Office of the Governor|
Governor McGreevey presents plan to increase
federal transportation aid to states by $60 billion
Without raising the federal motor fuels tax or increasing the national deficit, the plan would mean an additional $2 billion
for New Jersey's highways and public transportation system
(Indianapolis, IN) - Governor James E. McGreevey presented his plan to increase federal transportation aid to the states by $60 billion over the next six years at a closed session of the National Governors Association today. The Governor’s plan calls for increased federal transportation funding to help the states improve their transportation networks, clear up congested highways, and boost the local and national economy. The United States Congress is due to reauthorize the federal transportation program, The Transportation Equity Act for the 21st Century (TEA 21) this fall.
To achieve a large federal transportation program, Governor McGreevey has proposed an alternative financing mechanism that does not require an increase in the federal motor fuels tax and will not add to the national deficit. Governor McGreevey’s plan will boost funding with the creation of a Transportation Finance Corporation (TFC), a private non-profit entity established by Congress that would issue $80 billion in federal tax credit bonds. The Governor’s plan would add $2 billion in federal funding for New Jersey’s transportation network alone -- creating an additional 84,000 jobs in the state over the next six years.
“At a time when the nation’s economy needs it the most, this plan will increase federal transportation investment by more than 38%,” stated Governor McGreevey. “States nationwide are struggling to balance their budgets while at the same time trying to make necessary infrastructure improvements. Additional funding from the federal government will ensure the needs of New Jerseyans are met. Transportation investments are not simply about fixing roads and improving transit. Transportation investments are about spurring economic development, maintaining our competitive advantage and supporting more than 11 million jobs across the country.”
The TEA-21 program is set to expire on September 30 and must be reauthorized in the fall. After months of debate, Congress has not yet reached a consensus on how to fund the new program. Currently, TEA-21 distributes revenues from federal motor fuels taxes through the Highway Trust Fund. This funding mechanism is expected to support $240 billion in funding over the next six years. However, the FHWA estimates that the states will need more than $97 billion per year to maintain the nation’s transportation network. In order to meet the growing needs, Congress must increase transportation investment through an additional revenue source.
The Transportation Finance Corporation (TFC) proposal presented by Governor McGreevey would issue $80 billion in Federal Tax Credit bonds. $60 billion of the proceeds would be distributed to the states ($48 billion for highways, $12 billion for public transportation) as supplemental funding to current Highway Trust Fund revenues. The remaining $20 billion will be deposited into a sinking fund for repayment of the principal, and funds from the Highway Trust Fund will be used to reimburse the United States Treasury for lost revenues equal to the tax credits.
“The TFC is self financing. There is no cost to the states or to the Federal Government,” explained the Governor. “We hear about the growing national deficit on a daily basis. We, as Governors, face some of the worst State budget shortfalls in history. The TFC is a fiscally responsible way to invest in our economy and our infrastructure without passing the debt onto our children and without raising taxes.”
Seven of the nation’s leading investment banks reviewed the TFC concept and found that the tax credit bonds would receive a good investment rating and be highly marketable to private investors.
Other proposals currently being debated by Congress include a plan to raise the Federal motor fuels tax in order to increase Federal transportation funding, and a plan to divert funding from the Transit Account to increase funding for highways.
“As we look to spur our economy and to build the foundation for greater long term economic growth it is critical that we make a significant investment in our transportation and other critical infrastructure. We can no longer afford to under fund our highway and mass transit requirements,” said Senator Jon Corzine. “This new program would set forth a creative, alternative way to help fund our infrastructure needs that will help bring more mass transit and highway funding to New Jersey."
“The TFC protects funding for public transportation and avoids an increase in the Federal motor fuels tax,” said New Jersey Transportation Commissioner Jack Lettiere. “If Congress can rally around Governor McGreevey’s plan, both New Jersey’s and the nation’s transportation systems and economies will benefit immensely.” At the closed-door session of the NGA conference, Governor McGreevey said that support from the Governors would be critical as the reauthorization process moves forward in Congress.
Commissioner Lettiere emphasized the need to reauthorize a six-year program this year. “States require a reliable funding source in the long term. Without a large and predictable program, many necessary improvements to New Jersey’s transportation system will have to be deferred,” said the Commissioner, noting that in FY03 NJDOT had to defer $750 million in improvements due to a lack of funding. “The Governor’s plan for reauthorization makes sense from both a planning and economic perspective.”
Highlights of Governor McGreevey’s Transportation Finance Corporation (TFC) Proposal:
- Finances $60 billion in additional funding by creating a
- Transportation Finance Corporation (TFC).
- Reauthorizes a six-year program now.
- Maintains the current highway and transit-funding split.
- Avoids a federal motor fuels tax increase.
- Does not increase the national deficit