New Jersey Transit’s newly passed fiscal 2024 budget includes no new fare hikes and increased spending year-over-year, in the face of a looming fiscal cliff.
NJ Transit’s board passed a $2.86 billion operating budget on Wednesday that’s 4.1% bigger than fiscal 2023’s, with 60% of costs associated with labor and fringe benefits and 31% linked to materials, fuel and power, utilities, and outside services, the commuter rail and bus operator said.
Board members also passed a $1.73 billion capital spending budget to support a five-year plan that’s backed by a mix of state and federal funds, including the state’s casino revenue and funds from the New Jersey Turnpike Authority.
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Both the operating and capital budget “ensure the continued safety and reliability of our system, deliver a high-quality experience for our customers, and improve our overall service, without imposing any fare increases,” said NJ Transit President Kevin Corbett in a statement.
There will be no new fare hike, and 27% of operating costs will be covered by passenger fare revenues under the budget plan.
Funding for remaining operating costs will be sourced from “a combination of commercial revenue and state and federal resources,” notably $440 million from the New Jersey Turnpike Authority in addition to federal COVID-19 relief funds, the transit agency said.
The agency expects a fiscal cliff after the federal relief funds run out with its rail ridership still running 50% below pre-pandemic levels.
the state’s most recent budget
The recent state budget also included a $137 million boost in funding for NJ Transit, though did not lock down a dedicated funding source for the agency that an increasing number of state officials are calling for as it nears a fiscal cliff.
Officials announced in April that the operator faced a budget shortfall cliff as federal COVID-19 relief funding dries up and ridership contuses to lag from post-pandemic changes to travel and work, expecting to see revenue shortfalls starting at $119 million in 2025 and growing to $957 million by 2027.
NJ Transit reported serving 102.7 million bus passengers and 40.05 million trips on commuter rail in fiscal 2022, which ended June 30, 2022. In fiscal 2019, the last full year before the COVID-19 pandemic, it served 87.9 million commuter rail trips and 151 million bus rides, according to its annual report.
The operator lacks a dedicated funding stream and, while its been dialed back in recent years, successive administrations have “shortchanged the capital budget” or tapped other sources, including New Jersey Turnpike revenues and the state’s Clean Energy Fund, to keep service running, said William Glasgall, senior director for public finance at the Volcker Alliance.
Legislative leaders said during the most recent state budget negotiations the issues of a permanent funding stream would be addressed in future budgets.
NJ Transit said it newest budget helped close the looming gap by shaving $21.5 million off of original projections through tapping federal funds and other cost-cutting measures.
The New Jersey Transportation Trust Fund Authority sold $938 million of tax-exempt special obligation revenue bonds in May that including $674 million of transportation program bonds, 2023 Series AA, to refund outstanding bonds; and $262.8 of transportation system bonds, 2023 Series A system bonds to defease outstanding bonds subject to a tender offer from the authority.
The trust fund authority has $20 billion in debt outstanding associated with the maintenance and rehabilitation of the state’s transportation system.
New Jersey is riding into the new fiscal year with its highest bond ratings in recent memory after having received six upgrades, one from each of the four major rating agencies in a little over a year. The most recent came from the Kroll Bond Rating Agency, which upgraded the state’s general obligation bonds to A-plus from A.
S&P raised the state’s GOs to A from A-minus, Fitch upgraded the state to A-plus from A and Moody’s raised the GOs to A1 from A2.
After a strong economic rebound post-pandemic “revenues are cooling” said William Glasgall, senior director for public finance at the Volcker Alliance, and in the state’s most recent budget for fiscal 2024, a record-setting $54.3 billion spending plan featuring $8.3 billion surplus and $5.4 billion of new spending, New Jersey balanced the books by tapping the state’s surplus.
“If revenues continue to lag, albeit from a very high base, the governor and legislature will need to decide to keep the budget balanced either via spending cuts or further surplus drawdowns,” Glasgall said.
Officials said New Jersey’s tax revenues fell by $1 billion in 2022, due to declining stock market returns. However, in its new budget, the state’s still met its full annual pension payment of $7.1 billion for the third year in a row and directed more than $2 billion toward addressing debt while passing middle-class and corporate tax cuts.