Like an overextended credit card customer, New Jersey's Transportation Trust Fund brings in just enough money to cover nothing more than the minimum payments on its old debts. That's right — as of next year, the hard-earned money that New Jerseyans pay in gas and other taxes, money that is meant to pay for roads, buses and trains — nearly $900 million a year — will instead go to pay back old loans.
We've been here before. The last time the Transportation Trust Fund — the main source of funding for all capital improvements to New Jersey's roads and transit system — was up for re-authorization, in 2006, the Fund was nearly broke, as its revenues at the time were approaching the cost of funding the transportation capital program plus debt payments.
The response of Governor Corzine and the Legislature? Increase the transportation capital program by 33%; redirect a paltry $87 million to the Fund from the state's general budget and the toll authorities; and, to make the math work, refinance the Fund's debt and stretch it out from 20- to 30-year bonds. To pay these debts, Governor Corzine's strategy was to buy enough time to enact an "asset monetization" scheme, whereby bonds financed by future toll increases on the Turnpike and Parkway would have replenished the Fund.
But, as it turns out — unsurprisingly, I suppose — politicians in Trenton were not able to resist the temptation to delay making the unpopular decision, while never addressing the Fund's structural problem. And so, while in 2006, the Fund was $8 billion in debt, it is now $11 billion that New Jersey taxpayers are on the hook for, just 3 years later.
The Fund was created in 1984 to provide a stable source of pay-as-you-go funding for transportation projects. However, starting with the Whitman administration, elected officials have not dedicated appropriate levels of money to pay for ever-growing transportation programs. Over the 25 years of the Fund's existence, its expenses have grown twice as fast as its revenues. No wonder it will cost taxpayers $20 billion to repay old debt over the next 30 years.
Now look at it a different way: Since all the money currently raised for transportation is already committed to paying off old debt for the next decades, it's as though we're starting afresh, needing to finance the Fund's $1.6 billion commitment to the Transportation Capital Program with no tax revenues at all. None. So, what is Governor Christie going to do?
He can't let the Fund go broke. Without it, only the most basic emergency repairs would be made, paid for out of the state's General Fund, and important capital projects could be postponed indefinitely, including the new passenger rail tunnel to Manhattan, the rebuilding of the crumbling Pulaski Skyway and Portal Rail Bridge, and innumerable other projects that are critical to the growth of our economy. Oh, and the Fund's going broke would also jeopardize the federal government's one-to-one match of our transportation expenses.
Governor Christie also cannot continue to borrow money at the pace that we have been. For every time we borrow $1.5 billion - roughly the pace of our borrowing for the last several years - we are committing to paying back the bank $100 million a year for the next 30 years. Borrow another $1.5 billion the following year, and that's another $100 million on top of the first $100 million. (As a point of reference, New Jersey's gas tax currently brings in approximately $550 million every year.)
The only responsible solution is to raise significant new revenue specifically for transportation, and borrow less. Governor Christie seems to have already excluded raising the gas tax and tolls, but there are lots of other ways to raise money for transportation, including charging the state sales tax on gasoline, for example, as several states do (see the report for a list of ideas). The bottom line is that the Transportation Trust Fund spends more than twice as much as it brings in, and that is irresponsible and fiscally imprudent. Gov. Christie owes it to taxpayers to get the Fund out of its spiral of debt.
For more on this, download our recent report: Spiral of Debt.