This article was reported by New Jersey Monitor, a nonprofit publishing partner of NJ Spotlight News.
NJ Transit’s board approved $3.5 billion in spending for the fiscal year that began July 1, the largest operating budget in the agency’s history.
The budget represents an 11% increase over last year’s and comes after 12 months of fiscal headwinds for the nation’s largest statewide mass transportation provider. Collections from the agency’s dedicated revenue source tumbled spending on labor and benefits surged beyond expectations.
“This governor is the only governor in recent memory who has given us an 11% increase in budget,” said NJ Transit CEO Kris Kolluri. “That is how you begin to put the pieces together for this agency to make sure we do it.”
The fiscal 2027 operating budget, adopted on Thursday, maintains decades patchwork of funding sources for buses, trains and light rail. The board also approved $1.7 billion in capital funding. At least $800 million of that total is from federal sources.
State subsidies, whether through a direct appropriation from New Jersey’s general fund or via collections from a corporate business fee statutorily dedicated to NJ Transit, are expected to account for a majority of the agency’s revenue in the current fiscal year.
Corporate tax slump
Combined, NJ Transit expects to receive nearly $1.07 billion from New Jersey’s coffers, including a $302.2 million direct subsidy and $765.6 million in revenue from the corporate transit fee. That fee is a 2.5% corporate business tax surcharge on businesses with more than $1 million in income.
The direct subsidy is significantly higher than the $43.9 million approved as part of last year’s budget. That subsidy, though, grew to $230.6 million as a slump in corporate tax collections drove down that revenue source. That fee is set to expire, by law, at the start of 2029.
Fare revenue, historically the largest single funding source for NJ Transit, is expected to remain level with last year’s projections at $980 million. Collections from fares undershot their revenue target by about $48 million last fiscal year.
Since an initial 15% fare increase following a board vote in 2024, NJ Transit’s fares have grown automatically by 3% each year. Officials say the higher charges are to boost reliability after years of disinvestment.
Plea for meetings
Transit advocate Adam Reich noted that state statute required 10 public hearings — and no more than one per county — before raising fares.
“If Governor Sherrill’s going to insist that she’s transit obsessed, certainly taking the most rider-friendly view of the statute is absolutely critical,” Reich said Thursday. “It doesn’t mean New Jersey Transit can’t raise fares every year. It doesn’t mean they can’t necessarily follow a 3% plan, but it just means that riders at least be heard before we do that.”
The board’s vote approving both the one-time 15% increase and the 3% annual hikes followed numerous public meetings. The agency has argued that it does not need an annual vote to raise fares as a result.
Reich said the board may be able to raise them further, if they ask riders.
“Maybe we’d rather pay a little more but see service improvements or at least service stability instead of service cuts, as we did on May 31,” he said.
An annual diversion from New Jersey’s Clean Energy Fund will remain level at $140.1 million, while a yearly transfer from the New Jersey Turnpike Authority — under an agreement struck under then-Gov. Phil Murphy — will send the agency $485 million, up from $470 million last year.
NJ Transit paid nearly $103 million more for labor than it expected last year, and its spending on fringe benefits came in $70.5 million above budget. The agency faces a range of cost increases that outpace inflation.
“The costs are real,” said Kolluri, who also heads the Turnpike Authority. “I know people don’t want to understand, or care, because they are frustrated sometimes when their train is canceled. I understand it, but the fact that the labor contracts cost $55 million more than they did last year is a fact.”
