It’s Time To LOWER The Gas Tax in New Jersey

By Bill Spadea

“We broke it; don’t know how to fix it and you are just gonna have to keep paying for it.”

 – May have been overheard at the State House in Trenton. 

The proponents of the gas tax will tell you that the Transportation Trust Fund is separate from the general fund and needs to be addressed directly.  They’ll tell you that the government’s hands are tied due to the massive debt and legal obligations of paying pensions and benefits.  They’ll tell you the entire $30+ Billion dollar state budget is spoken for so there is simply no choice but to raise another tax. 

As gas prices rise again after a couple of months of enjoying less than $1.70 a gallon prices in the Garden State, many in the legislature are seriously considering raising the gas tax.  Drivers understandably are upset by the prospect having had only a short while to enjoy really low prices. We’ve come to expect somewhat lower gas prices in the Garden State partly because of our historically low tax on gas.  The issue is coming to a head now due to the cries from construction unions and civil engineers claiming the hundreds of NJ bridges are in such disrepair we’re facing a possible repeat of Minneapolis 2007. And they’ve got a video to scare you into believing it… https://www.facebook.com/njallianceaction?fref=photo

Let’s take it at face value and agree that our aging roads & bridges are in need of a major overhaul.  Although it’s unclear exactly how much money would be needed to bring NJ roads & bridges out of the ‘scare zone’ the Transportation Trust Fund (TTF) currently expects more than 1.2 Billion dollars in funding annually.  http://www.state.nj.us/ttfa/faq/  The fund is going to need hundreds of millions more to begin new projects.

Unfortunately, the money supposedly allocated to the fund is often spent on other state budget priorities and debt service and the fund has to make up the difference through additional borrowing. http://www.njaflcio.org/transportation

The easy ‘knee-jerk’ reaction from politicians is to seek immediate revenue through a new tax.  After all, if you’re facing potential death on the road, what’s a couple hundred more dollars a year, right?  Gas tax estimates will raise approximately $50 million for every $0.01 of a gas tax increase.  http://www.app.com/story/news/politics/new-jersey/2015/02/09/gas-tax-alternatives-blasted-asinine-asburd/23139887/ According to the state TTF site, current expected minimum revenue from motor fuels tax is set around $500 million.  With dollars diverted to pay debt service it would take another $0.10 in new gas tax revenue to meet that number.

The challenge from consumers is partially due to opposition to higher costs at the pump in a state that already has among the highest costs of living in the US.  It’s also about a lack of trust for the Trenton government’s ability to prioritize and allocate tax dollars appropriately.  Remember, it’s this same legislature and previous administrations that got us here in the first place.

Some have suggested shifting dollars from other parts of the budget, namely education and using that money to fix the infrastructure.  Some simply want to blame Governor Christie even though the current state of affairs was set in motion decades ago.  For the most part, Republicans have been very good at throwing up roadblocks to tax hikes without offering a workable solution to fix the problem of continued borrowing.  We’ve been borrowing and taxing our way into the mess we’re in now for decades.  We need a new plan.  We’re already overtaxed.  And we spend more than we take in annually.  We’re not going to be able to borrow much more money, if any.  The need for government spending especially on transportation is critical for the economic future to get NJ back on a positive financial footing.

Let’s move past the ‘tax or die’ debate.  There are other possible solutions.  Instead of raising another tax, why not let current consumer demand help raise revenue by creating new business, jobs and opportunity for communities to grow?

Here are two short term solutions:

Sports Betting Revenue

The opportunity to capitalize on the bi-partisan support for legalized sports betting in NJ may be the fastest solution to raise revenue and start fixing our aging transportation infrastructure.  Legalize it and spread the wealth and the revenue across bars and restaurants throughout New Jersey.  If the FBI estimates on illegal betting revenue are accurate, there’s enough potential revenue to immediately begin funding the TTF with revenue instead of borrowed dollars without raising the gas tax.

Since there’s a bond required for a liquor license holders under current regulations, there’s already an enforcement mechanism and process in place to protect the consumer.  According to State Senator Ray Lesniak, the FBI reports that the revenue from illegal betting is between $500-600 million. http://www.njtvonline.org/news/video/sen-lesniak -sports-betting-would-bring-revenue-to-the-state/ 

Although he does qualify the number by saying it’s undetermined how much would find its way to the state coffers.  

