New Tax Hike To Save NJ Transit Possible As Gov. Murphy Weighs In

NEW JERSEY – New Jersey lawmakers are pushing for a new tax hike to help save NJ Transit and fix its long-running problems. And now Gov. Phil Murphy has opened the door to supporting the idea.

Senate President Steve Sweeney has unveiled a plan to dedicate $500 million a year from the Corporation Business Tax, the New Jersey Turnpike and the Clean Energy Fund to NJ Transit’s operating budget, providing what he calls much-needed financial stability to the embattled agency.

Sweeney's plan includes a tax surcharge that would raise the rate on businesses that earn more than $1 million from 10.5 to 11.5 percent.

During an unrelated event on Thursday, Murphy said the notion of finding recurring, reliable revenues for infrastructure, and specifically NJ Transit, "is something we absolutely are all in for."

"Exactly how we do that – I think it's too early yet to tell. But we're open-minded to finding that solution," Murphy said. "We're open to finding a good place to land on that."

Murphy's statements came as school aid figures were released on Thursday, showing that as many as 193 school districts may have to raise taxes to make up for cuts. Read more: These 193-Plus Districts May Face Tax Hike: NJ School Aid Figures

The plan calls for the constitutional dedication of $300 million a year from the Corporation Business Tax, $125 million from the New Jersey Turnpike, and $75 million from the Clean Energy Fund to NJ Transit, lawmakers said.

“The absence of consistent funding for NJ Transit operations has undermined its ability to provide safe and reliable service,” said Sweeney. “Dedicated funding will help prevent the diversion of resources needed to improve basic services so the agency can bring an end to the breakdowns, delays and service failures that have plagued the system far too long.

It would also place an outright ban on capital-to-operating transfers from state funding sources like the gas tax and sales tax, and put a hard cap on similar transfers from federal funds, lawmakers said.

For NJ Transit to make service and performance improvements, Sweeney said, the state needs to end the practice of diverting hundreds of millions of dollars away from the capital projects.

“Capital-to-operating transfers are like eating your seed corn,” Sweeney said. “The reason our trains and buses break down so much is that we don’t have the capital dollars needed to replace them on a timely basis. We need to put capital dollars into capital. That’s the only way we can expand mass transit ridership to the levels we can and should achieve in the most densely populated state in the nation.”

Most major transit agencies in the nation have a dedicated source of operating funding that covers 50 percent or more of its non-farebox costs, he said. NJ Transit gets just 1.6 percent of its revenue from dedicated sources.

“Investing in NJ Transit is one of the most important investments we can make to spur New Jersey’s economy, protect our housing values and improve the quality of life for hundreds of thousands of New Jerseyans who depend on NJ Transit to get to work, to school, to shopping and doctor’s appointments, and back home every day,” said Sweeney. “This is a comprehensive approach that shares the cost of NJ Transit’s dedicated operating revenue fairly.”

Senate President Sweeney’s plan would specifically do this:

• Dedicate $300 million a year from the Corporation Business Tax to NJ Transit’s operating budget by constitutional amendment. The extra surcharge on companies making over $1 million is projected to raise $250 million to $300 million this year and rise in future years based on current collection patterns. Most of the tax is paid by out-of-state companies, Sweeney said.
• Dedicate $125 million annually in New Jersey Turnpike revenue currently going to NJ Transit’s operating budget on a permanent basis, either by constitutional amendment or statute. New Jersey’s motorists and the out-of-state drivers who pay a high percentage of Turnpike tolls have an interest in reducing traffic and increasing mass transit.
• Dedicate $75 million annually from the Clean Energy Fund to NJ Transit’s operating budget on a permanent basis by constitutional amendment. The fund is a vital part of any strategy to meet our 2050 clean energy goals.
• Prohibit the transfer of capital funds to operating expenses from state revenue source in the Transportation Trust Fund by constitutional amendment and put a hard cap on federal capital-to-operating transfers by statute.

“The uncertainty leaves an agency that requires stable funding at the mercy of fiscal conditions and political circumstances that can easily fluctuate. This has been a long-standing problem that needs a long-term solution,” said Sweeney.