Gov. Phil Murphy tore into the U.S. Treasury’s Wednesday restrictions on how New Jersey can use $1.8 billion of aid from the COVID-19 federal rescue package, arguing that the parameters are so tight that the state might not be able to use any of the money.
“I was assured that this funding would be able to be used flexibly by states,” Murphy said at his daily COVID-19 briefing Thursday in Trenton. “Those assurances apparently were empty.”
Under the CARES Act [“Coronavirus Aid, Relief, and. Economic Security Act], $3.3 billion in federal aid is going toward New Jersey: $1.8 billion toward the state, and the remainder toward towns, cities and counties.
The April 22 restrictions on the entire $150 billion pot of money bar states from using that money to make up for revenue lost during the COVID-19 pandemic, as well as to pay for expenses that a state or local government already budgeted as of March 27, when U.S. President Donald Trump signed the CARES Act into law.
Those dollars can instead only go toward “necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019,” between March and December 2020.
“Treasury’s guidance renders much of this funding literally unusable,” Murphy said. “Without additional flexibility, we’ll likely have to return a good chunk of it to the federal government.”
The COVID-19 response triggered a domino effect in New Jersey and across the country. Governors put their states in virtual lockdown to prevent the spread of the virus—a tactic that has shown many signs of working, but which could stay in place for many more weeks.
But the mass business closures and bans on non-essential travel have ground commerce to a halt, destroying the types of revenue that states rely on – for New Jersey the sales, gas, income, corporate business, casino and lottery sales taxes.
The Murphy administration had been pushing for the money to come as direct cash assistance, which has much more flexibility in how it can be used, Matt Platkin, chief counsel for the governor’s office, said at the Wednesday press conference.
Something like expenses for K-12 education – an area which has changed dramatically with statewide school closures – would no longer be eligible for the COVID-19 federal assistance, Platkin suggested.
“We’ve budgeted for education for a year. We’re paying teachers to be teaching students and children through dramatically different means – remote learning, delivering school lunches – doing things that were never envisioned a year ago. Under Treasury guidance, we can’t use this funding.”
The governor is also looking to borrow up to $9 billion to plug holes in the state budget.
Fitch Ratings, aware of how cash-strapped the state has become, and amid the increasing uncertainty over what New Jersey’s finances will be in the coming months, downgraded New Jersey earlier this week.
Meanwhile, congressional Democrats are pushing for a fourth COVID-19 relief bill, clocking in at $500 billion just for states. Both New Jersey and New York’s Congressional delegations are seeking a combined $40 billion for the two states to shore up their finances.
But U.S. Senate Majority Leader Mitch McConnell, a Republican from Kentucky, laid out far more blunt opposition to federal aid for states and suggested they should turn to declaring bankruptcy rather than federal aid – calling the push for aid “blue state bailouts.”
Murphy decried those comments as “utterly irresponsible” and “dead wrong.”
Federal treasury officials did not immediately return requests for comment.