The point is that a legal sports betting program that was open to bars and restaurants could send the revenue number through the roof.  More businesses will profit and expand creating more jobs and increasing the revenue to the state indirectly in addition to the gaming tax.  Let’s face it, the only reason illegal gambling is flourishing is that the government has prevented private business from capitalizing on the incredibly high demand for betting.

Opt Out of Common Core

New Jersey already has some of the best schools in the nation. http://www.northjersey.com/news/nj-students-surpass-many-countries-in-ranking-of-test-scores-across-world-1.607220 The new Common Core directive from the Federal government has met with stiff opposition from parents and teachers. Opting out would be both practical from a political and financial perspective.  An unlikely ally for sure, The NJEA is already funding an all-out assault on the assessment component of Common Core, the Partnership for Assessment of Readiness for College and Careers (PARCC) test.

Several states have already opted out of Common Core altogether due to the cost, testing, accountability and privacy issues. http://www.scholastic.com/browse/article.jsp?id=3758244 

Given the specific concerns with the PARCC tests and the united opposition from conservative school choice groups like Eagle Forum and the teachers union, opting out would be a relatively popular position taken by the Trenton government.  This certainly wouldn’t hurt Governor Christie as he looks to 2016.  The test itself might be a wedge issue on a national level with the current Administration in Washington.  

How would this help eliminate the need for a gas tax hike?  The biggest benefit would be the hundreds of millions of dollars saved by NJ which could be allocated going forward for Transportation.  The estimated cost of the implementation of common core testing and standards in NJ is as high as $450 million dollars.http://www.app.com/story/news/education/2014/10/06/common-core-debate-nj/16832533/  This is nearly the amount of revenue needed for the TTF expected revenue from a new gas tax.

Here are a few ideas to fix the long term problem of financial stability in the Garden State:

Remove gaming license restrictions to enable and empower smaller venues to capitalize on gaming demand and revenue. 

The model of the big casino developer attracting people to one destination has failed in NJ.  And it failed miserably.  Casino after casino are folding in Atlantic City. http://www.reuters.com/article/2015/01/22/us-usa-atlantic-city-emergency-idUSKBN0KV1RL20150122 Millions of dollars that could’ve and should’ve been focused on rebuilding the transportation infrastructure were squandered on propping up a failed business model.  http://www.breitbart.com/big-government/2013/02/20/chris-christie-s-bad-bet-casino-that-received-taxpayer-funds-to-file-for-bankruptcy/ 

Enough already.  Las Vegas is successful as a destination without an ocean or millions within a short drive.  The streets are clean and crime is relatively low for a big city.  What are they doing right?  One of the main success stories in Vegas are the small businesses who directly benefit from the gaming demand.  There are slot machines and electronic gaming machines in the airport and in diners across the city.  The market meets the demand in tandem with the big developers.  Small business and big developers are not mutually exclusive.  Imagine slot machines in Wildwood and in the Meadowlands retaining those NJ residents and the revenue we’re currently losing to our neighbors?

Change collective bargaining for state workers and teachers so that benefits are negotiated locally.

This is essentially what Governor Walker did through Act 10 in Wisconsin.  The state was facing a $3.6 billion deficit when he took office in 2010.http://www.forbes.com/sites/realspin/2014/08/12/its-working-in-wisconsin-high-court-upholds-act-10/   Without raising taxes, the state has enjoyed a surplus in each subsequent year. 

The plan took collective bargaining for many government workers and teachers off the table and forced the unions to negotiate locally.  What’s interesting is by allowing local communities to decide how to spend dollars to attract and retain teachers, starting teacher salaries rose in some places after implementation. http://walker.wi.gov/wisconsin-priority/reforming-government/reforms-and-results/act-10-reform-updates  This did not impact Fire Fighters and Police unions. http://www.politifact.com/wisconsin/article/2013/aug/02/context-walker-extending-act-10-police-firefighter/

Local negotiations by school boards and municipal leaders accountable directly to the voters put the parents and taxpayers back in control.  Enabling choice in health plans and eliminating forced dues created opportunity for teachers to excel and benefit for being a good teacher.  The bill was a win for teachers, students and taxpayers. http://watchdog.org/63485/wirep-exclusive-analysis-finds-wisconsins-act-10-saving-taxpayers-big/  Sounds like exactly what we need in New Jersey.

