Public education, mass transit and tuition aid for college students are among the nearly two dozen state programs that will be funded with money Gov. Phil Murphy and lawmakers will borrow to prop up the annual budget.
Members of a special panel of four lawmakers are planning to meet in the State House on Monday to give final authorization for $4.5 billion in new debt that will be issued without voter approval to help sustain a nine-month budget that received a final legislative signoff on Thursday.
According to a list provided by the Department of Treasury, more than half of the borrowed money will be spent on education programs.
Also in line to receive borrowed money are public colleges and universities and a program that provides state-funded tuition-aid grants to college students. Mental-health services, substance-abuse programs, New Jersey Transit and the state police are among some of the other areas slated to receive borrowed money, according to Treasury’s list.
The New Jersey Constitution generally prohibits using borrowed money to fund deficit spending. But it allows for exceptions such as responding to war or a major emergency. And while New Jersey is already one of the nation’s most-indebted states, Murphy and fellow Democrats who control both houses of the Legislature have argued that more borrowing is needed this year to help offset revenue losses triggered by the ongoing coronavirus pandemic.
Lawmakers approved the budget after an agreement by Murphy, Senate President Steve Sweeney (D-Gloucester) and Assembly Speaker Craig Coughlin (D-Middlesex) called for $4.5 billion in borrowing to help sustain $32.7 billion in spending between Oct. 1 and June 30, 2021. Murphy is expected to sign the budget early next week once the borrowing receives final legislative approval.
More debt than Murphy asked for
The budget agreement between Murphy and the legislative leaders added $500 million to the amount of debt the governor originally requested in late August. But Murphy’s budget plan also called for $1 billion in tax hikes, and lawmakers didn’t accept all of them in the final spending bill they approved Thursday.
An emergency borrowing law enacted earlier this year allows for up to $7.2 billion in debt to be issued without voter approval to help fund the budget over the next nine months.
Coughlin and Sweeney named themselves as members of the Select Commission on Emergency COVID-19 Borrowing, which was established in the emergency borrowing law. The other members are Assembly Budget Committee Chair Eliana Pintor Marin (D-Essex) and Senate Budget and Appropriations Committee Chair Paul Sarlo (D-Bergen).
The panel is scheduled to meet at 2:30 p.m. Monday at the State House in Trenton, according to legislative staff. But there is little suspense going into the meeting since all four cast votes on Thursday in favor of the majority Democrats’ budget, which already counts on the $4.5 billion in borrowed money being available to spend.
When will it be paid off?
Earlier this month, Department of Treasury officials indicated they are planning to issue bonds that would be paid off over 10 years, and they suggested current market conditions would yield an interest rate around 2%. A report submitted to lawmakers in recent days indicated the interest rate can be no more than 6%, and the bonds may be paid off over a term of 12 years.
The following is Treasury’s complete list of programs and services that would be funded with the borrowed money during the 2021 fiscal year, broken down by department, program and dollar amount.
State Department-Program-Dollar Amount
Children & Families: Children’s System of Care In-Home Behavioral Health Services — $61,934,000
Corrections: Earn Your Way Out Act — $5,917,000
Education: Equalization Aid — $2,331,796,000
Education: Nonpublic Security Aid Per Pupil Increase — $3,250,000
Education: Grants for After School & Summer Activities for At-Risk Children — $1,000,000
Environmental Protection: Drinking Water Infrastructure — $60,000,000
Health: Hospital Subsidies-Graduate Medical Education — $163,350,000
Health: Health Care Subsidy Fund Payments — $51,715,000
Health: Maternal, Child and Chronic Health Services — $34,359,000
Higher Education: Senior Public Colleges Operating Aid & Outcomes Based Allocation — $394,973,000
Higher Education: Tuition Aid Grants — $334,887,000
Human Services: Medicaid Medical Day Care — $45,000,000
Human Services: DDD Individual Supports & Community Programs — $314,408,000
Human Services: MHAS Mental Health Community Care & Case Management Services — $241,242,000
Human Services: DFD Substance Use Disorder Initiatives — $15,012,000
Human Services: DFD Work First New Jersey Support Services — $11,534,000
Human Services: DFD Work First New Jersey Work Activities — $8,350,000
Human Services: DFD Code Blue — $2,500,000
Human Services: DFD SSI Attorney Fees — $1,367,000
Law & Public Safety: State Police Non-Salary Operating Expenses — $31,260,000
NJ Transit: NJ Transit Subsidy — $386,146,000
GRAND TOTAL: $4,500,000,000
Source — New Jersey Department of Treasury