A Pattern of Failure: As Debt Grows, Political Resolve and Gas Tax Shrink

As we’ve written about extensively, New Jersey’s Transportation Trust Fund is soon expected to collapse after decades of irresponsible borrowing and bonding. The first article in our series, A Pattern of Failure, detailed the inability of the New Jersey Turnpike Authority and state legislators to raise tolls on the Garden State Parkway and NJ Turnpike according to bond agreements.

This lack of fiscal fortitude has unfortunately not been limited to NJTA. Instead of paying for infrastructure by raising tolls and taxes, Governor Corzine and NJDOT Commissioner Kolluri are advocating an “asset monetization” plan to pull the state out of this looming fiscal disaster. The plan is expected to be revealed on January 8th.

The Campaign has long argued that the more sustainable solution to New Jersey’s Transportation Trust Fund woes is to raise the gasoline tax to an appropriate level (see MTR #556, 490, 472, etc). New Jersey’s gasoline tax, at 10.5 cents per gallon (14.5 cents if you add in the petroleum products gross receipts tax) ranks third lowest in the country, with only Alaska (8 cents) and Georgia (7.5 cents) boasting a lower rate. Last raised in 1988, the 10.5 cents gasoline tax is worth about 6 cents today when adjusted for inflation.

Only Alaska, Georgia and Virginia have been more reluctant to raise the gas tax in the last 20 years. Nineteen states have somehow mustered the political courage to raise gasoline taxes in the last 5 years. Yet, with the notable exception of Assemblyman Wisniewski, New Jersey’s elected leaders have been too scared of perceived political suicide to consider a gas tax hike.

Established by constitutional amendment in 1984 and initially intended only to pay for transportation improvement projects, The Transportation Trust Fund received most of its income from 2 cents of the then 8-cent-per-gallon gasoline tax. The 1984 amendment explicitly stated that the money was to be used only to plan, acquire, build, and repair the transportation system, and expressly forbade the Legislature “to borrow, appropriate, or use these amounts for any other purpose, under any pretense whatsoever.”

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A Pattern of Failure: NJTA's Debt Spiral Driven By Fearful Politics, Financial Shell Games

“What experience and history teach is this — that people and governments never have learned anything from history.”

- George Wilhelm Hegel, German philosopher.

 

With the 2011 collapse of New Jersey’s Transportation Trust Fund (see MTR #556) and Governor Corzine’s secret “asset monetization” of the Garden State Parkway and NJ Turnpike menacing the horizon, Tri-State decided to look back and examine the big picture of New Jersey transportation funding. As we set about our research, it became increasingly apparent that the history of transportation in New Jersey is plagued by poor planning and underfunding, largely caused by a lack of political will. The first article in A Pattern of Failure, a series exploring the current state of transportation funding in New Jersey, examines how the New Jersey Turnpike Authority racked up its monumental debt and how it relates to the upcoming monetization.

Recently, Governor Corzine stated that in lieu of forming a public-private partnership, his “asset monetization” plan would likely raise tolls and divert the increased revenue to a newly formed public corporation, which would then issue bonds backed by that money. While this may seem fiscally responsible, when coupled with the planned $2 billion widening of the New Jersey Turnpike from exits 6 to 9, NJTA’s financial history would show otherwise.

No one wants to pay more tolls; but, even more than that, no one wants potholes, collapsing bridges or congestion. Unfortunately, New Jersey has not learned this lesson. In fact, the State has only been willing to raise tolls on the New Jersey Turnpike at ten-year intervals, and only once ever on the Garden State Parkway – despite borrowing plans based on more frequent hikes. In terms of the larger transportation funding structure, tolls contribute very little to the Transportation Trust Fund. In fact, they are not constitutionally dedicated to the TTF and are often diverted to the General Fund – a practice that has certainly contributed to the TTF’s skyrocketing debt.

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