Despite heavily funded attacks from organized labor, Wisconsin’s Governor won three elections in four years and became the first Governor in the US to survive a recall.http://www.csmonitor.com/USA/Elections/Governors/2012/0606/Gov.-Scott-Walker-makes-history-survives-Wisconsin-recall-election-video 

Seems that the voters who increased his margin of victory in the recall vote liked what they got and experienced the positive results first-hand.  Unemployment has dropped below six percent as the state continues to offer tax relief for small businesses.  Incidentally, businesses in Wisconsin polled 90% on the question of whether the state was headed in the right direction.http://www.politifact.com/wisconsin/statements/2012/mar/11/scott-walker/gov-scott-walker-says-94-percent-wisconsin-employe/

Change defined benefit pensions to defined contribution for state workers going forward

The very idea that there are more than 100,000 people employed by the state not including hospitals and cops has helped create an unsustainable drain on the NJ economy.  Add to that the fact that they will all be expecting pensions and benefits long into retirement and you area nearing an irreversible financial crisis.http://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=bkmk

The main issue is that government workers in New Jersey have been promised a defined benefit for their years of service.  There is tremendous resistance to implementing a defined contribution with a variable benefit.  The reality is that workers who are promised payment s when they retire may not be able to collect because the system will eventually run out of the funds to keep up with the demand. There is an estimated $90 Billion in future liabilities from current state workers (this includes first responders) and that number will only continue to rise.http://www.njspotlight.com/stories/14/08/11/explainer-why-state-s-unfunded-liability-for-retirees-is-90-billion-and-rising/   

Combined with an $85 billion dollar debt http://www.bloomberg.com/news/articles/2015-02-13/new-jersey-bond-obligations-rose-less-than-1-to-41-8-billion  that we have to service, the state simply lacks the revenue to pay for what it has promised without making a dramatic change.

Instead of looking at the current liability and negotiating recipients down, why not start fresh with the new employees coming in?  401k plans with a defined contribution and a company match work in the private sector as a way of attracting and retaining talent. There is no reason for government not to adopt a similar system for the benefit of its employees and the taxpayers footing the bill.   It’s as simple as an employee contribution and a government match.http://www.manhattan-institute.org/html/cr_40.htm

Let’s Get Going Then.

Seems simple enough. 

Generate new revenue from new business which will meet the rising demand for gambling.  Opt out of an increasingly unpopular education program without hurting education and spend the money on the roads.  Open up gambling to the rest of NJ by eliminating the failed state-protected monopoly of big casino developers.  Restructure union negotiations by following the lead of a successful model which is both politically viable and economically practical. Redefine benefits for future government employees by modeling after successful private sector companies.

We should be talking about capping the gas tax at a lower rate than today.  The proposed increase would barely be a drop in the bucket and we’ll be back at the debate a year from now.  It’s time for a some simple but dramatic changes in New Jersey.

Who speaks for the rest of us in New Jersey?  Those without guaranteed government income, without huge legal contracts with government entities, without the unchecked financial power of forced union dues?   Which politician will stand up and be counted?  Who will speak for us; the over-taxed, over-burdened resident of New Jersey who just wants to make a living and stay in the state we love?  Commonsense, practical solutions ready to be championed by someone who has the courage and the integrity to forge ahead. 

Many are moving out. I’m digging in and staying. Many have an exit plan prepared for after the kids graduate.  I’d like to be here for the long haul.  We’re only a few changes away from fixing the problem. Call your legislators and tell ‘em to get back to work.  There’s plenty to do and only a limited window of opportunity.

Bill Spadea
About Bill Spadea 83 Articles
BILL SPADEA is best known as NJ 101.5's unapologetically conservative and politically incorrect morning host. He's also a former business executive, consultant, congressional candidate, TV host, and New Jersey political strategist.

3 Comments

  1. why not get rid of the rtidiculous law that we cannot legally pump our own gas? I believe it was analyized years ago and it would result in a 7 or 8 cent reduction in gas prices. Why is everyone afraid of this?

  2. The 7 or 8 cents is not the problem. It is continuous spending. Finding places to create more cash for the bottomless pit in Trenton is the same as digging a deeper hole. It is the spending and if you do not have it you cannot spend it without terrible consequences, just like real people. Real people and businesses do not have bottomless pits of cash where they can run when they want a new toy. Time to tell the ‘rulers’ that they must live within their allowances. We cannot afford Common Core. We cannot afford solar projects that are NOT sustainable because the panels wear out before the costs are reached. We cannot afford to give Princeton, which has BILLIONS in their endowment fund, our taxpayer money, We cannot continue to create a portion of society that does not marry because single motherhood earns a living for Mom, Dad and the kids…

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