Gas Tax Going Up in New Jersey for First Time in 28 Years

by | October 18, 2016

By Christopher Maag

Gas prices in New Jersey will go up Nov. 1 by 23 cents a gallon after Gov. Chris Christie signed the largest gas tax increase in state history on Friday.

The total tax grows to 37.5 cents a gallon under a deal that pays for road, bridge and public transportation improvements. It's the first increase in gas taxes since 1988.

Polls conducted by the Eagleton Institute of Politics at Rutgers University consistently show that a majority of New Jersey voters oppose the gas tax hike.

"Through this legislation, we are continuing our commitment to providing tax relief for working New Jerseyans of all levels, senior citizens, military veterans and property owners, while ensuring solid, reliable, state-of-the-art roads, bridges and mass transit systems," Christie said in a news release.

The gas tax was part of a deal Christie negotiated with Senate President Stephen Sweeney and Assembly Speaker Vincent Prieto that ended a stand-off on transportation funding. Without an agreement in place, Christie had ordered projects across the state shut down.

The package approved Friday includes the elimination of the estate tax, a slight reduction in the sales tax, and an increase in tax credits to the working poor.

As he signed the package into law, Christie simultaneously rescinded his executive order that had stopped most transportation construction projects across the state.

The shutdown order took effect in July, at the height of the summer construction season, raising fears among transportation experts and municipal officials that the entire season could be lost. It was unclear Friday how many projects can re-start before the onset of cold winter weather, which makes it impossible to lay asphalt or continue most large-scale projects.

Democratic state Sen. Paul Sarlo said he was hopeful that work can continue.

"We can now put people back to work on stalled transportation projects," said Sarlo, who chairs the Senate budget committee. "This is one of the most significant investments in New Jersey's infrastructure and economy in recent memory."

While the gas tax is the largest in state history, the actual amount invested in construction actually will remain unchanged from recent years, transportation experts said. Thanks to the tax increase, the total amount raised by the combination of gas tax revenues and new borrowing will grow from $1.2 billion a year to $1.6 billion, an all-time high.

But of that new $400 million in new revenue, $334 million is dedicated to paying off old transportation debts, according to the legislation.

Other commitments made by legislators to get the deal passed, including more than $2 billion to expand two light rail systems in the state and $200 million to expand rail connections at New Jersey ports, will soak up even more of the money.

The biggest drain of all will come if legislators decide to continue the current practice of subsidizing NJ Transit's operating budget with $400 million a year in gas tax revenue instead of using money from the general fund.

In total, those subsidies plus the promised new construction projects will soak up $8.9 billion of the total $16 billion raised by the measure. That leaves about $7 billion for everything else, such as fixing New Jersey's 2,413 obsolete and structurally deficient bridges.

"It's flat funding," said Janna Chernetz, New Jersey policy director for Tri-State Transportation Campaign, which advocates for more mass transit.

The plan also calls for the state to rack up $16 billion in new debt by 2024, in addition to the $30 billion already owed by the Transportation Trust Fund.

"We are kicking the can down the road big time," said John Wisniewski, Democratic chair of the Assembly's budget committee. "We'll be deeper in debt, and we will have no available revenue."

Several Republican lawmakers said they would work to repeal the gas tax, an effort that faces a significant hurdle given the support from Democrats and Christie.

"I've heard from so many commuters who struggle financially every time the price of gas rises, and they're pleading for help to save them from the gas tax increase," said GOP Sen. Kip Bateman, who started an online petition seeking support. "Lawmakers have a responsibility to not harm already struggling residents through our state's tax policy, and that's what this effort to repeal the gas tax increase is all about. I encourage everyone to sign and share the online petition to help get the repeal movement rolling."

Others questioned the financial wisdom of the entire tax package.

Even after the new money from the gas tax increase, cuts like eliminating the estate tax and reducing the sales tax by a third of a percent will result in a net loss of $1 billion a year for the state, which also faces $80 billion in unfounded liabilities for its pension system. Moody's, one of the nation's "big three" credit rating agencies, warned this week that the lost tax revenue will further hurt New Jersey's credit and financial stability.

(c)2016 The Record (Hackensack, N.J.)