Sweeney: We Need More Info on Governor’s Borrowing Plan

Murphy spokesman counters that administration has met with key legislators and answered questions about the need for fiscal help during pandemic
Credit: Edwin J. Torres/ Governor's Office
Gov. Phil Murphy and Senate President Steve Sweeney exchange greetings during governor’s budget address in February.

Gov. Phil Murphy has not convinced Senate President Steve Sweeney that the administration should be allowed to do emergency borrowing to fund the state’s response to the coronavirus pandemic and the economic upheaval it is causing.

Sweeney said during a lengthy interview Tuesday with NJ Spotlight that he’s been waiting several weeks for the administration to respond to basic questions about the borrowing plan, even as the governor has been publicly pressuring lawmakers to sign on.

“The problem we have — and I’ve told the governor — I’m not opposed to bonding,” Sweeney said. “But I am opposed to doing it without knowing what we’re doing with (the proceeds), and how much we need.”

“We’ve been asking for weeks — weeks,” Sweeney added.

Asked for a response, Murphy spokesman Darryl Isherwood disputed Sweeney’s version, saying the state treasurer and other administration officials have met in recent weeks with legislative leaders and “provided written answers to over two dozen questions.”

“The only questions that remain to be answered are those that will be answered in collaboration with the Legislature as part of the budget process,” Isherwood said. “To say that we have been anything other than transparent is simply false.”

A growing fiscal crisis

New Jersey has been among the states hit hardest by COVID-19, trailing only New York in the number of infections and fatalities. Unemployment claims have also surged as the pandemic has spread across the state, and as Murphy has ordered strict social-distancing measures that have closed many businesses deemed “nonessential” by the administration.

New Jersey has yet to release updated budget projections that account for the economic upheaval caused by the pandemic. But Murphy has repeatedly portrayed the state’s fiscal situation as verging on dire. Earlier this week, he repeated warnings that massive public-worker layoffs may be looming if more aid doesn’t come from the federal government, and if state lawmakers continue to stonewall his borrowing plan.

Murphy’s pitch for wider borrowing powers was first revealed last month after a copy of draft legislation was obtained by the media. Additional details were also included in an administration bond disclosure that said the governor is seeking legislative approval for both short-term and long-term borrowing to address projected liquidity and cash-flow concerns during both this fiscal year and FY2021, which begins in October this year.

Murphy’s plan would also allow the state to tap a new lending facility being offered by the Federal Reserve that allows for bonds to be repaid by state and local governments within three years. Assembly Speaker Craig Coughlin (D-Middlesex) has already shown a willingness to consider Murphy’s borrowing plan, but Sweeney has taken a harder line.

Isherwood suggested on Tuesday that the governor has made no secret about his fiscal concerns and desire to take advantage of the Fed program, which is being funded under the $2 trillion federal CARES Act.

“The Governor has said repeatedly that the state is in dire need of additional funding from the federal government and, absent that, will need to be able to access the capital markets as well as the Federal Reserve’s Municipal Liquidity Facility to help plug the massive budget hole left by COVID-19,” Isherwood said.

Warning on the impact of layoffs

It was on Monday during a coronavirus media briefing that Murphy talked specifically about the need to pass the emergency-borrowing legislation as he also warned about the potential for layoffs among public workers that have played a critical role in the response to the viral outbreak.

“Even if Congress delivers, it won’t be enough,” Murphy said. “I ask (lawmakers) today, and I ask you to ask them today, to pass this legislation, swiftly.”

“Let’s get this done,” Murphy said.

But Sweeney on Tuesday raised concerns about the constitutionality of Murphy’s plan since it seems to seek authorization for both short-term borrowing and long-term bonds that could extend out as long as 35 years, according to the draft legislation. Other lawmakers have raised similar concerns, noting the state constitution calls for a balanced annual budget and that a 2004 state Supreme Court decision held that bond proceeds cannot be considered as “revenue” to meet that balanced-budget clause.

Sweeney also raised questions Tuesday about how the administration plans to pay back long-term bonds. The income tax is constitutionally dedicated to funding only property-tax relief in New Jersey, and the sales and corporate-business taxes — two other major sources of revenue — are likely to be strained for a long time 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,” Sweeney said.

“I think people might want to have an idea of that,” he went on to say.

Savings through furloughs

Sweeney also said Murphy had cast aside a bipartisan plan he sponsored with two other lawmakers that calls for temporary furloughs of at least some public workers at the state, county and local level.

The senators maintain their plan could save as much as $750 million across all levels of government even as workers making less than $89,000 would essentially be held harmless as they collect enhanced unemployment benefits that are being provided through the CARES Act through the end of July.

“The furlough bill we have, that can help if the governor will get on board with that,” Sweeney said.

The rift over the issue harkens back to the frequent intramural sparring that was a hallmark of the pre-pandemic relationship between the two Democrats. But Sweeney said he remains willing to work closely with Murphy as the crisis unfolds and went out of his way to praise the governor’s handling of the ongoing health crisis during the interview with NJ Spotlight. The session also covered issues like reopening businesses, addressing the state’s unemployment backlog and the high rate of COVID-19 infections among long-term care facilities.

“While we’re in this crisis, the most important thing we should be doing is sharing information and working together,” Sweeney said. “We have demonstrated — the Legislature has demonstrated, absolutely 1,000 percent — a willingness to work together.”

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