Transportation

As the name suggests, the Transportation Trust Fund (TTF) provides New Jersey with a way to pay for the roads, bridges, rail lines, and buses that residents and businesses rely on every day. For more than 30 years, state revenues—prominently including receipts from the state’s tax on gasoline—have been deposited into the fund to improve and rehabilitate state-controlled transportation assets.

However, contributions have failed to keep up with needs. A pay-as-you-go system became borrow-as-you-go¹ until the summer of 2016, when the trust fund’s resources were exhausted.²

Multiple factors caused the TTF’s depletion:

• Capital funding, an average of $1.5 billion per year, had not increased substantially in the past 15 years.
• Except to repair damage from Superstorm Sandy, the federal contribution to transportation infrastructure capital investment increased only modestly.
• All funding streams previously dedicated to specific transportation needs were pledged, for many years into the future, to paying the debt on bonds previously issued for capital investment.

The Transportation Trust Fund desperately needed more resources. In October 2016, the state raised its tax on gasoline to 37.5 cents per gallon from the previous 14.5 cents, the second lowest gas tax in the U.S., a rate that had gone unchanged since 1988. In a referendum in November 2016, voters decided that all the increased revenue from the gas tax would have to go to the uses of the TTF.

The 2016 reauthorization of the trust fund extended New Jersey’s annual transportation capital spending for eight years, at a rate of $2 billion a year.³ However, these new funds barely respond to needs that have compounded after so many years of neglect.

For one thing, the equivalent of 7 cents of the 23-cent increase in the price at the pumps was devoted to relieving the state budget’s General Fund of the Transportation Trust Fund debt service obligations incurred since 2010.⁴

For another, the size of the gas tax increase was not based on the state’s actual needs. Rather than conduct a strategic assessment of New Jersey’s full range of transportation capital needs and objectives and then determine how much money would be needed, legislators and the governor capped the revenue-raising process at a level chosen to satisfy the political imperative of keeping gas prices lower than in New York and Pennsylvania. Ironically, the political capital spent to secure the gas tax increase did not actually address the problem of constrained resources.

A more forward-looking approach is needed.

To make the numbers add up to a transportation system that meets public needs, including paying the state’s share of building an additional Hudson River tunnel, New Jersey needs to leverage maximum support from external sources, including bistate and in-state authorities and federal transit discretionary aid. The allocation of Turnpike revenues for transportation capital improvements, which was used in the state fiscal year that began July 1, 2010, should be considered for permanent support of the Transportation Trust Fund.

Even with these steps, it will be difficult to move New Jersey’s transportation system from an economic liability to a strength without another increase in state petroleum taxes in the next four years—unless policymakers take such alternative actions as:

• Raising motor vehicle license and registration fees beyond that needed for Motor Vehicle Commission improvements, and devoting part or all of the new revenues to transportation capital needs
• Charging tolls on Interstate highways in New Jersey
• Leasing toll roads to private operators and using the upfront cash to finance road and rail projects that have been on the shelf due to lack of funds
• Replacing petroleum-consumption taxes with mileage fees

New Jersey gives short shrift to the two transportation entities with the largest roles in delivering a well-run, efficient system:

• The state Department of Transportation (NJDOT), established in 1966 to replace the State Highway Department. Its major responsibilities, broadly defined, include creating and maintaining a master plan for transportation development and building and maintaining the state’s system of highways and bridges.
• NJ Transit, a state-owned system of bus, commuter rail, and light rail services that carries the third highest ridership in the U.S. It was created in 1979 to “acquire, operate, and contract for transportation service in the public interest.”¹⁸

It is essential to reverse the destabilizing impact that state budgeting practices have had on the work of the state Department of Transportation and NJ Transit.

ENGAGING THE PUBLIC

For years, state leaders have downplayed the severity of New Jersey’s transportation funding crisis. They missed the opportunity to build public understanding and support for infrastructure investment and good transportation policy.

As the state’s economy and the world of communications technology continue to evolve, years have gone by without NJDOT and NJ Transit launching a public discussion that would lead to a new vision for transportation investment and the state’s roles. As a result, the public’s constant complaints about traffic congestion, lost time, and gaps in mobility remain unanswered. The state agencies need to engage New Jersey residents and workers on these issues.

