It’s an election-year budget season in New Jersey, and with state tax revenues plummeting and voters reeling from national economic woes, the task at hand is how to gather the political and financial capital to keep the state moving.

The draft budget released by Governor Corzine last month is bleak at best, with fiscal year 2009 revenues falling almost $4 billion short of projections, projected FY10 spending levels on par with FY06, and 6 of 18 departments receiving double-digit percentage cuts. (New Jersey’s fiscal year 2009 will end on June 30.)

NJDOT fares comparatively well, with the department budget reduced 7.5% from this year. Unfortunately, the red pen was not as kind to NJ Transit. The state’s proposed cut of $62 million — a 17% cut in its already insufficient allotment – will impair the agency’s ability to properly fund operations, and increase the likelihood of a fare increase or service cutbacks.

At this point NJ Transit has not announced a plan to increase fares, but the cut in state aid puts significant pressure on the agency budget. In 2007, a $60 million deficit in NJ Transit’s operating budget led to a 10% fare increase.

The main funding sources of NJ Transit’s current (FY09) operating budget are $755M from fares, $358M in state subsidies, and a $356M transfer from the capital budget — a bad habit indicating that the agency needs more, not less, state support. NJ Transit is the largest transit agency in the country without a dedicated source of operating revenue.