A revamped version of emergency borrowing legislation that would allow Gov. Phil Murphy’s administration to borrow nearly $10 billion without voter approval easily cleared its first committee hurdle Tuesday.
Members of the Democratic-controlled Senate Budget and Appropriations Committee advanced the measure along party lines in an 8-3 vote after nearly an hour of debate, setting the stage for final approval in both full houses of the Legislature on Thursday.
Murphy, a first-term Democrat, has pressed lawmakers to give him the power to borrow without first going to voters as part of the state’s response to the coronavirus pandemic and the revenue losses it has triggered. He is expected to act quickly once the measure reaches his desk.
But sponsors acknowledged during Tuesday’s hearing that the borrowing issue will likely be tied up in court for months since Republicans have vowed to sue to block any borrowing done to finance deficit spending on the grounds that it would violate the state Constitution.
The new version also splits the potential borrowing into two segments, with up to $2.7 billion authorized for the remaining months of the current fiscal year, and a second amount of up to $7.2 billion for the fiscal year that begins Oct. 1 and runs through the end of June 2021. It also establishes a four-member select committee of lawmakers that will have the authority to approve or reject each proposal to borrow that comes from the Murphy administration through the end of fiscal year 2021.
Despite the addition of the new safeguards, Republicans on the Senate committee raised concerns during the hearing about how the new borrowing would be paid back, and how it could impact taxpayers. Language in the legislation allows for sales tax increases and a statewide property-tax assessment if general obligation bonds are issued and cannot be repaid with general budget revenues. It also allows for refinancing issues that would stretch out repayment for several decades.
“It will throw a $10 billion anchor around the necks of people who are already struggling to make ends meet,” said Sen. Sam Thompson (R-Middlesex).
“This borrowing was, and is, way too much,” said Sen. Michael Testa (R-Cumberland).
Democrats defend measure against Republican criticism
But Democrats on the committee defended the measure, saying the borrowing may be necessary to offset deep budget cuts or significant tax hikes as the state manages volatile revenues during the ongoing pandemic. They also maintained language in the state Constitution allows tight restrictions on spending and borrowing to be relaxed during times of war or major emergencies.
“Our most vulnerable citizens are at risk more than ever,” said Sen. Patrick Diegnan (D-Middlesex).
“The lives of so many people depend upon what we do in this room,” said Sen. Sandra Cunningham (D-Hudson).
Senate President Steve Sweeney, who negotiated the recent changes to the bill with Murphy, also signaled during the hearing that he could seek new cost-saving reforms when the administration proposes any borrowing.
Under a three-month stopgap budget enacted by the governor earlier this month that was based on his administration’s most recent revenue forecasts, spending has been balanced through the end of September without any borrowing, and with Treasury projecting a nearly $1 billion surplus. But some $2 billion in planned spending was deferred to balance the stopgap budget, and Murphy has projected additional revenue losses will persist well into 2021. A new budget plan is now due by Oct. 1.
Sweeney (D-Gloucester) has previously endorsed a report drafted by a group of fiscal policy experts that recommended dozens of ways government could cut costs in New Jersey, including by making major changes to public-worker pension and health benefits.
“Just bonding alone is not going to fix this problem,” Sweeney said during Tuesday’s hearing.
Registering their approval of the bill during the hearing were representatives of several public-worker labor organizations and left-leaning policy advocates. But representatives from business-lobbying groups said borrowing should be a last resort.
“There’s grave concern if it’s done wrong, and it will set us back for generations,” said Chris Emigholz, vice president of government affairs at the New Jersey Business & Industry Association.