Republican lawmakers said April 6 they are taking aim at the Murphy administration over the more than $4 billion the state borrowed to make up for lost revenue from the pandemic after revelations that the state may have likely needed very little of those funds.
Democratic lawmakers, who hold significant majorities in both chambers of the state Legislature, also want to dig deeper into the state’s dire predictions and see to what extent the $4 billion of debt was an appropriate response.
Last year, Gov. Phil Murphy was able to push plans forward allowing the borrowing of more than $4 billion, with the goal of using the funds to pay for expenses incurred by the COVID-19 pandemic.
Those funds are available for the current fiscal year, which runs through June 30, and for the coming $44.8 billion spending plan, which runs from July 1 to June 30, 2022. But billions of dollars will be socked away in the state’s rainy day fund.
On April 6, the non-partisan Office of Legislative Services predicted that had the state not borrowed that money, then its closing balance would have instead just fallen by $165 million by June 30.
According to OLS projections, the state will close with a year-end total of $44.6 billion, up from the $44.1 billion Murphy’s office projected, which itself was more than $3 billion higher than what Murphy’s office projected in September.
And New Jersey is slated to have a major infusion of $6.3 billion in its surplus, driven by the borrowed funds and $7.9 billion of federal COVID-19 relief funds. The roughly $12 billion of federal aid going to state and local government agencies has not yet been scored in the state’s spending plan.
State Republicans, who unsuccessfully challenged the Murphy teams borrowing plans last summer, panned the news on Tuesday, funneling their criticisms toward New Jersey Treasurer Elizbeth Maher Muoio during the afternoon hearing.
“The governor said we were at risk of being $10 billion, $20 billion, even $30 billion in the red,” Sen. Steven Oroho, R-24th District, said in his opening remarks to Muoio. “The administration used those sky-is-falling claims to sell the state Supreme Court on a $9.9 billion borrowing plan that wasn’t needed.”
He continued, “Republicans warned last fall that there was no emergency need to borrow… That’s proven to be the case, exactly as we predicted.”
“We’re going to have future discussions with the treasury on the hindsight of weather or not – back in October – should we have borrowed, should we have not borrowed,” Senate Budget Chair Paul Sarlo, D-36th District, said. “Back then, we made the decision to do this.”
In late March, the state Senate’s top elected official – Senate President Stephen Sweeney, D-3rd District – told NorthJersey.com that “I think we moved too quickly to go to the market” with the borrowing.
“It’s one of these things that we should have waited until after the first of the year to get a clearer picture of our revenues,” he added, according to the news outlet.
Sen. Teresa Ruiz, D-29th District, questioned at least where else the money from the bonds could go, given that it might not necessarily be needed for COVID-19 expenses.
“Now that we know that we’re in a much better place, can we retool the purpose of that in a space where it’s critically needed,” said Ruiz, whose district includes Newark.
Muoio said that the state did not have that luxury to wait, at a time when officials were trying to fully gauge what kind of financial hit the state and economy would take from the pandemic.
“We couldn’t simply say, as some are now suggesting, let’s wait until later in the fiscal year to make the decision to borrow,” she told lawmakers. “Imagine, though, how disastrous it would have been if we had somehow postponed borrowing and the opposite panned out. Imagine if, like the first wave, the economic ramifications of the second wave had mirrored the surge in cases.”
“Imagine if we faced an additional multi-billion dollar revenue hole, at the very time residents needed us most, and when we had already delayed a pension payment and school aid, and the fate of additional federal stimulus was entirely up in the air?” she continued.
The debt must be paid off within 12 years, but the terms of the bonds issued mean the state would not be able to immediately pay off its tab.
“That $4.3 billion borrowed wasn’t directly related to COVID-19… it was not needed,” Sen. Mike Testa, R-1st District, said on Tuesday. Testa was one of the key attorneys who argued before the Supreme Court on behalf of the state’s Republicans trying to block the borrowing plan.