Credit: (AP Photo/Matt Rourke, File)

With possibly some political repercussions, New Jersey motorists — and the lawmakers who represent them — should find out within a matter of weeks whether the state’s per-gallon gas tax will need to be reset later this year.   

Every August, a close analysis of the latest gas-tax revenue and consumption data is conducted in Trenton, by law, to determine whether there’s enough funding coming in under the current tax rate to keep pace with planned transportation infrastructure spending that is tied to the tax. 

Depending on how the analysis goes, the gas-tax rate, which is currently set at 41.4 cents for each gallon of gasoline purchased at the pump in New Jersey, must be increased, decreased or left unchanged.  

This year’s analysis comes as the average price of a gallon of gas in New Jersey has decreased by more than 50 cents compared to a year ago, when the annual rate of inflation was running much hotter than it has been in recent months.  

But it also comes as lawmakers across the state are gearing up for a big election in the fall, where all 120 state legislative seats are up for vote. And while gas prices and overall inflation have tempered compared to a year ago, affordability issues and taxes in general remain key concerns for many voters — and those vying to represent them in the State House.   

If a rate adjustment is required, any change to the state gas tax would likely be announced by Department of the Treasury officials by the end of the month and, by law, it would go into effect on Oct. 1 — just about a month before the election.  

In all, New Jersey’s gas tax is the sixth-highest among U.S. states, according to the latest analysis prepared by Kiplinger Personal Finance. The state taxes are levied on top of a federal gas tax of 18.4 cents per gallon.   

As of late last week, the average cost of a gallon of gas in New Jersey was running just above $3.70, according to AAA New Jersey. A year ago, the average cost of a gallon of gas in New Jersey was nearly $4.25.  

There was good news last year 

It was nearly a year ago that Treasury officials announced a 1-cent reduction of the gas tax was in the offing thanks to better-than-expected consumption in the wake of the worst years of the COVID-19 pandemic. That marked the second year in a row that the statutory formula generated a rate decrease in New Jersey. 

In addition to lowering the per-gallon rate for gas to 41.4 cents, the rate for a gallon of diesel was also lowered last year by a penny, to 48.4 cents.  

The state law that links New Jersey’s gas tax to annual consumption levels — and to require automatic rate adjustments based on the latest revenue and consumption trends — was enacted in 2016 at the same time the state’s then gas tax of 14.5 cents per gallon was increased by nearly 23 cents. 

At the time, New Jersey’s Transportation Trust Fund had run dry, and the Democrats who controlled the Legislature and former Republican Gov. Chris Christie were at odds over what to do next. 

Funded primarily with revenue from the gas tax, the trust fund is a separate account from the state budget that ensures New Jersey has enough money on hand to maintain its extensive network of roads, bridges and mass-transit infrastructure on an annual basis.  

New Jersey’s gas tax is the sixth-highest among U.S. states, according to the latest analysis prepared by Kiplinger Personal Finance. 

To break the 2016 impasse, Christie and lawmakers agreed to hike annual transportation spending as part of an eight-year reauthorization of the trust fund, in part, by using new revenue from a 22.6-cent per-gallon rate hike that was enacted later that year. 

Meanwhile, language was also inserted into the 2016 transportation finance law to allow for additional gas-tax changes to go into effect automatically each year based on an analysis of what’s known as the state “Highway Fuels Revenue Target.” 

Under that language, the state treasurer must meet annually “on or before August 15” with the top public finance official from the nonpartisan Office of Legislative Services. Together, they determine whether the tax must be adjusted upward or downward to maintain the roughly $2 billion that’s needed annually to support planned trust-fund spending. The same law also allows for a determination that no change in the rate is required to maintain annual spending. 

Effect of pandemic 

While the rate has been reduced during each of the last two years, the last automatic increase occurred in 2020, when the gas tax was hiked by 9.3 cents after total revenues dipped amid the outbreak of the COVID-19 pandemic. 

In many ways, the 2016 law was meant to take politics out of the decision-making process when it comes to the gas tax to ensure the trust fund would remain solvent, but that hasn’t stopped it from becoming a political issue at times, including when the formula brings on an automatic increase.    

In addition to the pending analysis of the gas-tax data, key officials from Gov. Phil Murphy’s administration must also soon determine what to do about the next reauthorization of the Transportation Trust Fund itself.  

The current trust fund, including the authorization to issue debt to finance long-term transportation investments, is set to expire by the middle of next year. The next reauthorization will come at a time when Murphy and lawmakers continue to promote and incentivize the use of electric vehicles in response to growing concerns about climate change. And while electric vehicles are generally better for the environment, motorists who drive them do not regularly contribute to the maintenance of the state’s transportation network because they escape the gas tax. 

Last year, the Department of Transportation launched a voluntary pilot program to explore the use of a mileage-based fee as an alternative to the gas tax.   

But state Transportation Commissioner Diane Gutierrez-Scaccetti told lawmakers during a budget committee meeting in May that the impact on the trust fund from electric vehicles is “not that significant at the moment.”   

“We’re not seeing what I would call a major impact to the trust fund. We’ve been able to continue to do all the things that are expected of us, all the projects that are expected of us, through the trust fund,” she said. “But that’s not going to continue forever.”