The State should spend any revenue from a PPP according to three principles:
• Prioritize the "user pay" principle that underlies transportation finance,
• Ensure the future of State's transportation capital program, and
• Improve long-term fiscal stability.
Depending on how the PPP is structured and when it is adopted, there is a strong chance that most or all of the revenue to be reaped from a PPP could be spent by the current governor and State legislature. This presents an opportunity and also a risk. There could potentially be a temptation to use windfall revenue for short-term purposes - for example, for unsustainable tax cuts, or to cover recurring expenditures for only a few years. Instead, all expenditures that result from a PPP should be devoted to long-term improvements in the State's transportation network and the long-term fiscal condition of the State. This approach precludes short-sighted expenditures such as temporary tax relief.25
First and foremost, the State should use any windfall and ongoing revenue from a PPP to restore fiscal health to New Jersey's underfunded transportation system. This reflects the "user pay" principle that underlies transportation finance: transit fares and tolls are used for transportation infrastructure upkeep and capacity expansion. Cross-subsidies between auto fees and public transit are used to reduce congestion, optimize efficiency in the transportation system and reduce air pollution. The lump sum from a PPP represents future toll payments made by motorists in the State. Spending the windfall on anything other than transportation would amount to redirecting toll money toward other purposes.
The transportation system should not receive any less revenue as a result of a PPP than it would under current policies, and additional revenue should be used first to restore the fiscal integrity of the Transportation Trust Fund and support NJ Transit and NJ DOT capital programs. The NJ DOT and NJ Transit capital plans cost $3.2 billion per year to support. They include a plethora of congestion-fighting, smart growth projects vital to the economic growth of the region. Half of this is funded by the New Jersey Transportation Trust Fund, which is caught in a spiral of unsustainable levels of debt issuance. The Trust Fund has tied up future motor fuel and other transportation-related tax revenues to such an extent that there are no resources for capital programs after the current 5-year plan is expended. After 2012, the State will have no choice but to raise new revenues for transportation, even though gas taxes and other taxes and fees will still be collected from residents.26 The first priority for any revenue realized from a PPP should be to restore integrity to Trust Fund and advance needed transportation capital projects.
If the revenue realized by the State is more than sufficient to address these needs, then any remaining revenue should be dedicated to improving the State's long-term fiscal health, such as by retiring some of the State's general obligation debt. This will enhance the State's ability to address a range of future needs, from infrastructure investments to competitive tax rates.
Governor Corzine has described the State of New Jersey as on a "new path toward fiscal responsibility."27 A PPP can help move the State further along that path, if revenues are used fairly and if it is structured to protect a broad range of public interests.