The state of Washington offers a good model. Its quarterly publication, the Gray Notebook,¹⁹ reports on transportation performance, including updates on the status of planned projects.

EFFECTIVE LONG-RANGE PLANNING

Over the past decade, NJDOT and NJ Transit have been unable to prepare a long-range transportation plan that bears the governor’s endorsement. Three other organizations that do this kind of work as part of their federal mandates at an acceptable level of quality are the state’s Metropolitan Planning Organizations: North Jersey Transportation Planning Authority, Delaware Valley Regional Planning Commission, and South Jersey Transportation Planning Organization. In fact, NJDOT has assigned to these organizations the responsibility of updating the Strategic Highway Safety Plan.

NJ TRANSIT

The state budget is the main source for bridging the annual difference between transit operating expenses and revenues from such sources as fares and the sale of advertising space on trains and buses. This annual deficit is now at $1.1 billion.

In the early 2000s, the General Fund of the New Jersey state budget contributed approximately $350 million toward NJ Transit’s operating deficit. By the fiscal year that started July 1, 2015, that support was down by 90%, to $33 million.²⁰

Public transit agencies in many other states can depend on annual revenues from the state budget. For example, dedicated taxes contribute between 47% and 62% of operating assistance for systems based in Philadelphia, Chicago, Los Angeles, and Boston.²¹ NJ Transit has no such cushion.

A major byproduct of state budgetary neglect has been heavy reliance on fare increases. A 2015 New Jersey Association of Rail Passengers study reported that NJ Transit riders paid higher fares for a 50-mile trip than passengers of comparable U.S. commuter rail agencies.²³ As of 2012, fares made up 52% of NJ Transit’s revenues, compared with 34% to 38% in such comparable metropolitan areas as Chicago, Philadelphia, and Boston. NJ Transit has raised fares five times since 2000, including a record 22% hike in 2010.²⁴

Because of reluctance to raise taxes that would strengthen revenue flows to the state’s General Fund (in fact, some state taxes were reduced to win legislative and gubernatorial support for raising the gas tax), competition for allocations has intensified. NJ Transit is a victim of that competition. The agency has persistently lacked resources, resulting in the loss of several key staff members to other regional transportation agencies after almost a decade of no pay increases and creating vacancies in important authorized safety-compliance positions.

One factor contributing to constant scarcity and instability is the longstanding practice of devoting a sizable amount of federal transit capital dollars, in the absence of state operating funds, to preventive maintenance. More than $400 million annually is diverted in this way, a practice begun in the late 1990s. Restoring this money to its intended use would strengthen a NJ Transit capital budget that remains fragile and insufficient even after the 2016 Transportation Trust Fund re-authorization.

Beyond relying on capital money to pay for operating expenses, NJ Transit’s budget suffers from instability caused by temporary fixes that paper over shortfalls.

Drivers might be surprised to find out that the tolls they pay on the New Jersey Turnpike have become a major component of the transit agency’s annual operating budget. For three years, some $295 million per year from the last Turnpike Authority toll increase, originally allocated to the Hudson River tunnel, was used to cover part of NJ Transit’s operating budget deficit. This diversion occurred under a provision in the arrangement consolidating New Jersey’s toll authorities that loosened restrictions on the use of Turnpike Authority revenues. In the state fiscal year that began July 1, 2017, the Turnpike Authority’s contribution was $204 million.²⁶ Allocating Turnpike revenues to NJ Transit regular operations both masks the budget gaps and diverts funds that could be used appropriately for NJ Transit capital improvements.

The state Clean Energy Fund is another temporary fix for these budget gaps. Intended to promote ways to reduce energy consumption, and derived from assessments on utility customers, the fund increasingly is being used for NJ Transit operations: $82.1 million in the most recent two budgets and $62 million two years before.²⁷ Energy-conservation advocates understandably contend that supporting NJ Transit’s annual operations is not an appropriate use of utility-bill assessments.

NJ Transit is governed by a board of directors chaired by the state commissioner of transportation. The other six members are the state treasurer, a member selected by the governor from his or her administration, and four “public” members nominated by the governor and confirmed by the state Senate. The four public members, often business people or lawyers, do not represent any specified constituencies.

