by Carlos Rodrigues, PP/AICP, RPA's New Jersey Director
Governor Jon Corzine of New Jersey has demonstrated remarkable leadership by promoting a fiscal restructuring plan that revolves around a series of toll increases on the state's three major toll roads. Raising tolls in New Jersey makes enormous sense - and not just because many of the people using the roads are out-of-staters. Tolls have risen only minimally over the last 10 to 15 years, while the cost of everything else has gone up. A re-adjustment is long overdue.
By putting forward this plan, Governor Corzine is recognizing the magnitude of the fiscal problems his state faces. He is also pioneering bold new ideas and showing his willingness to take a direct, hands-on leadership role. His most vocal critics, who claim that the state can solve its problems by cutting wasteful spending - but somehow never explaining just what they would cut and how much it would add up to - should follow his lead by offering honest alternatives, rather than grandstanding the issue.
With all that said, we hope the governor also has the stamina to go from what he hoped would be a sprint to what promises to be a marathon - if not an obstacle course.
In a nutshell, the Governor proposes to use aggressive toll increases to pay down 50% of State debt and fund the Transportation Trust Fund for the next 75 years. In addition, he would freeze state spending, and put in place mechanisms that would limit future spending to growth in revenues, and require voter approval for future un-securitized borrowing.
Legislators and political groups seem to largely agree, in principle (although not in the details), on important aspects of the plan, such as what to do with the money and how to control spending in the future. The proposal to assign the new revenues toward the transportation sector and paying down the state debt has not generated much debate. It is largely consistent with RPA's position on this issue, as described in the 2007 publication "Proceed with Caution - Ground Rules for Public-Private Partnerships", as well as several other reports dealing with the future of the Transportation Trust Fund.
There is no agreement, however, with respect to where the new money should come from. There are many concerns with the Governor's "toll-only" strategy. Toll increases could divert significant amounts of traffic to non-toll or local roads. They will place a disproportionate burden on the citizens residing in certain counties while other parts of the state would be exempt. Toll increases are regressive, and could be bad for the state's economy. And toll increases - unlike a gas tax - do not penalize greenhouse gas producing vehicles, and do not respond to concerns about climate change.
While all these concerns have substance, as a whole they can also be seen as resistance to swallowing the bitter but necessary strong medicine encapsulated in Corzine's plan.
Insisting that the State can solve its fiscal problems simply by tightening its belt shows a profound misunderstanding of the realities of the state budget. Most insiders on both sides of the aisle privately agree that the spending freeze already on the table is unrealistic in the face of growing personnel costs - but more on that later.
Other, more constructive suggestions are starting to emerge from the public debate. The common theme is to diversify the revenue sources, distribute the burden more equitably around the state and not to rely exclusively on toll increases. For example, New Jersey Policy Perspective proposes to raise new revenues by combining a gas tax increase with increases in a number of other car-related fees, such as car registrations and driver licenses. The New Jersey Chapter of the National Association of Office and Industrial Parks has also suggested a "more broad-based and equitable revenue-generating approach, including tolls on east-west corridors and a gas tax increase." Even a number of influential state legislators have begun to weigh in on compromise solutions. All include an increase to the gas tax which until yesterday was considered a political "kiss-of-death." That it is now being considered already represents one achievement of the Corzine plan.
A compromise between the Governor's proposal and the various suggestions might be the way to go - a fiscal mechanism to provide a long-term, sustainable source of funding for the state's vital transportation infrastructure, while ameliorating the state's chronic public debt - provided the new transportation investments are guided by smart growth principles and consistent with the state's own smart growth policies.
At the same time, this entire discussion misses an important issue. Governor Corzine's proposal is an ambitious effort to correct the state's fiscal woes by addressing the out-of-control borrowing that has funded New Jersey government for the last decade. By the Governor's own admission, however, an equally large problem looming in the state budget is the major under-funding of pension and medical liabilities for state workers. While the current budget proposes $2.2 billion to pay down these accumulated debts, its own analysis reveals that the "Annually Required Contribution" is really closer to $7.2 billion. So the State is underfunding the pension and medical benefits it has promised its workers to the tune of $5 billion a year.
Deficit hawks argue that before the Governor restructures the capital debt of the State, he should think about how to address the State's rapidly growing pension and medical liabilities. In particular, solving this crisis is certainly going to require tough negotiations with the state employees' unions. These conversations will not be pretty. In December 2005, New York City's subway and bus system was shut down for several days when the transit workers walked out over essentially the same issues - pensions, medical benefits and retirement age.
While the Governor deserves enormous credit for focusing attention on the fiscal problems of the state and promoting realistic solutions, one could argue that before he asks the citizens to dig deeper into their pockets to keep the state's infrastructure system afloat, he should start talking with the legislature and the unions about reining in these costs. Otherwise, the $30 billion or so he hopes to raise from the toll increases could simply kick the pension and medical liability issue down the road for a couple of years, when the state will be right back where it started.
Only this time, there won't be any ridiculously low tolls to increase to get the new money.
