By Hilary Russ
NEW YORK (Reuters) - New Jersey Governor Chris Christie on Friday signed into law a gasoline tax hike of 23 cents a gallon and ordered that stalled bridge, road and transit projects be restarted.
A week ago, lawmakers agreed to increase the state gas tax, which had not been raised since 1988, to 37.5 cents per gallon in order to replenish the nearly broke fund that pays for many transportation projects.
In early July, Christie halted all but the most essential projects paid for with the state's Transportation Trust Fund, including $2.7 billion of NJ Transit projects, because he and lawmakers could not agree on how to fund the program.
The deal between the Democrats who control state legislature and Christie, a Republican, calls for the sales tax rate and other taxes to fall in exchange for the higher gas tax. An estate tax on wealthy residents when they die will also be phased out.
"This compromise legislation locks in what I called for from the beginning: tax fairness for all residents, leading to a more affordable state and an improved economy," Christie said in a statement.
Critics of the plan said that once the tax cuts are fully phased in they will blow a $1.4 billion hole in the state budget every year.
Moody's Investors Service said this week the combined revenue package would "strain the state's operating budget amid rapidly rising pension contributions and below-average revenue growth."
The expected $1.2 billion to be raised annually for the next eight years will be dedicated to transportation projects, while the reduction in other taxes will reduce money available to pay for education, services and other costs, Moody's said.
(Reporting by Hilary Russ; Editing by James Dalgleish)