Spiral of Debt

The Transportation Trust Fund, New Jersey’s main source of funding for road and transit projects, is caught in a massive spiral of debt.

It didn’t happen overnight but gradually: Over the last 25 years, we have bought ourselves major transportation improvements – road widenings, interchange redesigns, new rail lines and countless other projects – without raising the money necessary to pay for them. Instead, we’ve borrowed money. We have borrowed – and we continue to borrow – so much money that nearly every dollar we raise in taxes for transportation projects from the gas tax and other taxes, almost $900 million a year, is instead going to pay off interest and principal on bonds issued years ago.

New Jersey has no choice but to own up to this untenable pattern of borrowing and chart a new path to fiscal sustainability. The reality is that New Jersey spends $3.5 billion each year to maintain, renew and expand New Jersey’s transportation system – to repair the roads after accidents, paint bridges, buy new buses, expand our rail system, and everything else that lets New Jersey’s neighborhoods and businesses thrive. Nearly half of that is to come from the Transportation Trust Fund. Yet the Trust Fund is on track to be insolvent by the time it is up for re-authorization in mid-2011. Without a meaningful infusion of new annual revenue, there will be no dedicated source of funding for even the most basic safety and emergency repairs to our roads and railways. We will also be unable to provide $250 million in local-aid grants for municipal transportation projects. Finally, the federal government’s $1.6 billion annual match for New Jersey transportation projects will be at risk if the state contribution from the Trust Fund is lost.

We’ve been here before. In 2006, the Transportation Trust Fund neared bankruptcy. But instead of dedicating significantly more tax revenue to the Trust Fund and cutting transportation capital costs, Gov. Jon Corzine and the state legislature postponed the crisis by refinancing the Trust Fund’s debt and stretching it out farther into the future. This fiscal gimmick bought us a few years’ reprieve, but did nothing to address the long-term issue: that New Jersey does not commit enough tax revenue to fund its growing transportation capital program.

Break the cycle of debt: Get the Transportation Trust Fund back on track

New Jersey cannot have a functional, sustainable transportation system while borrowing beyond its means. ​“Cutting waste” and ​“improving efficiency” are appealing catchphrases, but given that more than $3 billion is at risk, efficiency savings would at best make up a small part of the solution. A refinancing strategy would also provide only limited breathing room, since the Trust Fund refinanced its entire bond portfolio to very long (30-year) maturities, just four years ago. Finally, redirecting existing revenue toward the Trust Fund at levels required would severely impede another part of the state budget. New Jersey needs real, lasting solutions that will require new financial contributions by many sectors.

It would be an understatement to say that breaking this cycle of debt will be politically difficult. Governor Chris Christie has been vocal about not raising taxes, but without several hundred million dollars in new revenue dedicated to the Trust Fund, New Jersey will lose the transportation system that our economy depends on. Governor Christie and the Legislature have a responsibility to acknowledge this imminent crisis and adopt real, effective solutions.