New Jersey will soon receive more than $6 billion in direct federal aid to continue the state’s fight against the coronavirus pandemic, but it’s too early to say exactly how that money will be spent.
The new infusion of federal dollars comes as the state’s fiscal outlook has brightened despite the lingering health crisis, thanks, in part, to an improving revenue forecast and emergency borrowing that raised more than $4 billion.
The aid from the recently enacted American Rescue Plan Act is also coming with fewer strings attached than past coronavirus relief packages, giving state government more of the flexibility that Gov. Phil Murphy has repeatedly called for.
“This is the relief that our families and communities have sorely needed to get them through these challenging times,” Murphy said during a news conference Friday in Elizabeth to celebrate final adoption of the aid law.
But how exactly the Murphy administration will spend the direct federal aid related to the pandemic in the coming months has yet to be determined, his administration officials said Friday, citing pending guidance from the U.S. Treasury. Lawmakers, who must approve Murphy’s election-year budget or draft one of their own before July 1, plan more hearings this week on his spending plan.
Effect on NJ tax credits?
It also remains to be seen whether language added to the relief bill in the U.S. Senate — and designed to prevent states from using the coronavirus aid to finance major tax cuts instead of responding to the pandemic — could get in the way of Murphy’s ongoing efforts to expand New Jersey tax credits to the working poor and to parents to help with child care.
In all, more than $25 billion in federal aid will be coming to New Jersey and its residents in some form from the $1.9 trillion relief bill that President Joe Biden signed into law last week.
Some of that aid will go directly into the bank accounts of New Jersey residents, thanks to the law’s funding of a new round of stimulus payments. Individuals making under $75,000 annually qualify for payments of $1,400, and married couples earning under $150,000 annually will receive $2,800, according to the new law.
A total of $9.5 billion in direct stimulus payments will eventually be sent to nearly 4 million qualified households in New Jersey, with payments averaging $2,600, U.S. Sen. Bob Menendez (D-NJ) said during Friday’s news conference.
The new law also provides funding to extend until early September enhanced federal unemployment benefits that were due to lapse this month.
“Help is truly on the way,” Menendez said.
Where some of the money is going
Counties and municipalities in the state are also due to receive significant federal aid under the law — more than $3 billion. That should help ease budget crunches, caused by the decline in many revenue sources during the health crisis at the same time costs related to funding frontline workers and other elements of the pandemic response have gone up.
In addition, public schools here will get $2.7 billion, and the law also provides for nearly $900 million to go to colleges and universities in the state. And New Jersey Transit is in line to receive an estimated $2 billion to help stabilize its budget.
All that federal aid should help ease pressure on the state budget, a large portion of which is sent out annually as direct aid, including to schools and municipalities.
It also has the potential to ease pressure on local property taxes and to give the state budget an additional boost by supporting more consumer spending in the coming months, which could, in turn, mean increased tax revenue for the state.
And then there are the billions in direct federal aid the state will receive to help offset revenue losses and cover increased costs incurred during the pandemic response.
The governor offered few specifics about his plans for those funds during Friday’s news conference, but he said generally that the new relief law would boost New Jersey’s ongoing efforts to vaccinate residents, and reopen schools and the state economy.
Murphy, a Democrat who is up for reelection in November, was already planning to increase state spending by more than 10% year-over-year under a nearly $45 billion budget plan that he put forward last month. Lawmakers are holding a series of virtual public hearings this month to review the governor’s spending proposals.
State revenues already on the rise
Total revenues during the current fiscal year were up year-over-year by nearly 5% through the end of February despite the ongoing pandemic, according to new tax-collection data released by the state Department of Treasury on Friday.
Thanks to the state’s own brightening revenue outlook, Murphy is planning to open the 2022 fiscal year on July 1 with more than $6 billion in reserves, even before factoring in any of the direct new aid from the federal government.
Murphy press secretary Alyana Alfaro Post said Friday that the funding from the American Rescue Plan Act would generally allow the administration to “redouble our efforts to fight COVID, vaccinate our citizens, and rebuild our economy.” But, she added, “We are still waiting for final guidance from the U.S. Treasury Dept. before making any decisions about the exact uses of funds.”
During Friday’s news conference, Murphy said his administration wouldn’t treat the recovery from the pandemic the same way the state handled the aftermath of the 2007-2009 Great Recession. Murphy suggested cutbacks enacted at the time contributed to New Jersey’s slow recovery from that downturn.
“New Jersey will be the Number One state to recover from this pandemic. You have my word,” Murphy said.