U.S. President Donald Trump maintained Thursday that the prospect of putting federal dollars toward states that have seen their tax revenue decimated by the COVID-19 recession, like New Jersey, was a “tough question.”
That comes despite a chummy media appearance between Trump and Gov. Phil Murphy at the Oval Office Thursday afternoon, where the two gave glowing remarks to the other on the COVID-19 responses in their respective jurisdictions.
New Jersey, according to Murphy, received the most ventilators of any state from the Trump administration.
“You can’t have a better representative than this man. Plus he’s an old Goldman Sachs guy,” Trump said of Murphy.
Murphy, who has been much warmer toward Trump in recent weeks, came to the White House to press for expanded testing capacity, and more federal dollars for New Jersey as the COVID-19 pandemic guts the state’s tax revenue and budget.
“A big part of our ability to reopen as fast as we all want to is to rapidly expand testing, and you all literally in the here and now this week are helping us in a big way to at least, I would expect by the end of May … at least double… our testing capabilities,” Murphy said.
But state aid Murphy requested, to fill a budget shortfall that could be anywhere from $20 billion to $30 billion for New Jersey, has been a much harder sell to Trump.
The president has insisted that states cannot use federal aid for “legacy” issues such as pension obligations. New Jersey’s public worker retirement system is considered one of the worst in the country.
“This is to allow us to keep firefighters, teachers and EMS on payroll, serving communities in their hour of need,” Murphy said. “We don’t see this as a bailout, we see this as a partnership.”
“We made a lot of progress in what I would call the legacy issues: Record pension payments, stabilizing indebtedness, record surplus,” the governor added.
Federal aid has also been a tough sell to Senate Majority Leader Mitch McConnell, a Republican from Kentucky, who derided the aid as a “blue state bailout.”
The congressional delegations for New York and New Jersey are seeking a combined $40 billion of federal aid for states.
In recent weeks, McConnell has warmed up to federal support, on the condition that such a stimulus package include more legal protection afforded to business owners over COVID-19 lawsuits
Trump indicated that he might use the prospect of federal aid to strong arm states with “sanctuary” policies – where authorities refuse to cooperate with federal immigration officials – to roll back those policies.
When asked about it during an April 29 press conference in Trenton, Murphy did not comment on that proposal.
New Jersey, under Murphy, is likely to borrow roughly $5 billion from a new Federal Reserve program in order to shore up its finances, amid uncertainty over how much federal funding the state could get.
Mass business closures and bans on non-essential travel have ground commerce to a halt in the Garden State, destroying the types of revenue it rely on – the sales, gas, income, corporate business, casino and lottery sales taxes.
Murphy introduced a $41 billion budget in February, but that spending plan has largely been thrown out the window, and he is obligated to reintroduce a proposal for the 2021 Fiscal Year by Aug. 25 for an updated Sept. 30 budget deadline.
Fitch downgraded New Jersey and Moody’s lowered the state’s credit outlook, both over concerns on how the state could ride out the COVID-19 recession, the uncertainty over federal aid, and the potential reliance on new debt.
S&P Global dropped the state’s credit outlook, saying that the recession may lead to New Jersey cutting its pension contributions or delaying payments.
Editor’s note: The original headline on this story misquote President Donald Trump as saying federal aid for New Jersey was a “tough sell,” in fact he said it was a “tough question;” it was updated at 8:00 a.m. EST on May 1, 2020.