Murphy to Consider New Jersey Gas-Tax Hike With Driving Down

(Bloomberg) -- New Jersey Governor Phil Murphy is considering raising the state’s gasoline tax by 5 to 10 cents per gallon to cover road and rail projects as a commuting shutdown has decimated fuel sales, according to a person briefed on the matter.

Over 24 months, New Jersey projects a $334 million revenue drop from the motor-fuels and petroleum products gross receipts tax, according to a budget summary released on Tuesday. To plug the gap, Murphy is examining raising the 41.4-cents-per-gallon tax by as much as 25%, said the person, who spoke on condition of anonymity because they weren’t authorized to discuss internal business publicly.

A fuels-tax shortfall leaves New Jersey governors with little choice but to charge motorists more because the state is legally obligated to put that revenue toward Transportation Trust Fund debt. That fund, totaling $16 billion for 2017-2024, pays for rail and road improvements.

Murphy spokesperson Alyana Alfaro declined to comment. Jennifer Sciortino, a spokesperson for state Treasurer Elizabeth Muoio, didn’t respond to emails asking for comment. The governor on Tuesday made no mention of potential higher gasoline costs in his budget speech for the fiscal year that starts on Oct. 1.

Eric DeGesero, executive vice president of the Fuel Merchants Association of New Jersey, a Cranford-based lobbying group, said each 1-cent increase yields $40 million to $50 million in revenue, according to an industry calculation. By that measure, New Jersey needs as much as 8 cents more per gallon, he said in an interview.

“The industry and the public needs to know what is going to happen and how soon is it going to happen,” DeGesero said by telephone. “This is certainly of grave concern to the public and the state and the state’s economy right now.”

In July 2016, as the transportation fund balance headed toward zero and with no legislative renewal on the horizon, then-Governor Chris Christie, a Republican, shut down all but essential transportation projects amid a stalemate with lawmakers. Three months later he and Democratic legislative leaders authorized a 23-cent-per-gallon increase -- the first change since 1988 -- and erased New Jersey’s claim to one of the lowest such taxes among U.S. states.

New Jersey governors’ administrations have the power to adjust the tax based on driving projections. The most recent per-gallon increase was 4.3 cents, enacted by Murphy in October 2018. In a news release the next year, announcing no increase, Muoio said New Jersey gasoline use had “continued a multiyear decline.”

In March, when the first novel coronavirus case was reported in the state, New Jersey Turnpike traffic volume dropped by one-third from a year earlier, according to state transportation data. In April, the first full month of Murphy’s stay-home order, traffic was down 63% as nonessential businesses were shut and most office commuters worked remotely.

New Jersey has reported almost 16,000 coronavirus deaths.

©2020 Bloomberg L.P.