Energy funds raided to balance New Jersey budget

Posted: July 05, 2010

TRENTON - Last month, a state utilities board voted to allocate $15 million in federal stimulus money for grants to make businesses more energy efficient.

The money for the program, which seeks to lower New Jersey residents' utility bills by reducing demand from the biggest users of the electric grid, should have come from a fee assessed on major commercial and industrial users since 2003.

But the Retail Margin Fund, which holds that revenue, is empty - among the consequences of hundreds of millions of dollars in diversions from "dedicated" funds to help the state close a multibillion-dollar budget gap.

Budget documents show that environmental and clean-energy programs designed to reduce New Jersey household and commercial utility bills are being hit particularly hard, with about $400 million rerouted into the state's general fund.

The state raided $128 million from the Retail Margin Fund, which is generated by fees from commercial and industrial users, in the fiscal year that ended June 30, and will take $14 million under the $29.4 billion budget signed into law last week.

Greg Reinert, spokesman for the Board of Public Utilities, said the fund had never spent the money collected over the years.

Today, he said, "there's nothing left in it."

Just last year, the state enacted a law authorizing the fund to spend $60 million on combined-heat-and-power grants for businesses. The program aimed to help the state develop 1,500 megawatts of cogeneration capacity by 2020.

Assemblyman Upendra Chivukula (D., Somerset), a primary sponsor of the 2009 law, criticized the shift of $15 million in stimulus money to fund the cogeneration program as a one-shot fix.

The fund is paid into by business customers "who are hurting with higher energy costs. By taking their money away and not giving it back to them, to balance the budget, it's totally inappropriate," he said.

Chivukula grilled the sponsor of the bill authorizing the diversions from that and other environmental funds on the Assembly floor during last Monday's marathon legislative session. Yet Chivukula provided one of the handful of Democratic votes needed to pass the measure, citing "the spirit of bipartisanship."

"Given the dire circumstances we're facing in New Jersey with revenue shortfalls, we have little or no choice" but to look to other areas "to make this budget balanced," Assemblyman Joseph Malone (R., Burlington), the bill's sponsor and a previous critic of budget raids, told Chivukula.

The moves concern lawmakers and environmental advocates alike.

"One of the problems is that this isn't taxpayer money. . . . It was ratepayer money that had been set aside and dedicated to clean energy that helps people save money and helps create jobs and helps reduce pollution, so it was a no-win situation for the environment, the economy, and the people of New Jersey," said Matt Elliott, the global-warming and clean-energy advocate for Environment New Jersey.

"Once they get used to robbing these funds," said Jeff Tittel, director of the New Jersey Sierra Club, "they may continue to rob them because it becomes easy – and that is going to mean higher electric costs for consumers, fewer jobs in a time when we need to grow our economy, and more air pollution."

The largest diversion comes from the Clean Energy Fund, which annually takes in about $250 million, an average of $20 per New Jersey household, through a charge on utility bills. The fee stems from the 1999 utility deregulation under Republican Gov. Christie Whitman.

Revelations that the administration of Gov. Jon S. Corzine rerouted $30 million from the fund in 2009 drew outrage from several South Jersey lawmakers. Assemblymen Vincent Polistina and John Amodeo, Republicans from Atlantic County, lambasted the move as "Exhibit A of budget-balancing gimmicks." Sen. Diane Allen (R., Burlington) called for an end to the practice.

But those same lawmakers closed out fiscal 2010 by voting to authorize a $158 million diversion from the fund, and an additional $10 million this fiscal year.

In interviews, the three legislators said they continued to oppose raiding funds, but described their votes as necessary in a difficult fiscal climate.

Polistina blamed the Democratic Corzine administration, saying it had "overestimated revenues so badly that we were left with very little options, and at this point it seemed like the best way to try to close the shortfall that was created by Corzine."

The moves have also upset the industry: The Mid-Atlantic Solar Energy Industries Association sued the Christie administration in May, saying diversions of clean-energy money were unconstitutional.

Reinert said the impact of the diversions from the Clean Energy Fund had been softened by the BPU's recapturing $61 million that had been set aside but never spent on various projects. He said the BPU had actually increased funding for a successful home energy audit program.

Taking money from dedicated funds is a longtime, if controversial, practice under administrations of both parties in Trenton. State leaders gave approval last week to dip into funds dedicated to spinal-cord and breast-cancer research, disability payments, and economic development.

They authorized diverting $10 million set aside to make state buildings more energy efficient, and tapping the recycling fund for $7 million, the same amount diverted last year. The budget also says that "all revenues from fees and fines collected by the Department of Environmental Protection . . . shall be deposited into the state general fund without regard to their specific dedication."

States from California to Connecticut are raiding dedicated funds to offset enormous budget deficits.

Rhode Island this year decided it was a violation of state law to divert cap-and-trade revenue from the Regional Greenhouse Gas Initiative, which is an agreement among 10 Northeast states to cut carbon emissions.

New York and New Hampshire, however, took millions from their RGGI funds this year. New Jersey is redirecting $65 million in RGGI money to its general fund.

Sen. Jeff Van Drew (D., Cape May) said the moves meant a lack of investment in the future, given that New Jersey has been "on the cutting edge of clean energy." He withheld his support for the budget last year out of numerous concerns about raiding dedicated funds, and has sponsored a resolution to bar the practice through a state constitutional amendment.

He nonetheless voted to authorize the diversions last week, explaining: "We have to move forward in New Jersey. We have to put out a message that we can't have a [government] shutdown."

Contact staff writer Maya Rao

at 856-779-3220 or

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