Lawmaker proposes dedicated funding for troubled New Jersey Transit

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After years of contentious state budget battles over New Jersey Transit, one of the state’s top lawmakers is proposing a permanent funding solution.

Senate President Steve Sweeney, D-Gloucester, is pitching a plan to dedicate $500 million a year toward NJ Transit’s operating budget deriving largely by making permanent a tax surcharge on top-earning corporations. Sweeney is also proposing asking voters to pass a referendum that would amend the state constitution and insure that the new funding is dedicated to the statewide bus and rail operator on an annual basis.

New Jersey Senate President Steve Sweeney, D-Gloucester, wants to implement a dedicated $500 million annual revenue stream to New Jersey Transit through a constitional amendment

“The absence of consistent funding for NJ Transit operations has undermined its ability to provide safe and reliable service,” Sweeney said in a statement after announcing the proposal on Feb. 21. “The uncertainty leaves an agency that requires stable funding at the mercy of fiscal conditions and political circumstances that can easily fluctuate.”

NJ Transit’s state operating subsidy was set at $457 million for the current 2020 fiscal year. The agency also gets backing from $211 million in diversions from the New Jersey Turnpike Authority and the state's Clean Energy Fund.

Sweeney’s proposal calls for a constitutional dedication of $300 million annually toward NJ Transit from the state’s corporate business tax. He wants to extend surcharges created in 2018 on businesses with more than $1 million in profits that increased their tax rates to 11.5% from 9%. The CBT surcharge is scheduled to be phased out by 2023.

The remaining $200 million of dedicated funds for NJ Transit under Sweeney’s plan would derive from $125 million in New Jersey Turnpike Revenue and $75 million from the Clean Energy Fund. The proposal would also place a ban on capital-to-operating transfers from state and federal funding sources like the gas tax that have cut into NJ Transit’s capital program to fund operations.

The proposed new funding source for NJ Transit was announced on the same day that the agency’s CEO, Kevin Corbett, appeared before the Senate Select Committee on NJ Transit and was criticized by lawmakers for ongoing service woes. Corbett told reporters after the hearing that efforts to generate dedicated revenues toward NJ Transit are “totally music to my ears.”

New Jersey Gov. Phil Murphy unveiled a $40.9 billion 2021 fiscal year budget proposal that would increase NJ Transit funding by $132 million for a record total allocation of nearly $600 million. The Democratic governor said the money would be used to train an additional 98 locomotive engineers, fund service enhancements at both Newark and New York Penn Station and start a new electric bus program.

Structurally imbalanced budgets and rising pension liabilities drove 11 rating downgrades to New Jersey general obligation bonds between 2011 and 2017. The Garden State’s GO debt is now rated A3 by Moody’s Investors Service, A-minus by S&P, and A by Fitch Ratings and Kroll Bond Rating Agency. Only Illinois is rated lower among the 50 U.S. states.

Murphy made increased state support for NJ Transit one of his campaign pledges in 2017, but his third budget proposal still includes diversions from the NJTA and Clean Energy Fund. Annual underfunding of NJ Transit by the State of New Jersey has forced the transfer of at least $400 million from the agency’s capital budget to meet basic operating needs, according to the Regional Plan Association. The mass transportation system’s operational and maintenance costs have also jumped nearly 30% during the past decade while state subsidies declined.

“It is essential that New Jersey provide increased and dedicated funding for NJ Transit in this year’s budget,” Tom Wright, RPA president and CEO, said in a statement. “The Governor and State Legislature must address the problem at hand.”

Alyana Alfaro, press secretary for Murphy, said that the administration will access all of the legislature’s proposals as part of the budget process and will work “collaboratively” to toward continuing “historic investments” he has made in NJ Transit.

Murphy’s budget does not include increases to the CBT, but he did push a millionaire’s tax for a third straight year that would net around $500 million in state revenue if adopted. The proposed hike on annual incomes above $1 million to 10.75% from 8.97% would be allocated to property tax relief, healthcare and education.

“The Murphy administration has been resistant to higher corporate taxes because they think companies are more likely to leave the state than individual families,” said Ben Dworkin, director of Rowan University's Institute for Public Policy and Citizenship. “They believe the CBT affects corporate behavior.”

NJ Transit’s funding woes were underscored in January when the agency needed a $500 million bond sale by the New Jersey Economic Development Authority to purchase 600 buses and 17 trains. A 179-page audit released by Governor Murphy in October 2018 showed that NJ Transit lacked adequate financing for its $5.3 billion of capital assets.

The current 2020 New Jersey budget that expires June 30 directed $75 million of new direct funding toward NJ Transit, a $50 million increase from what Murphy proposed in his original budget following pressure from state lawmakers. Janna Chernetz, deputy director of the Tri-State Transportation Campaign, stressed that years of neglect and underfunding have fostered a series of breakdowns impacting for the just under one million daily trips.

“The agency didn’t crumble during one administration nor will it be totally fixed in one, but the state can’t continue to shortchange an agency in terms of funding and vision and expect change,” Chernetz said. “It’s time to adequately fund NJ Transit so that the agency can provide service that the residents of the Garden State need and deserve.”

The full state legislature has until early August to pass legislation that would put an NJ Transit constitutional amendment ballot measure before voters in November.

A late January report issued by New Jersey State Auditor Stephen M. Eells said the agency faced escalating costs associated with installing positive train control equipment and questioned whether the system would be operational by a Dec. 31, 2020 federal deadline. The Federal Railroad Administration granted NJ Transit approval to begin testing for its PTC system on Feb. 18 with Corbett saying he was “confident” about meeting the deadline for full implementation.

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