No dedicated funding source for NJ Transit this year, budget chair says

It’s unlikely lawmakers will identify a source of dedicated funding for NJ Transit this year, a top Assembly lawmaker said Wednesday, delaying until next year a discussion on how lawmakers will help the transit agency avert massive funding shortfalls due to arrive when federal pandemic aid runs dry.

NJ Transit faces staggering budget shortfalls in coming years. While federal funds and a patchwork of diversions and subsidies will fund NJ Transit in the fiscal year that begins July 1, officials estimate the agency will fall $119.4 million short of full funding in the following year and $917 million in the next.

“This is a national issue affecting all transit systems, so we also await to see how the federal government will respond. This is not a burden that can be fixed solely on the state level,” NJ Transit CEO Kevin Corbett told the Assembly’s budget panel Wednesday.

Assemblywoman Eliana Pintor Marin (D-Essex), the committee’s chair, said following Wednesday’s hearing with state transportation agencies that she hopes lawmakers could find a more permanent funding source for NJ Transit during next year’s budget negotiations. The Legislature is now mulling the budget for the fiscal year beginning July 1.

Like many transit networks, NJ Transit has struggled in the wake of the pandemic. Though the agency’s network of bus, train, and light rail operations lost money even before the pandemic, the scale of those losses duplicated as ridership plummeted amid coronavirus lockdowns and a shift to remote work.

In the last full fiscal year before the pandemic, the agency overall lost $7.61 per mile. It’s projected to lose $9.18 per mile in the coming fiscal year.

And though costs have declined slightly from 2019 levels, weekday ridership has been locked to between 55% and 75% of what was seen before the pandemic, Corbett said.

Lawmakers, advocates, and transit officials have floated some potential fixes, including an extension of a surtax on profitable businesses, an agency restructuring, and fare hikes Gov. Phil Murphy has eschewed since taking office in 2018.

It’s not clear how much NJ Transit would save by reorganizing or whether that restructuring would bring service cuts with it, though transit officials said Wednesday the agency could reap some savings by making bus routes more efficient, for example.

With the U.S. economy still in a state of uncertainty following sharp inflationary pressures over the past year — and with promises made to business groups — it’s not clear there will be any support for extending the corporate business tax’s 2.5% surcharge on net profits above $1 million.

Sen. Pat Diegnan (D-Middlesex), the chamber’s transportation committee chair, raised the specter of a recession when discussing support behind extending the surcharge.

“I think, at this point, there’s none,” Diegnan said. “If we do get through the next six months … and the economy is vibrant, then all of those things are back on the table. But right now, when the R-word is in the back of everybody’s mind, I think increasing taxes is something that folks don’t want to talk about.”

Raising fares may also be a non-starter. Diegnan called it “the worst solution,” noting that low-income residents who do not own cars most rely on NJ Transit for transportation.

At present, NJ Transit is funded by a mix of federal pandemic aid, farebox revenue, budget diversions, and state subsidies.

The agency is set to receive $70.1 million in a diversion from the state’s clean energy fund, $334 million obtained by raiding the agency’s capital construction budget, $440 million from the New Jersey Turnpike Authority, and $140 million in a direct subsidy from the state’s general fund.

The capital-to-operating transfer, which has become a fixed part of the agency’s funding over the past three decades, is used primarily for maintenance expenses, said Transportation Commissioner Diane Gutierrez-Scaccetti.

Years of these transfers have laid rocky ground for the agency’s capital planning, including on procurement of replacements for a fleet of aging trains and busses and larger projects like Gateway.

“It’s not my preference that we continue that practice. In a typical financial model, you wouldn’t transfer capital money. Theoretically, you’d still be able to maintain your equipment through your operating budget,” Gutierrez-Scaccetti said. “But again, New Jersey Transit, as many transit agencies in this country, is underfunded.”