The Star-Ledger reported recently that more than half of the mass transit money slated for NJ Transit’s capital budget in fiscal 2005 would go to debt service and transfers of capital resources to the agency’s operating budget. The situation represents a major problem for an agency that has added new capacity and seen robust ridership growth in recent years. If it cannot maintain and upgrade its vehicles and facilities, the railroad will be unable to offer good service, will delay expansion plans and begin to incur higher repair and replacement costs.

Governor McGreevey’s blue ribbon transportation commission recommended that NJ Transit move away from these practices. It said the agency should be spending about $1.8 billion per year on capital, including $250 million for debt service. Perhaps in a concession to realism, a chart in the report maintained a transfer of $300 million per year from the capital to the operating budget.

But NJ Transit is far short of these levels. In its fiscal 2004 capital program, its overall capital budget was $1.34 billion, with $383.5 million transferred to operating expenses and $263 million in debt service. In its proposed FY2005 budget, spending is slated for $1.16 billion, with over half of that amount slated for debt service and transfer to the operation budget, according to newspaper reports. Agency documents show, however, that state-of-good-repair spending will also expand this year.

NJ transportation commissioner Jack Lettiere said continuing these budget practices is necessary until a permanent source of capital program revenue is established. The state intends to borrow $900 million to stave off any heavy capital program cuts over the next two years (see MTR #’s 446, 447).

But the cuts have been happening at NJ Transit for a number of years, because the operating budget has been inadequately funded. Trenton could start to ameliorate some of the problem by coming through with an increased operating appropriation this year, and set the stage for gradual increases that start to dig Transit out of its hole. But perhaps another season or two of major lapses in service, as occurred on NJT’s rail system last summer, will have to take place before the political costs of neglecting transit investment become clearer.

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