Could This Be the NJ Gas Tax Version of ‘Brexit’? Ballot Question Fuels Opposition
The Assembly voted for the Transportation Trust Fund plan, the Senate voted for the Transportation Trust Fund plan, and Gov. Chris Christie signed it into law.
But a key portion can’t take effect without one final approval from New Jersey voters.
Seemingly innocuous Ballot Question No. 2 has emerged as an unlikely flashpoint among those angry that the gas tax is going up Tuesday by 22.6 cents a gallon. The question asks voters to guarantee that all gas tax revenues go into the TTF, rather than into the general state budget.
Left unsaid is that $12 billion in borrowing over the next eight years depends on it. The section of the TTF refinancing legislation that permits the state to issue up to $12 billion in transportation program bonds through 2024 takes effect on the day the constitutional amendment is approved.
If it’s not approved, where does that leave things? In limbo.
“Well, obviously we would have to then regroup and need to do whatever we would have to do as a cleanup bill,” said Assembly Speaker Vincent Prieto, D-Hudson. “But again, I have the utmost confidence in the voters that they will understand.”
One thing a defeat of the ballot question wouldn’t do: Eliminate the hike in the gas tax.
That was approved through separate legislation not tied to the ballot question. And the Senate president said it wouldn’t even prevent the state from finding ways to borrow.
But to Ellen Steinberg, a former Millburn councilwoman who has lost three bids for election to the Legislature, a "no" vote starts “a dominoes effect” she hopes would lead to the repeal of the gas tax.
“If they vote down the dedicated funding, the Transportation Trust Fund bill falls apart. And if it falls apart, it’s going to force the legislators to come back to the table to create something new,” Steinberg said.
“They need people to look at this. And by voting no on the dedicated revenue, that’s the first step in doing this,” she said.
Prieto said “it’s key and pivotal” that the ballot question passes.
“This means that that money can never be diverted, not by current [or] future governors, current or future legislatures that will be able to divert that money and use it for something else,” Prieto said.
"People need to understand that. I’ve been hearing people say, ‘Oh, you should vote no.’ No, this is what actually makes sure that this tough issue, that we’re asking people to pay more at the pumps, that the money goes to good road infrastructure,” Prieto said.
Senate President Stephen Sweeney likened the situation to how the state repeatedly diverted payroll taxes, $4 billion over 10 years, toward hospitals for charity care for the uninsured that was supposed to go into the unemployment fund. That practice was put to a stop by a 2010 constitutional amendment.
“What this does is make sure that the money’s not going to get used for something else,” Sweeney said.
“To allow the Legislature and the governor to have their way with billions of dollars’ worth of funds I think is crazy, because we have some big bills coming towards us,” Sweeney said. “What would stop a governor from using the money to pay the pension payment?”
Sweeney said the gas tax increase won’t disappear if the question is defeated. The state will still find ways to borrow money for transportation, as it always has and is seeking to do against federal funds currently, he said. But he said it’s “very reckless” to allow new taxes not to be constitutionally dedicated.
“I think it’s going to pass, if people pay really attention to it. I hope it passes because otherwise it leaves it to the Legislature and the governor. You know, it’s not locked up,” Sweeney said. "You don’t want money, large pots of money, to be fungible. You don’t want that. I think it’s dangerous.”
The votes to put the question on the ballot were cast by the Legislature in January. The Assembly approved it 75-0 and the Senate 36-1, with only state Sen. Christopher Connors, R-Ocean, opposed.
In addition to all revenues from the gas-tax increase, the question dedicates around $34 million in collections from the existing retail and wholesale fuel taxes to the TTF.
Voters have shot down ballot questions that seemed like slam-dunk prospects before.
In 2007, voters turned down a proposal to dedicate a portion of sales tax revenues, equal to $900 million a year, to property tax relief. It was defeated the same year as a stem-cell ballot question. They were the first questions New Jersey voters had defeated since 1990, breaking a string of 33 consecutive "yes" votes.
This year, a ballot question on North Jersey casinos appears to be heading for a large defeat. And a Fairleigh Dickinson University poll shows the gas-tax dedication question is only narrowly ahead, with 46 percent in favor and 39 percent opposed.
Sweeney said he's not surprised it's close.
“No, because there’s a lot of misinformation being given, and you can, they can attempt to confuse the public," Sweeney said.
Steinberg thinks it's a matter of trust — or in this case, a lack of it.
“I think the public doesn’t want anything that the Legislature is putting out. Anything that the Legislature is putting out, they’re saying no to,” Steinberg said.
“You wonder why people don’t trust our legislators,” Steinberg said of how the ballot question doesn’t explicitly mention its link to borrowing. “When you look at these bills, it kind of creates this big doubt. They’re not being truthful with us.”
Lt. Gov. Kim Guadagno appeared to startle the Christie administration by coming out against the plan Thursday. Assemblyman Erik Peterson, R-Hunterdon, added his voice to the opposition to the ballot question Friday.
“The only reason the governor and Democratic leadership are pushing the ballot question is to enable borrowing against the new tax increases, which will exhaust all of the new revenue in eight short years and will require future tax increases," Peterson said.
The Transportation Trust Fund refinancing allows the state to spend $16 billion over eight years, including $12 billion that will be borrowed.
The $12 billion in bonding authorization is contingent on voters approving the ballot question that amends the state constitution by dedicating all revenues from gas taxes, both retail and wholesale, to the Transportation Trust Fund.
“If (the constitutional amendment) is not approved by the voters,” the nonpartisan Office of Legislative Services wrote in a fiscal analysis, “the bill will provide no increase in bonding capacity and, as a result, the state will only be able to support transportation capital projects through the direct appropriation of revenues that would otherwise be available to the general fund for any state purpose.”
The law signed by Christie in mid-October dedicates all revenues from the gas taxes to the TTF, using language that mirrors the constitutional amendment. Unlike the constitution, that law can be changed or overridden by the state budget at any time.
Presuming it is distributed evenly between 2017 and 2024, the plan would translate to $1.5 billion in borrowing each year and $500 million in "pay-as-you-go" funding – directly sending out the door a portion of the money generated from the gas tax.
Additional money from the $1.1 billion annual gas tax hike would be used to repay the borrowing. Nonpartisan analysts for the Office of Legislative Services estimate that each instance of borrowing would cost $86 million a year for 31 years. By 2024, the new borrowing would cost $688 million a year to repay.
Last fiscal year, the state spent $1.247 billion from the TTF. It also spent $353 million in funding from the Port Authority of New York and New Jersey that is expiring, for a combined $1.6 billion. That will jump to $2 billion a year – an increase of $400 million, or $753 million when looking solely at the state books.
If the ballot question is rejected, and the state can’t figure out an alternative path to borrow the additional funds, the spending on road, rail and bridge projects could actually drop, rather than jump, even with the higher gas tax.
The gas tax will generate around $1.1 billion a year. And much of that money couldn’t be spent on state projects, as the new law requires $400 million a year in grants to counties and municipalities.
If the state wanted to spend $2 billion on construction without any additional borrowing, that would require a gas-tax hike of around 40 cents a gallon.