Transportation Trust Fund on the Road to Bankruptcy
March 11th, 2010 by Jay Corbalis
- New Jersey’s Transportation Trust Fund (TTF) contributes $1.6 billion to the state’s $3.5 billion annual transportation capital program (the rest comes from federal matching funds). The money is used to maintain and upgrade the state’s 40,000 miles of highways, roads and streets; 6,500 bridges; 1,100 miles of rail; and other key infrastructure.
- The TTF is headed for bankruptcy. By the summer of 2011, 100 percent of its revenue from the gas tax and other sources will be needed to service existing debt, leaving no money for new or routine maintenance projects.
- In a recent Monmouth University poll commissioned by New Jersey Future and the Tri-State Transportation Campaign, 70 percent of New Jersey residents reported being greatly or somewhat concerned that the TTF is running out of money.
- In a report released this week, titled “Spiral of Debt: The Unsustainable Structure of New Jersey’s Transportation Trust Fund,” the Regional Plan Association concludes that in the absence of a solid financing mechanism for the TTF, New Jersey residents will be looking at deteriorated roadways and less transit services at a higher cost.
Painful Decisions Await the Governor and Legislature
Governor Chris Christie’s announcement of state funding cuts to NJ Transit, and the resulting fare hikes and service cuts, has received a lot of attention recently. While many are unhappy with having to pay more in fares for reduced service, the governor and NJ Transit Executive Director James Weinstein pointed to the agency’s looming $300 million budget deficit as evidence that “painful adjustments” are necessary.
By that standard, the options facing the governor and the Legislature for addressing the looming bankruptcy of the Transportation Trust Fund will likely be excruciating. The report released this week by the Regional Plan Association details just how bad the situation is, and how bleak the options are for fixing it.
Although the TTF, created in 1984, was initially envisioned as a “pay-as-you-go” system, it quickly moved away from that principle, and has been piling up debt ever since — to the point where the $900 million the fund now takes in annually, primarily from the gas tax, will soon be needed solely for debt service. This not only leaves no money for new projects or routine maintenance, but also endangers $1.5 billion in federal matching funds.
As the RPA report notes, doing nothing is not an option. Letting the TTF become insolvent would bring future capital projects to a screeching halt; this would include the ARC Tunnel, the second Hudson River tunnel that would double NJ Transit rail service to New York. It would also eliminate regular maintenance necessary to ensure safe travel conditions, and jeopardize federal matching funds. Refinancing the TTF debt, already at $11 billion, as was done during the Corzine administration, would be similarly problematic; the state has already bonded against existing revenue streams, and any further restructuring would endanger the Fund’s credit rating.
While some new capital projects could be put on hold to save money in the short term, the vast majority (77 percent) of the state Department of Transportation’s capital program consists of maintenance and repair of existing infrastructure. Putting these projects on hold would have a disastrous impact on safety, and would lead to further deterioration of the state’s roads and bridges, already rated as among the worst in the nation. The most recent (2009) National Bridge Inventory by the Federal Highway Administration listed 35 percent of New Jersey’s bridges as structurally deficient or functionally obsolete.
Governor Christie’s reluctance to raise new revenue in tough economic times to support the state’s transportation spending is understandable. He has repeatedly rejected raising the state’s gas tax, although it is one of the lowest in the nation, and has likewise ruled out raising or adding new tolls on the state’s roadways. In the end, however, both the governor and the Legislature may find that new revenue sources that ensure the safe and efficient movement of people and goods — the backbone of our economy — is the lesser of two evils. While the cost of maintaining the transportation system may be daunting, the cost of doing nothing may ultimately be far greater.