry, counts both taxes the same in computing each state’s total motor fuel taxes.

New Jersey anticipates raising $541 million through the current motor fuels tax this fiscal year -- or $51.5 million for each penny per gallon imposed as part of the 10.5-cent gasoline excise tax -- and $215 million from the current petroleum products gross-receipts tax, which includes the 4-cent tax on motor fuels as well as a tax on aviation fuel used in takeoff and landing.

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New Jersey’s 14.5-cent total motor fuels tax (gas tax plus petroleum products gross-receipts tax) ranks 49th in the nation and has not been increased since 1988. The 2014 average in the 16 Northeastern industrial states running from Maine to Wisconsin was 33.6 cents per gallon, and 12 of those 16 states have raised their motor-fuel taxes since 2009. Last year, the overall national average was 26.8 cents per gallon.

New Jersey Forward, a nonpartisan coalition of business, labor, and nonprofit leaders assembled under the leadership of New Jersey State Chamber of Commerce President Tom Bracken to push for enactment of a stable source of funding for TTF, laid out a series of funding options last week. The biggest tax proposals were a 15- or 20-cent increase in the gas tax, a petroleum products gross-receipts tax ranging from 6 percent to 8 percent, and extension of the current 7 percent sales tax to gasoline.

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