NJ Transit approves $3.2B budget, engineer contract

The new budget is the agency's first since the pandemic that does not include hundreds of millions of dollars in federal relief funds. (Fran Baltzer for New Jersey Monitor)

NJ Transit’s board in unanimous votes Thursday evening approved a new contract for locomotive engineers and a roughly $3.2 billion spending plan, its first budget since the pandemic that does not include hundreds of millions of dollars in federal relief funds.

The agency’s budget represents a 5.1% increase from the $3 billion it approved last year and, for the first time, includes $788.6 million in revenue from a corporate business tax surcharge, called the corporate transit fee, enacted last year.

“Every penny of increase that we’ve asked for is accounted for, is budgeted in a thoughtful way, but what I want to assure you, mister chairman and the board members, is the budget in front of you has been thought about,” NJ Transit CEO Kris Kolluri said at the board’s meeting.

The business surcharge, which imposes a 2.5% non-marginal tax on businesses with more than $10 million in profit, is meant to fill the hole left by federal funds drawn down over the past six fiscal years.

The surtax is due to expire at the start of 2029, though lawmakers extended its predecessor before replacing it with the new surcharge, whose revenue is statutorily dedicated to the transportation agency.

Some urged the surtax to be made permanent, which would require legislation.

“Imagine the prosperity New Jersey Transit would bring to New Jersey if it had the permanent funding source that it and its riders deserve. Investing and streamlining service would incentivize more ridership,” said Jannelie Javier, a fellow at the Tristate Transportation Campaign.

The budget includes a 3% fare increase that went into effect at the start of July, and the agency expects farebox collections to reach $980 million in the fiscal year that began on July 1. If those targets hold, the agency will have brought farebox revenue back to prepandemic levels.

Though NJ Transit ridership has clawed out of the nadir it reached during the pandemic, it has not recovered to prepandemic levels — and with remote work now a fixture in the labor market, it’s not clear it will. The agency expects moderate ridership increases the next 12 months.

The agency’s most recent projections show $890.8 million in fare revenue in the last fiscal year, about $56 million less than forecast by that year’s budget. Federal maintenance funds and other reimbursements came in $141.3 million above expectations set last summer.

The agency’s direct state subsidy will fall to $43.9 million under the budget approved Wednesday, from $145 million in the last fiscal year. The agency’s annual diversion from New Jersey’s clean energy fund would roughly double to $140.1 million.

Other commercial revenue — money collected from the sale of property, ad space, and parking fees, among others — is expected to rise 48.7% to $195.9 million.

The remainder of the agency’s funding would flow from the New Jersey Turnpike Authority ($470 million) and reimbursements for preventative maintenance and other projects ($536.9 million).

Labor and benefits were the largest source of cost increases for the new fiscal year. Those are expected to rise $54.7 million, to about $1.8 billion, due mostly to contractual wage increases and bus routes the agency has taken over from private carriers.

Purchased transportation expenses — how much the agency pays private carriers to run buses, some light rail services, and Access Link — are expected to rise $45.4 million, to $334.1 million.

Board vote caps yearslong contract fight

The new, seven-year contract with the Brotherhood of Locomotive Engineers and Trainmen comes after protracted negotiations left members under an expired contract for five years and spurred the agency’s first strike in more than four decades (it interrupted services for four days in May).

The agreement, approved in a unanimous vote, raises hourly rates to $53 for locomotive engineers, $43.48 for assistant locomotive engineers, and $37.10 for trainees. Those wage rates are set to rise by 3% when the next fiscal year begins in July 2026.

“It was, as you all know, a difficult and contentious negotiation, but what we ended up with did not violate the fundamental principle that the governor and I laid out, which is we wanted something that was fiscally responsible but also met the needs of the union, and I think we’ve gotten an agreement that you’re going to consider today that will do just that,” Kolluri told the board.

Locomotive engineers who worked at the agency between 2020 and the date of the new contract will receive a collective $22.9 million in retroactive pay for the years spent under a lapsed agreement.

The new deal offers engineers an additional sick day and two new holidays, Juneteenth and Veterans Day. In 2023, the union paid $50,000 as part of a settlement agreement over an alleged unauthorized sickout on June 19, 2022. That agreement did not include an admission of guilt.

The agreement shifts out-of-network health reimbursements to a Medicare standard, mirroring provisions in contracts with the agency’s other unions. The change is expected to reduce the agency’s health care spending.

It phases out the engineers’ health management organization insurance plan and transfers employees using it to an exclusive providers organization plan, raises worker health premiums to 3% of base pay, and increases their workday to nine hours, from eight. These provisions are meant to avoid triggering provisions in contracts with the agency’s other unions that would provide them with identical wage increases if the Brotherhood of Locomotive Engineers and Trainmen had made no concessions.

“No other union that is of any consequence has come to my door and said, ‘I want the same deal.’ What does that tell you? That the givebacks were real. They were consequential, and they gave New Jersey Transit what we had asked for, which is givebacks that had value,” Kolluri said.

The agreement will reduce travel payment allowances by 10% and require engineers who move through NJ Transit’s training program to repay a portion of their training expenses, ranging from $4,650 to $9,300, if they leave the agency in the three years after their training is completed.

The repayment provision does not apply to workers who are laid off or suffer a disability that prevents them from working, and new language allows the agency to terminate workers without cause or hearing within 180 days of their completing training.

Other provisions require engineers to complete 16 hours of training annually on their own time and withdraw grievances filed under a 1982 agreement that required engineers’ hourly pay to be at least 10.4% more than conductors.