They are faced with a quandary, those tunnels are now 112 years old, they are heavily used by Amtrak, NJ Transit and even LIRR on occassion (they have through trains out to Swamp Stadium for one thing). The big problem is they flooded during Sandy 8 years ago and the salt water that came in made it much,much worse. The original ARC project was canned by then governor Christy because he claimed that the state would end up paying for all the overruns likely to happen (which studies since have said basically was not true, the federal government would have picked up most of that). His other objection was a bit more valid, the ARC terminated on the NYC in its own station, it wasn't connected to Penn and wouldn't have easy access to the subways. He did try to use like 500 million the feds had already paid out to use on NJ roads, I think the federal government clawed that back. I don't think the ARC station was the reason, or the overruns, I suspect the reason can be inferred from a statement he made after he canceled the project "Well, if this is about jobs in NYC, they should move to NJ"
The thing about ARC is it wouldn't have helped the problem with the North River tunnels, though. Amtrak would still be using them and probably the NJ Transit shore lines. Amtrak came up with the Gateway project to build two new tunnels, which would allow shutting down the existing tubes on weekends and at night and allow them to be rebuilt once the gateway tunnels were on line since the new ones could easily handle the traffic during those times. In the end there would have been 4 operating tunnels into Penn Station, along with new bridges over the rivers on the NJ side (replacing a cranky old drawbridge that has arthritis), it is one of the busiest rail links in the world and needs the capacity.
The tunnels are in really bad shape, they have safety issues galore, they are crumbling and have big problems with the electrical feeders that go through it as well, not to mention the track leading to the tunnels, and I guess they are saying it is better to fix them now because the likeleyhood of the Gateway project happening anytime soon is pretty tiny to non existent, despite promises about infrastructure being a high priority. It is going to take a lot longer this way and cause a lot more disruptions, they are going to need to shut them down on nights and weekends, and also may have to do things like divert NJ transit trains to Hoboken rather than into Penn.