“Stopgap” Refinancing Plan? I’m Not So Sure

By Steve Adubato, Ph.D. A few weeks ago, I wrote a column praising Governor Jon Corzine for implying that he was open to the idea of a modest increase in the gas tax. Even though Corzine made it clear during the gubernatorial campaign that he had no intent on raising the gas tax, I was impressed that he was open to the idea once he actually became governor and faced the stark fiscal realities of being our chief executive. The Transportation Trust Fund created in 1984 (as a state legislator at the time, I was proud to vote in favor of the legislation creating the Trust Fund proposed by then governor Tom Kean) is the pot of money set aside to pay for road improvement and mass transit projects. It also deals with bridges in their continuing state of disrepair. In response to my column, dozens of readers responded by saying how wrong I was. They questioned how I could praise Governor Corzine for “breaking a promise” that he appeared to make during the campaigning regarding NOT raising the gas tax. My logic at the time was that sometimes it is actually better to break promises if the promise you made was the wrong one to make in the first place. Apparently the governor has heard from those same people and the countless legislators who are scared to death to have to vote on an increase in the gas tax. There will be no gas tax increase this year, nor will there be a gas tax increase next year. There is not going to be a gas tax increase for a long time in New Jersey. Some of you think that is good news, but let me tell you why it’s not. The new plan to put money into the Transportation Trust Fund so it doesn’t go broke over the next few months is about refinancing debt. Nearly $2 billion in transportation bonds will be refinanced by the state. That’s going to lower our annual debt payments by over $100 million. The refinancing plan is pretty simple. Instead of paying off the bonds in 20 years, which we are currently doing, we will be paying them off in 30. It’s like refinancing your house with a 40 year mortgage instead of a 30 year mortgage. But here is the catch. While you pay less each month, sooner or later that bill is going to come due, and when it does, all bets are off. Instead of a modest increase in the gas tax of about 3 cents per year over the next five years, the gas tax that will be necessary in 2011 will be closer to 50 cents per gallon. Call me naƒ¯ve, but I just think that’s wrong. The bottom line is that we’ve known for years that the Trust Fund was running out of money. Refinancing the debt and borrowing more has been the norm for too long. Jim McGreevey knew the gas tax had to be raised, as did Christie Whitman, but neither one ever seriously tried to do it. They just borrowed more. Some will say we’ve dodged a bullet because the gas tax increase is off the table, but I say we’ve just made a bad situation a hell of a lot worse. What message does it send to our children and those who look to us as adults to make responsible decisions about our finances? We tell our kids when they go away to college not to run up credit card debt that they can’t afford to pay because the interest will build up and then they are going to be in trouble. We tell them it will hurt their credit record and saddle them with payments they are not going to be able to afford to make. We say they’ll pay too much on interest and not enough on the principle. We tell them that they should pay as they go, or only buy what they can afford or need. But when the time comes for us to show that our actions match our rhetoric, we punt. Every public opinion poll appears to show that voters in New Jersey are dead set against the gas tax increase. Clearly legislators on both sides of the aisle have read those poll results and have made it clear to the governor and his staff that they would never support any tax hike on gas. This, despite the fact that New Jersey has one of the lowest gas tax rates in the country and our gas prices are amongst the lowest in the nation. This refinancing of the Transportation Trust Fund is being talked about as a “stopgap” measure. That implies that it is only temporary. But we’ve heard this so many times before. The problem is that this current temporary remedy follows other temporary measures by other governors and legislators who have refused to be responsible and face the fiscal music that has been at a crescendo for a long time now. I say pay the debt now. Bite the bullet. Don’t saddle our kids and their kids with gas tax hikes that they are not going to be able to afford. It’s not fair. Then again, I’m not the governor. Nor am I still a legislator running for reelection next year. I’m only one guy with a column and a point of view who 22 years ago voted for the Transportation Trust Fund. At the time, the plan was to put money in the Fund as needed, with new revenue created by a gas tax. The plan was to limit borrowing and keep interest payments down. But that was 1984, which now seems like ancient history.

“Stopgap” Refinancing Plan?  I’m Not So Sure