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Corzine Plan to Fix Transportation Fund Won’t Raise Gas Tax

Wed March 08, 2006 - Northeast Edition
CEG



TRENTON, NJ (AP) Gov. Jon S. Corzine on Feb. 24 said he would revive the ailing fund for road and rail projects by restructuring part of its debt, but without increasing the gasoline tax.

The plan, which requires legislative approval, would dedicate more of the existing gasoline tax toward the Transportation Trust Fund.

The fund, which has bankrolled billions of dollars of construction since 1984, was on track to run dry June 30. That’s because all of the money coming into the fund, primarily from the state’s gasoline tax, would be needed to pay for its debt.

Motorists pay 10.5 cents in state taxes for every gallon of gas they buy, of which 9 cents is intended for the trust fund, with the rest going into the general fund. Corzine’s plan would shift the remaining 1.5 cents to the trust fund, generating approximately $78 million a year.

Corzine’s five-year fix involves a combination of replenishment and reforms, including a freeze on the amount used each year for capital maintenance projects and creating a pay-as-you-go program for future capital projects.

“We think it is a very solid intermediate program. I do believe we will have to come back and revisit the long-term financing issue,” Corzine said. “We have the option of doing that at any time during the five years.”

Besides delaying work on crumbling roads, a bankrupt trust fund would have put the state at risk of losing billions in federal transportation grants since New Jersey would not be able to put up the required matching funds, supporters of the fund have said. Corzine said this plan ensures that New Jersey will be eligible for 100 percent of federal matching funds.

Some transit advocates favored an increase in the gas tax to replenish the trust fund, but few legislators endorsed such a move, fearing voter backlash.

The advocates also criticized how the trust was administered, asserting that the debt rose, in part, because funds were spent on items such as salaries instead of pavement and steel.

The plan unveiled Feb. 24 seeks to refinance a quarter of the fund’s debt, or approximately $1.8 billion. The refinancing would be bid competitively, Corzine said, and would add approximately $100 million in debt service the first year. Figures for future years were unavailable.

Sen. Leonard Lance, R-Hunterdon, assailed the plan, saying it added debt to an already over-indebted state without voter approval.

“This will hurt our children and, indeed, their children,” Lance said.

Former Gov. Richard J. Codey credited his successor, however, with crafting a well thought-out plan.

“The governor’s proposal addresses many crucial elements — funding capital improvements, creating a dedicated revenue source, rehabilitating our infrastructure and increasing aid to municipalities,” Codey said.

The plan would dedicate $1.6 billion a year to funding road and rail projects, and would increase state aid to communities for such projects by $25 million a year, to $175 million.

Bill Dressel, executive director of the New Jersey State League of Municipalities, said communities appreciate the additional aid but had hoped for a long-term, stable funding source for road projects.

“However, given the fact that there is no political consensus for a gasoline tax — and we will continue to argue for that — we will accept this,” Dressel said.

New Jersey’s gasoline taxes haven’t been raised since 1988, and are among the nation’s lowest.

Transit advocates have complained that not all of the 9 cents went to the trust fund, asserting that amounts over $400 million went to the general fund.

Fuel wholesalers pay an additional 4 cents per gallon, which contributes an additional $200 million to the trust fund. It also gets approximately $200 million from other fees, including those on new cars.