During his campaign, New Jersey Gov. Jon Corzine promised to not raise taxes in order to replenish the bankrupted transportation fund. However, the state has already borrowed $1 billion to keep the program alive for the 2006 state fiscal year and is now borrowing $175 million from future federal funds to stay afloat. Raising taxes may just be the tip of the iceberg.
Why is the state in such a financial crisis? According to Bob Briant Jr., CEO of the Utility and Transportation Contractors Association (UTCA), the problem began during the Whitman administration in the ’90s.
“State Treasurer Brian Clymer tried to solve the funding problems by taking 10-year bonds and refinancing them into 20-year bonds without any real revenue being generated. In addition, the Transportation Trust Fund [TTF] was constantly tapped to replenish the state’s general fund. The state was accustomed to funding the TTF with 50 percent bonds and 50 percent cash. During Whitman’s term, that number jumped as high as 80 percent bonds and 20 percent cash, which created much higher annual debt service payments,” explained Briant.
“It’s a vicious cycle. Each year more cash is used to pay higher annual debt service payments due to increased borrowing and each year more borrowing takes place because the state has less cash for the its capital construction program,” he continued.
Briant is currently serving on the Governor’s Transportation Trust Fund Finance Authority.
“At the same time, government was taking items normally paid out of the general fund and transferring them into the capital program. They were essentially taking out 20-year loans to pay for salaries, office space, tires, mufflers, you name it,” said Briant.
In 2000, the TTF was renewed, stipulating a minimum of $445 million in new revenue per year. The revenue was to be generated from a new automobile sales tax, petroleum gross receipts tax, and additional credit from motor fuel taxes collected by the state.
The New Jersey TTF, however, is one of the top 10 largest debt-holders in the country, according to Briant. The state is currently looking at paying $805 million in debt per year until 2022.
The Governor’s Transportation Transition Advisory Committee has submitted a number of recommendations to establish new revenue. They include:
• A motor fuels tax increase of an additional 15 cents to be phased in at 3 cents per year over five years. Each tax penny generates $53 million.
• Full yield of the gas tax. Of the $53 million per penny, the TTF only gets $45 million. The rest is diverted to the general fund.
• Increased registration fees for vehicles weighing more than 25,000 lbs.
• A tax on daily car rental fees.
• Phasing expenditures, including salaries, operational costs and public transit, out of the TTF into the general fund over a number of years, freeing up approximately $350 million.
• Full yield on petroleum gross receipts tax, approximately $16 million per year.
“In order to maintain the program, the TTF needs at least $795 million for the first year,” said Briant. “Our team is advocating $1 billion.
“The goal is to have the bill introduced in the next seven to 14 days. We hope to have it approved and on the Governor’s desk prior to March 31st,” continued Briant.
The New Jersey Department of Transportation is preparing for possible layoffs if the funding crisis is not solved in the next six weeks. Notice of lay-offs must be given out by mid-March. Engineering and state projects also will be brought to a halt.
According to Briant, the construction industry hasn’t felt the hit just yet. There are still projects being finished and workers on the job. That is subject to change in late spring, early summer if there is no money to fund future projects.
The state faces a $6-billion budget deficit for next fiscal year. Gov. Corzine released a report that recommended tax increases, a week without pay for state workers and preparing plans for state worker layoffs, as reported by the Trenton Times.
“I have made the proposition that we are going to scrub the budget as thoroughly as we can possibly do to define the kinds of savings that hopefully will keep us from taking on some of the other draconian steps,” the governor told the Times. “We will see whether that’s possible.” CEG