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

A study conducted for New Jersey Forward by economist Allison Premo Black recommended increasing the Transportation Trust Fund from $1.6 billion a year in state spending -- which is currently matched on a dollar-for-dollar basis by federal transportation aid -- to $2 billion.

With state debt-service payments already eating up more than 10 percent of the state budget, the new TTF should include at least 50 percent pay-as-you-go funding, transportation advocates argue, which would thus require a minimum of $800 million to $1 billion annually in new revenue:

  • Based on Treasury’s FY2015 revenue projections, a 15-cent increase in the gas tax would raise $772.86 million, while a 20-cent gas tax hike would generate $1.03 billion.

  • Adding the current 7 percent sales tax to excise gas sales instead would produce $1.12 billion.

  • A 6 percent petroleum products gross-receipts tax would raise $883.5 million at an estimated $3.25 per gallon wholesale price, while a 7 percent tax would bring in $1.07 billion and an 8 percent tax would generate $1.25 billion. Raising the gas tax by 20 cents or imposing a 7 percent sales tax or petroleum gross receipts tax would raise New Jersey’s total motor fuels tax from 14.5 cents to about 34.5 cents a gallon -- less than 1 cent per gallon above the current average for the 16 Northeastern states, and still 16 cents less than New York State and seven cents less than Pennsylvania.

In any case, it is clear that the pay-as-you-go funding New Jersey needs to renew the Transportation Trust Fund will have to come from new revenue sources, because the funding sources Christie counted on for the FY2012-FY2016 Transportation Trust Fund will not be available next year.

Christie, who ran for governor on a “no new taxes” pledge in 2009, managed to avoid raising the gas tax when the Transportation Trust Fund came up for its five-year renewal in 2011 only because he had cancelled the Access to the Region’s Core (ARC) rail tunnel to New York City in October 2010.

Christie promised to dedicate $1.8 billion in Port Authority funds and $1.3 billion in New Jersey Turnpike toll revenue originally earmarked for the ARC Tunnel, plus another $500 million in state revenues, to provide $3.6 billion in pay-as-you-go funding for TTF, with the remaining $4.4 billion to come out of borrowing.

But Christie’s recurring fiscal problems forced him to use almost all of the Turnpike money and all of the promised state revenue to fill budget shortfalls. As a result, he was forced to rely so heavily on debt to keep the TTF going that he used up most of the program’s $4.4 billion borrowing capacity in just four years, leaving the TTF at least $800 million short of the $1.6 billion needed to fund the full transportation capital program in Fiscal Year 2016, which begins June 30.

The $1.8 billion in Port Authority funding that went into the FY2012-FY2016 Transportation Trust Fund will not be available for the next five-year plan, and the $335 million in annual Turnpike Authority toll being used to prop up the state budget can’t be redirected in future years to TTF without creating yet another hole in a state budget that has been plagued with recurrent revenue shortfalls for several years.

With the TTF scheduled to run $800 million short of the needed funding in the next budget, Senate President Stephen Sweeney (D-Gloucester) has been traveling around the state highlighting critical bridge repair needs.

Assembly Speaker Vincent Prieto (D-Hudson), who has spoken since taking leadership of the lower house in January about the inevitability of an increase in the motor-fuels tax to fund TTF, announced that the Assembly Transportation Committee would hold a series of public hearings seeking recommendations to solve the transportation crisis.

The committee, which is chaired by Assemblyman John Wisniewski (D-Middlesex), a longtime proponent of increasing the gas tax, will hold its first hearing at Montclair State University tomorrow morning.

Thus far, however, Sen. Raymond Lesniak (D-Union) has introduced the only bill to increase the state’s gas tax. While Lesniak originally planned a 15 percent hike phased in over three years, he eventually settled on a 9 percent increase over the same three-year period. His legislation has yet to move, and Democratic legislative leaders are looking to work out an agreement with Christie that would enable them to propose a joint solution.

That’s Christie’s goal too, as he said on his 101.5-FM “Ask the Governor” call-in show the night he nominated Fox. “We’ll sit down and talk with the Senate president, the Speaker and the Republican legislative leaders,” Christie said, “and see what we can agree upon in order to make funding our road and bridge upkeep and repair appropriate -- an appropriate level, and also make sure that we deal with issues of taxation in this state in a way that’s fair to the people who are paying the bills.”

When a reporter at the governor’s press conference did not believe that Christie was actually considering a tax increase, the governor was adamant that he was open to all solutions: "Is there something about 'Everything's on the table' that's confusing to you?" he demanded.

While most transportation advocates are primarily concerned that the pay-as-you-go funding be sufficient to support a robust $1.6 billion to $2 billion per year state transportation capital program -- and do not care whether it is funded with a gas tax, a petroleum products gross-receipts tax, or a sales tax -- Robins argues that it would be better to have a percentage-based tax, rather than a per-gallon tax.

“Using a percentage tax base that is growing is desirable because we have been stuck with a cent-per-gallon tax that doesn’t capture inflation as gas prices raise,” Robins said. “A per-gallon tax also hurts you because the laudable public purpose of requiring vehicles to get higher mileage will reduce gasoline sales. We have to look ahead.”

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