The top lawmaker in the state Assembly is now on board with Gov. Phil Murphy’s plans for borrowing at least $5 billion to plug gaping holes in the state budget, as the COVID-19 pandemic slams the global economy and wrecks the state’s finances.
Assembly Speaker Craig Coughlin, D-19th District, said on Wednesday that he will schedule the borrowing proposal – known as the COVID-19 Budget Recovery Bond Act – for a floor vote on June 4.
That puts him at odds with his counterpart in the upper house, Senate President Stephen Sweeney, D-3rd District – an often-times political rival of the governor, who has reacted coolly to the borrowing scheme.
Murphy’s plan calls for borrowing at least $5 billion from the Federal Reserve under a bond program meant to shore up state and local governments that have seen their finances hit by the pandemic.
Under New Jersey’s constitution, the state is fairly limited in its ability to use borrowing as a means to cover its annual budget. But it does include a carveout for “purposes of war, or to repel invasion, or to suppress insurrection or to meet an emergency caused by disaster or act of God,” and the proposal calls for triggering those powers.
“While not ideal, I will support the borrowing of necessary funds through bonding, provided the sacrifice is spread evenly and that proper legislative oversight is included, to ensure our economic position is strengthened for both the present and future,” Coughlin said on Wednesday evening.
Sweeney has maintained that he is not necessarily opposed to the borrowing proposal, but rather, it’s scant on details.
“I want to know what taxes have to go up, what’s the governor talking about cutting?” he told NJBIZ in a May 12 editorial interview. “I have not ever said I was opposed to borrowing. I just need to know what I’m going to borrow, how I’m going to pay it back, so I’m walking into this with my eyes wide open.”
New Jersey is slated to see a $10 billion budget hole through the end of June 2021, the state treasury said last week.
That includes a $2.75 billion shortfall through the current budget, which ends Sept. 30, and a $7.3 billion shortfall for the upcoming fiscal year, which runs Oct. 1 to June 30, 2021.
Responses to the outbreak from Murphy and other governors nationwide has entailed placing their respective states on near-total lockdown and closing businesses en masse. The move has shown many signs of working, but in the process ground commerce to a halt—driving up unemployment and causing major slashes in the taxes on which the state relies: corporation, income, sales, gas, casino and lottery sales, as well as fares and tolls.
Moreover,New Jersey has shelled out hundreds of millions of dollars for its response to the virus, including for personal protective equipment and to medical facilities.
Murphy argues that the move will grant the state short-term cash, as congressional Democrats push for hundreds of billions of dollars in aid for state and local governments at the federal level.
He’s warned that the state is just weeks away from a “fiscal disaster,” and that he may need to lay off thousands of state workers and slash public services to balance the budget.
“I’m not going to be in a position where the governor announces ‘I’m going to be laying off these people because you won’t bond, you need to bond,’ and everyone starts yelling at us because I’m not willing to bond because I don’t know what the numbers are and are given the numbers last minute,” Sweeney said.