Will New Jersey's Tank Run Dry?
In January, as a bridge collapse claimed the life of a construction worker and created significant travel disruptions in the Cincinnati area, the crumbling state of America’s transportation infrastructure was once again thrust into the limelight. Shortly after the tragedy in Ohio and the forced closures of several deteriorating bridges in his own state, New Jersey Secretary of Transportation Jamie Fox ordered the inspection of about 300 structurally deficient spans.
New Jersey faces a monumental task in upgrading its bridges - according to the Federal Highway Administration’s National Bridge Inventory, 621 of the 6,600+ bridges in the state are structurally deficient. Repair and reconstruction of these spans is expected to cost billions of dollars.
The Garden State, however, faces a problem familiar to many other states across the nation – this kind of public money is nowhere to be found. The state’s Transportation Trust Fund, established in 1984 to serve as a tool for strategic, long-term capital investment in transportation networks, has all but run out of cash.
The Fund is capitalized by a variety of sources, with the majority of appropriations coming from state gas tax revenues. The Fund was initially envisioned as a pool of dollars to support pay-as-you-go financing for capital projects across the state but has evolved to rely increasingly on debt financing. Today, the Fund is so leveraged that as of this summer, all of the approximately $1.2 billion in annual appropriations will go to interest and principal payments on bonds for projects that are already completed or underway.
This will not be news to anyone who follows New Jersey transportation policy and investment. The Trust Fund’s perilous financial trajectory has been well-documented by experts, who for several years have called attention to the looming crisis and made the case for dedicating more revenue to the Fund. However, in a state widely known for its high overall tax burden, the anticipated political ramifications of increasing taxes to replenish the Fund have kept the state’s elected leaders at a prolonged standstill.
With the fiscal “D-Day” of June 30 just a few months away, calls for action have grown louder than ever, and the legislature has made some modest overtures to this end.
State assemblyman John Wisniewski, chair of the Assembly Transportation Committee, has introduced a bill that would modify and raise the state’s petroleum products gross receipts tax, which is currently levied on the wholesale purchase of gasoline by distributors at refineries.
Wisniewski’s proposal would change the tax from a flat rate of four cents per gallon to nine percent of the retail price of a gallon of gasoline. In targeting a wholesale tax as the prime source of revenue, Wisniewski’s proposal bears a family resemblance to Pennsylvania legislation passed in 2013 that established an unprecedented level of dedicated transportation funding for the state.
To complement his call for increased revenues, Wisniewski has also proposed merging the cash-strapped New Jersey Department of Transportation and NJ Transit with the toll-funded New Jersey Turnpike Authority to gain administrative efficiency and lower costs. This restructuring of the state’s transportation agencies – both politically and logistically an extremely complex endeavor – would create one of the nation’s largest transportation agencies. While Wiskniewski’s proposals score points for their boldness, they have yet to draw formal support from fellow lawmakers.
Some of the other “solutions” being floated are mirages: calls for the state to rely more heavily on public private partnerships (or “P3s”) instead of increased public revenues reveal a misunderstanding of how these types of deals are structured. Public revenue is a necessary component of a P3 deal, so without either handing over a revenue stream (like a toll) or making regular payments from state coffers to the private concessionaire, the hope of engaging in this type of arrangement is nil.
Outside of the State Capitol, business and civic leaders have begun to mobilize as well. Forward NJ, a transportation-funding coalition led by New Jersey Chamber of Commerce President and CEO Tom Bracken, is, in its own words, “advocating for a robust, reliable, sustainable and constitutionally-dedicated solution to this problem.”
Bracken has gone on record to support lowering New Jersey’s notoriously high estate and inheritance taxes – the “death taxes” – in exchange for a hike in fuel taxes. While a handful of legislators has indicated a willingness to consider this concept, others oppose the idea on the basis that such a trade-off would shift tax burden away from wealthy households and onto working-class families.
No one, however, has yet developed this idea into a formal proposal for consideration by the legislature. In fact, outside of Wisniewski’s bill, formal proposals on the matter are scant. With time growing ever shorter until the Trust Fund runs dry, the political stakes are growing higher.
Continued inaction promises further bridge closures, more travel headaches for commuters, and setbacks for planned enhancements to the state’s transportation systems. And while the solution to New Jersey’s transportation funding woes is not yet clear, one thing is certain: over the next few months the ability of the state’s lawmakers and civic leaders to identify and act on a shared solution will be put to the test on a very public stage.