For over a decade, NJ Transit has taken money intended for capital projects, much of it borrowed, and spent it on day-to-day operations. This alarming habit, which reflects the state’s shortchanging of transit operations, has continued under Gov. Corzine through the recently passed fiscal year 2010 budget.

This isn’t chump change. In just the four NJ Transit budgets passed under Gov. Corzine (FY2007-10), $1.42 billion has been shifted from the capital budget to the operating budget. This is more than three times the amount of federal stimulus money NJ Transit received for capital projects (about $420 million). It is also more than NJ Transit’s entire fiscal year 2010 capital program ($1.39 billion).

What could $1.42 billion purchase if it were invested in infrastructure? A quick look at NJ Transit’s website reveals plenty of possibilities:

• The recently announced extension of the Hudson-Bergen Light Rail to Tenafly, currently unfunded and projected to cost at least $800 million,
• Bus rapid transit service on Routes 42 and 55 and other highways leading to Camden and Philadelphia (the preliminary cost estimate is $200-300 million),
• Low-floor buses that would improve urban bus service and could be used for bus rapid transit (the agency included $75 million for buses in an early stimulus request list but took it out after federal guidelines were clarified),
• New train cars that are less likely to break down (NJ Transit’s new multi-level cars cost $1.89 million each),
• Rehabs of selected stations to add full access for the mobility-impaired, and improved amenities (an ongoing rehabilitation of Ridgewood Station costs $41 million),
• And so on…

The state has made a modest effort at phasing out the capital-to-operating transfer. Since 2005, NJ Transit has held the transfer steady at $356 million per year, while the operating budget has grown from $1.34 billion to $1.78 billion in 2010. The transfer made up more than a quarter of the FY2005 operating budget, but will represent only 19.9% of the FY2010 budget, according to agency figures.

Ending the capital-to-operating transfer will require raising enough annual revenue to replace it. But with state government in austerity mode, don’t expect elected officials to raise the gas tax or dedicate new revenue sources for NJ Transit. Just as unlikely is freeing up aid for transit by cutting from other departments, most of which have been severely cut already.  But elected officials can’t keep borrowing money to pay for daily operations, which puts additional stress on a nearly bankrupt Transportation Trust Fund. Elected officials will have to reauthorize the Trust Fund by 2012 at the latest, and should take steps towards ending this unsound practice at the same time.

By keeping this money in the capital budget, New Jersey could dramatically improve its transit network and reap the environmental and economic payoff. Or the state could maintain NJ Transit’s current level of capital investment while issuing less debt to support the agency. Either would be better than the status quo.

Image: TSTC analysis of NJ Transit data. “Other agency revenue” includes advertising and miscellaneous revenue generated by NJ Transit. “Other” is primarily federal and state reimbursements.