Missed projection fuels New Jersey's gas tax increase

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New Jersey’s gas tax will rise by 4.3 cents per gallon on Oct. 1 to support the state's Transportation Trust Fund.

State Treasurer Elizabeth Maher Muoio said lower-than-projected fuel consumption levels over the last two years necessitated a gas tax increase in order to comply with a 2016 law that requires a steady stream of revenue to support the fund.


Former New Jersey Gov. Chris Christie and state lawmakers in 2016 approved an eight-year, $16 billion, TTF re-authorization that raised the state’s gas tax by 23 cents per gallon.

“The law enacted in 2016 contains a specific formula to ensure that revenue is meeting a certain target,” said Muoio in a statement. “Unfortunately, because the Christie administration overestimated gas consumption rates last year, the tax rate has to be increased by nearly two cents more this year in order for us to meet our obligation under the statute and fully fund the state’s many pressing transportation infrastructure needs.”

Muoio said that gas tax revenues fell $125 million short for the 2018 fiscal year that ended June 30 and were off by $32.6 million in 2017.

The new gas tax increase, which will mark the second in three years after New Jersey went without one after 1988, brings the Garden State's gas tax to 41.4 cents per gallon. The Garden State's gas tax will still be lower than the neighboring states of New York (45.8 cents per gallon) and Pennsylvania (58.7 cents), according to the Tax Foundation.

“The precise change in the gas tax rate is dictated by several factors, all of which are beyond the control of the current administration,” said Muoio.

"Only legislative action can change the statutory formula and any new statutory change would still need to secure reliable annual revenues for the Transportation Trust Fund," said the news release from the treasury department.

Christie's 2016 gas tax increase to help fund transportation infrastructure was part of a deal with lawmakers that also involved cutting the sales tax to 6.625% from 7% and phasing out the estate tax. Moody's Investors Service analyst Baye Larsen cautioned in a November 2016 report that the compromise tax plan was a credit negative for New Jersey because it could create an estimated $1.1 billion loss to the state’s general fund by 2021.

New Jersey was hit with 11 bond rating downgrades under Christie and is now the lowest- rated U.S. state other than Illinois.

The state has general obligation bond ratings of A3 from Moody’s Investors Service, A-minus from S&P Global Ratings and A from both Fitch Ratings and Kroll Bond Rating Agency.

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Gasoline tax State budgets Transportation industry Phil Murphy Phil Murphy State of New Jersey New Jersey
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