The board structure has not changed since it was established in 1979. Now is a good time to revisit that structure, with an eye toward governance that better represents the wide range of New Jerseyans who have interests in a smooth-running public transportation system. For example, people who ride the system could bring sensitivity to users’ needs, business people could help guide the operation of a public enterprise, and elected officials who have served on transportation boards, such as the North Jersey Transportation Planning Authority, could offer knowledge of the economy’s needs. Such criteria could inform the selection of future board members.

N.J. DEPARTMENT OF TRANSPORTATION

In most states, transportation needs (or at least highway needs) are funded from dedicated trust funds, relying mainly on gasoline taxes. These funds support both the capital and operating costs of the agency. New Jersey chose a different model. In the 1970s, after decades of inadequate, unpredictable financial support for transportation, policymakers rejected the idea of a trust fund that would support both capital spending and operations, instead enacting a single purpose fund devoted solely to capital expenditures. Support for daily operations and maintenance needs, as opposed to major construction projects, was left to annual appropriations from the state budget, and this practice continues today.

Over the past three decades, reliance on funding operations and maintenance from the state’s General Fund has turned out to be a bad deal for New Jerseyans who depend on a reliable transportation system. NJDOT’s allotment from the state budget has been tightly squeezed—from $85 million in the fiscal year that began July 1, 2003, to only $43 million in the current fiscal year. This squeeze is even more remarkable when inflation on the purchasing power of the 2003 appropriation is taken into account.²⁸

Gubernatorial administrations, legislators, and policymakers at NJDOT often appear more concerned with the “optics” of expenditures than with efficiency (for example, by publicizing staff reductions as cost savings), leading to chronic staff shortages in key areas, restricting workers’ professional development opportunities, eliminating office administration tools, and other negative consequences.

The continuing squeeze on the NJDOT operating budget can be seen in numerous vacant positions and the resultant designation of “acting managers.” As state appropriations have declined, management salary increases have been rare, leading to a hollowing out of the management structure. Few employees seek management positions, because classified civil service positions hold the promise of salary increases over time and management positions do not. Inadequate numbers of support staff such as accountants lead to project delays and cost increases. Reductions in engineering staff increase reliance on private engineering consultants, which makes road construction more expensive.

A decline in operations and maintenance quality that would correspond to the sharp decline in appropriations is avoided only by shortsighted budget maneuvers, most commonly “capital-to-operating transfers” that divert money from major projects to fund day-to-day expenses. The capital budget, intended for construction projects and major improvements to the transportation system, now includes such items as salaries, preventive maintenance, and purchasing equipment such as roadway lighting. In the past, these routine expenditures came from state General Fund appropriations.

Shifting operating costs to financing through bonded indebtedness is a particularly costly practice. Due to interest incurred over the life of the Transportation Trust Fund’s long-duration bonds, New Jersey ends up paying nearly double the original cost. More disturbing is the fact that the same activities such as resurfacing or guard rail replacement will be repeated on the same piece of roadway three or four more times before the original bond is retired.

These state budgeting practices contribute to a decline in the overall transportation network by diverting millions of dollars in capital funds for operating purposes and deferring both routine maintenance and intermediate roadway and bridge rehabilitation projects.

While seeking better ways for public investment to meet the state’s transportation needs, policymakers have the opportunity to consolidate state transportation entities and take advantage of these entities’ organizational, policy, and financial strengths to address system weaknesses.

The skill shortages and resource scarcity that have weakened NJDOT might be best addressed by such a merger. The merged professional and administrative workforce would be subject to the Turnpike Authority’s salary and employment regulations, which are more comparable to the private sector. Recruitment efforts could be strengthened through better salaries and broader career opportunities. Efficiency could be enhanced by the flexibility to assign workers where they are most needed, while reducing expenses for administrative functions and duplicative space. New funding streams could be developed through future toll increases.

New Jersey occupies the fifth smallest land area of any state and it is the most densely populated. Put those two statistics together, and the importance of being able to move with ease becomes more than a luxury. Getting from place to place as rapidly, safely, and affordably as possible is essential to New Jersey’s economy and its residents’ well-being.

Clearly, not being able to move people and goods efficiently poses a threat to the state’s prosperity and quality of life. And, yet, here we are.

The leaders chosen by our state have the responsibility to restore New Jersey’s willingness to make the public investments necessary for a top-quality transportation system and to engage the public in setting priorities and determining how to pay for them.