NJ Plan to Borrow Billions to Avert Public Worker Layoffs: Late last week, Governor Murphy, Senate President Sweeney and Assembly Speaker Coughlin agreed to a plan that would allow New Jersey to borrow billions of dollars to help make up for massive losses in tax revenue brought about by the COVID-19 pandemic.
Under the agreement, a special commission of four lawmakers — two from the Senate and two from the Assembly — would consider any borrowing covered by this agreement. Three of the members would have to agree. Sweeney and state Sen. Paul Sarlo (D-Bergen), chairman of the Senate budget committee, will serve on the commission.
The agreement would allow the state to borrow up to $9.9 billion in new debt without voter approval to offset significant revenue losses caused by the pandemic. The Murphy Administration has projected roughly $34 billion in revenues will be collected by the end of June 2021, well below the $38.7 billion budget that was enacted around this time last year for fiscal year 2020.
Murphy’s administration has not said how much money they intend to borrow, only that “Our intent is to borrow only as much as absolutely necessary,” as Treasurer Elizabeth Muoio has said.
This borrowing plan is expected to face a legal challenge from Republicans who oppose using debt to finance deficit spending. GOP legislators have cited language in the state constitution that tightly restricts how bond proceeds can be used by the state and maintain that those restrictions remain in place even in a health emergency situation.
“This debt plan is bad policy, and without voter approval is clearly unconstitutional. We will file suit to stop it,” the state GOP said in a statement issued Friday.
Any new debt issued to offset revenue losses during the health crisis could trigger another credit-rating downgrade. New Jersey has already been given negative outlooks by major Wall Street credit-rating firms.
New Jersey is one of the nation’s most-indebted states, and maintains the second-worst credit-rating of any U.S. state, behind only Illinois. Another downgrade would move New Jersey’s general-obligation bond rating out of “A”-level or higher territory for the first time in its history.
“I appreciate the magnitude of the fiscal crisis we are in, but we haven’t even exhausted other fiscal management practices,” said Sen. Steve Oroho (R-Sussex) in response to Friday’s announcement.
A Senate committee vote on the borrowing legislation is expected this Tuesday, and a full vote of the Senate is expected on Thursday.
Murphy Orders 15% Departmental Budget Cuts: Governor Murphy has ordered his cabinet members cut 15% of their department budgets to accommodate revenue shortfalls and growing expenditures linked to the coronavirus pandemic and subsequent economic shutdown.
The order was delivered in a memo written by David Ridolfino, acting director of the Office of Management and Budget, and requires departmental fiscal officers to submit plans for reducing their budgets by July 15.
Departments are being encouraged to explore cuts to any discretionary grant programs that are considered obsolete or ineffective. Reductions are also expected for entitlement programs, some of which may be obtained by narrowing eligibility thresholds or setting caps on participation.
The July 7 memo comes less than two weeks after Murphy signed a short-term budget bill that took the unprecedented step of extending the state’s fiscal year by three months.