Folks food shopping on pandemic-stricken pocketbooks certainly grasp New Jersey’s critical financial dilemma. But unlike lawmakers Thursday, they didn’t get to vote on borrowing almost $9.9 billion to help balance the state budget. It’s a whopping potential debt increase.
“I think it’s terrible,” said one resident. “Well we’re already in too much debt, aren’t we? Shouldn’t you be trying to cut back?”
“I feel OK with it because we’re going to need help financially throughout the state for a lot of different reasons,” said Wharton resident Mike Slack.
“It’s good for if it’s needed in the economy, absolutely. Is is bad for the paying back and the debt? Absolutely,” said Rich Chovanec from Rockaway. “It’s a rock and a hard place.”
Gov. Phil Murphy signed the bill just hours after it passed the Democratic-controlled Legislature in a mostly party line vote. Republicans had argued for fiscal restraint.
“The brutal reality we face is that cuts simply will not be enough given the storm that is raging around us. We simply can’t cut our way out of this. Our successful recovery from this pandemic requires us to look and lean forward,” said Murphy during Friday’s coronavirus press briefing.
But Murphy won’t control the borrowing. That will rest with a select committee of just four Democrats: Senate President Steve Sweeney, Senate Budget Committee Chair Paul Sarlo, Assembly Speaker Craig Coughlin and Assembly Budget Committee Chair Eliana Pintor Marin.
“What immense power they now have. If you think about it, typically these types of borrowing issues go before all of New Jersey’s registered voters; millions of people get to sign off,” said NJ Spotlight budget and finance writer John Reitmeyer. “It will be four people get a say, four people representing just portions of the state.
“I took the oath to represent all families, not just the 29th, to make sure families are fed, make sure that our schools are funded, we continue to make pension payments,” said Pintor Marin.
Murphy says New Jersey’s constitution gives him the right to circumvent borrowing restrictions under special powers granted during times of war and emergency. Republicans adamantly disagree.
“That emergency clause was enacted when there were potential U-boats off of the coast of the state of New Jersey and we were facing foreign invasion, potentially,” said Sen. Mike Testa.
Republican lawmakers Thursday filed suit to block the new law, arguing New Jersey Supreme Court’s already ruled against using bonded debt to fund basic operating expenses. The high court will hear oral arguments in the case August 5.
“This level of borrowing is unconstitutional,” Testa said. “That is then going to be appropriated as they see fit with no public input.”
Why borrow $9.9 billion? That’s how much the state treasurer figured New Jersey would lose in in tax revenues because of the pandemic. And the state’s facing an almost $5 billion pension payment Oct. 1. Still, is $9.9 billion too much?
“I would say yes because, again, we have not seen a plan. This is a guesstimate, estimate by the administration of, ‘We need to borrow this amount of money,'” said Ralph Albert Thomas, CEO and executive director of the New Jersey Society of CPAs.
The New Jersey Society of Certified Public Accountants notes the state still has unspent federal coronavirus aid dollars and warns the massive borrow could boost Jersey’s debt load to about $150 billion, putting it among the nation’s highest. That could further hurt the state’s already bad credit rating. And, ultimately, it could raise taxes if revenues can’t cover debt payments.