Murphy Defends His Emergency Borrowing Plan Despite Rumblings Over Its Constitutionality

The plan, which is stalled in the Legislature, cites NJ Constitution’s provision for tight restrictions on borrowing to be relaxed in wartime or during major upheaval
Credit: (Rich Hundley III, The Trentonian)
Gov. Phil Murphy: “We wouldn’t be doing this if we didn’t think it was constitutionally feasible.”

Gov. Phil Murphy is defending an emergency borrowing plan he’s urging members of the Legislature to approve as part of the state’s ongoing response to the coronavirus pandemic after some lawmakers have said it runs afoul of New Jersey’s Constitution.

The governor’s borrowing plan cites language in the state Constitution that relaxes at least some restrictions on the issuance of debt during times of war or major emergency, and Murphy has argued that exercising those powers has become necessary to offset the major economic upheaval the pandemic is causing.

But some lawmakers have said what Murphy is proposing goes beyond what the Constitution allows, even during an emergency, and have not ruled out filing a lawsuit to block his plan.

Asked to address the constitutional concerns during a media briefing in Trenton on Friday, Murphy stood by the borrowing plan, which remains stalled in the Legislature.

“We wouldn’t be doing this if we didn’t think it was constitutionally feasible,” Murphy said.

One question, no direct answer

But the governor did not directly address a reporter’s question about whether he has obtained or would be seeking an official legal opinion from the state Attorney General’s Office to assuage lawmakers’ concerns. That’s something governors have done in the past when constitutional questions have been raised, including for matters related to public finance.

Word that Murphy, a first-term Democrat, was seeking legislative approval to use emergency borrowing powers in response to the pandemic was first detailed in a Bloomberg News report last month.

Draft legislation that his administration has sent to lawmakers that was obtained by NJ Spotlight cites language in the Constitution that allows for tight restrictions on borrowing to be lifted “for purposes of war, or to repel invasion, or to suppress insurrection or to meet an emergency caused by disaster or act of God.” Those restrictions include the requirement that if the borrowing would total more than 1% of annual state spending, it should be put before voters.

The Murphy administration’s draft legislation does not indicate exactly how much borrowing — via the issuance of bonds — the governor is seeking to do without voter approval, but a recent disclosure from the Department of Treasury indicated up to $5 billion in general-obligation bonds would be issued under his plan.

The draft legislation — including a version dated May 1 — calls for the approval of both short-term borrowing and for potential refinancing issues that would push out the maturity of the bonds as far as 35 years.

Murphy’s borrowing plan has strong support from a number of prominent liberal groups, and Assembly Speaker Craig Coughlin (D-Middlesex) has also indicated a willingness to work with the governor to advance his plan.

But taking a harder line is Senate President Steve Sweeney — a former gubernatorial candidate who has previously clashed with the governor on several fiscal issues. In fact, earlier this week during an interview with NJ Spotlight, Sweeney (D-Gloucester) accused Murphy of not fully addressing all the concerns that lawmakers have been raising in recent weeks, including exactly how badly the state’s finances are being drained by the pandemic.

“When they won’t give you the numbers and then they go out in the press and say ‘Call your legislators, we need to borrow,’ I bet you the people of New Jersey would like to know which taxes we’re going to raise, and how much we’re going to borrow,” he said.

Sweeney is among the doubters

Sweeney also said he isn’t convinced Murphy’s plan is fully constitutional.

Echoing that concern earlier this week was Assemblyman Hal Wirths (R-Sussex), who said it is “incumbent upon the governor to be as transparent as possible.” Last month, Assemblyman Jay Webber (R-Morris) also questioned Murphy’s plan on constitutional grounds.

Webber, a lawyer, participated in a landmark 2004 state Supreme Court case that defined the word “revenue” for state budgeting purposes in a way that specifically disqualifies bond proceeds from being used for anything other than funding capital projects or purchases. When asked if he would be willing to sue the Murphy administration to prevent future borrowing that seems to be outside constitutional restrictions on spending and borrowing, Webber said, “Let’s see what the governor’s actual plan is.”

Meanwhile, an opinion drafted by legal counsel for the nonpartisan Office of Legislative Services earlier this month also took on some of the constitutional issues, including whether bonds can be issued as part of the state’s response to the pandemic. The opinion, according to a copy obtained by NJ Spotlight, cited scenarios where bonds could be issued without voter approval and without running afoul of the constitution, but also some scenarios where they could not.

During Friday’s media briefing, Murphy’s chief counsel, Matt Platkin, said in response to a reporter’s question about the constitutional issues that lawmakers have been raising that he wasn’t “going to get into a back-and-forth with what some members of the Legislature have said.”

“We feel very confident that the plan is constitutional, both on the text of the (Constitution) and based on the precedent from prior cases,” Platkin said.