Governor Jon Corzine of New Jersey has demonstrated remarkable leadership by promoting a fiscal restructuring plan that revolves around a series of toll increases on the state's three major toll roads. Raising tolls in New Jersey makes enormous sense - and not just because many of the people using the roads are out-of-staters. Tolls have risen only minimally over the last 10 to 15 years, while the cost of everything else has gone up. A re-adjustment is long overdue.
By putting forward this plan, Governor Corzine is recognizing the magnitude of the fiscal problems his state faces. He is also pioneering bold new ideas and showing his willingness to take a direct, hands-on leadership role. His most vocal critics, who claim that the state can solve its problems by cutting wasteful spending - but somehow never explaining just what they would cut and how much it would add up to - should follow his lead by offering honest alternatives, rather than grandstanding the issue.
With all that said, we hope the governor also has the stamina to go from what he hoped would be a sprint to what promises to be a marathon - if not an obstacle course.
In a nutshell, the Governor proposes to use aggressive toll increases to pay down 50% of State debt and fund the Transportation Trust Fund for the next 75 years. In addition, he would freeze state spending, and put in place mechanisms that would limit future spending to growth in revenues, and require voter approval for future un-securitized borrowing.
Legislators and political groups seem to largely agree, in principle (although not in the details), on important aspects of the plan, such as what to do with the money and how to control spending in the future. The proposal to assign the new revenues toward the transportation sector and paying down the state debt has not generated much debate. It is largely consistent with RPA's position on this issue, as described in the 2007 publication "Proceed with Caution - Ground Rules for Public-Private Partnerships", as well as several other reports dealing with the future of the Transportation Trust Fund.
There is no agreement, however, with respect to where the new money should come from. There are many concerns with the Governor's "toll-only" strategy. Toll increases could divert significant amounts of traffic to non-toll or local roads. They will place a disproportionate burden on the citizens residing in certain counties while other parts of the state would be exempt. Toll increases are regressive, and could be bad for the state's economy. And toll increases - unlike a gas tax - do not penalize greenhouse gas producing vehicles, and do not respond to concerns about climate change.
While all these concerns have substance, as a whole they can also be seen as resistance to swallowing the bitter but necessary strong medicine encapsulated in Corzine's plan.
Insisting that the State can solve its fiscal problems simply by tightening its belt shows a profound misunderstanding of the realities of the state budget. Most insiders on both sides of the aisle privately agree that the spending freeze already on the table is unrealistic in the face of growing personnel costs - but more on that later.
Other, more constructive suggestions are starting to emerge from the public debate. The common theme is to diversify the revenue sources, distribute the burden more equitably around the state and not to rely exclusively on toll increases. For example, New Jersey Policy Perspective proposes to raise new revenues by combining a gas tax increase with increases in a number of other car-related fees, such as car registrations and driver licenses. The New Jersey Chapter of the National Association of Office and Industrial Parks has also suggested a "more broad-based and equitable revenue-generating approach, including tolls on east-west corridors and a gas tax increase." Even a number of influential state legislators have begun to weigh in on compromise solutions. All include an increase to the gas tax which until yesterday was considered a political "kiss-of-death." That it is now being considered already represents one achievement of the Corzine plan.
A compromise between the Governor's proposal and the various suggestions might be the way to go - a fiscal mechanism to provide a long-term, sustainable source of funding for the state's vital transportation infrastructure, while ameliorating the state's chronic public debt - provided the new transportation investments are guided by smart growth principles and consistent with the state's own smart growth policies.
At the same time, this entire discussion misses an important issue. Governor Corzine's proposal is an ambitious effort to correct the state's fiscal woes by addressing the out-of-control borrowing that has funded New Jersey government for the last decade. By the Governor's own admission, however, an equally large problem looming in the state budget is the major under-funding of pension and medical liabilities for state workers. While the current budget proposes $2.2 billion to pay down these accumulated debts, its own analysis reveals that the "Annually Required Contribution" is really closer to $7.2 billion. So the State is underfunding the pension and medical benefits it has promised its workers to the tune of $5 billion a year.
Deficit hawks argue that before the Governor restructures the capital debt of the State, he should think about how to address the State's rapidly growing pension and medical liabilities. In particular, solving this crisis is certainly going to require tough negotiations with the state employees' unions. These conversations will not be pretty. In December 2005, New York City's subway and bus system was shut down for several days when the transit workers walked out over essentially the same issues - pensions, medical benefits and retirement age.
While the Governor deserves enormous credit for focusing attention on the fiscal problems of the state and promoting realistic solutions, one could argue that before he asks the citizens to dig deeper into their pockets to keep the state's infrastructure system afloat, he should start talking with the legislature and the unions about reining in these costs. Otherwise, the $30 billion or so he hopes to raise from the toll increases could simply kick the pension and medical liability issue down the road for a couple of years, when the state will be right back where it started.
Only this time, there won't be any ridiculously low tolls to increase to get the new money.
@RegionalPlan
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