Business leaders and progressives are nervous that state lawmakers may divert revenue from a new tax that is meant to fund NJ Transit. (Fran Baltzer for New Jersey Monitor)
In a rare show of agreement, a business industry group and a progressive think tank are urging New Jersey lawmakers not to divert revenue from a new business tax intended to fund NJ Transit.
Their call comes as elected officials prepare to negotiate the state’s next annual budget and centers on collections from the new tax, which was enacted last year with the goal of bridging multimillion-dollar budget shortfalls at NJ Transit.
“Our concern all along was without it being constitutionally dedicated, that money could be used for any purpose, and we have heard from legislators that they would like to see that money go to other purposes, like tax relief,” said Michele Siekerka, president of the New Jersey Business and Industry Association.
The tax — Gov. Phil Murphy has called it the corporate transit fee — levies a 2.5% non-marginal surtax on corporations with at least $10 million in profits and is expected to generate roughly $800 million each year until it sunsets on Jan. 1, 2029.
Though collections from the surtax have initially flowed into the state’s general fund, statutory language requires its revenue be sent to NJ Transit beginning in July.
Revenue from the surtax is intended to fill a roughly $767 million budget gap the transportation agency faces in the coming July-to-June fiscal year, replacing federal pandemic funds set to be spent down by the end of the current fiscal year.
But the lack of a constitutional dedication and New Jersey’s long history of diversions has advocates and industry groups fearing NJ Transit may not see all of the funds.
“The concern is the budget bill always overrides any other laws. That’s why New Jersey lawmakers continue to raid these funds to fill these budget gaps,” said Alex Ambrose, a policy analyst at New Jersey Policy Perspective.
Murphy and lawmakers anticipate making some tough budget choices in upcoming months.
New Jersey’s current budget calls for the state to spend $2.1 billion more than it takes in through taxes. After revenue from the transit fee is sent to NJ Transit and other one-shot revenue sources expire, that deficit is set to expand to more than $3.8 billion in the fiscal year that begins July 1.
In the fall, Murphy ordered state agencies to pause raises and identify cuts equal to 5% of the administration’s budget target, but it remains to be seen whether those cuts will be sufficient to pay for state programs, including Stay NJ, a nascent property tax relief program for seniors.
Stay NJ promises to cut seniors’ property tax bills in half, to a cap of $6,500. Questions about whether the state can fund the program have swirled since Murphy signed it into law in June 2023. Lawmakers initially envisioned pausing Stay NJ if the state’s surplus fell below 12% of spending, but last year, they included language in the current budget to overwrite that provision.
Rhonda Schaffler, a spokeswoman for Assembly Speaker Craig Coughlin (D-Middlesex), the architect of Stay NJ, said Coughlin’s office is not discussing budget matters until after Gov. Phil Murphy presents his spending plan to the Legislature. That speech, scheduled for Feb. 25, is the launching point for negotiations over the state’s annual budget.
Murphy’s office declined to comment.
Business groups have some reason to distrust the reliability of the transit fee’s statutory dedication. Though lawmakers have pledged that money would be used to stand up NJ Transit’s budget, they previously promised an end to corporate business tax surcharges.
A separate corporate business tax surcharge that levied a 2.5% non-marginal tax expired at the end of 2023 and Murphy initially said he opposed renewing it. But he and lawmakers enacted the transit fee in June 2024 and made it retroactive to the start of that year.
“Businesses are worried to invest when we change the rules of the game, and at the end of the day, that’s the biggest concern: How do you see companies making investments in New Jersey when they don’t have predictability and certainty about things that should happen relative to policy?” Siekerka said.
It’s not possible for lawmakers to amend the constitution to dedicate the transit fee’s revenue before they must pass the next budget. In New Jersey, referendums are the only method to amend the constitution, and to place a constitutional question on the ballot, lawmakers must either pass the amendment with a three-fifths supermajority once or with a simple majority in two successive years.
Even if lawmakers managed to amend the constitution, the transit fee is set to expire at the start of 2029. Business groups would oppose a move to make the tax permanent. Others warn NJ Transit won’t be able to fund itself.
“No transit agency in our country is able to rely only on its own revenue,” Ambrose said. “We need state investment in this state service to best provide mass transit to New Jersey residents.”
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