Murphy cautions against ‘drunken sailor’ spending with extra cash

As lawmakers and state officials gauge how to spend billions of dollars in extra cash, Gov. Phil Murphy reiterated growing calls for public leaders to tighten their belts on how they spend this new money.

The state is looking at a closing balance of $6.3 billion this year thanks to $4 billion of new debt, spending freezes last year, and surges in consumer spending driven by pent-up demand following a year of COVID-19 closures.

Plus, the state now has $6.4 billion of federal aid from the Biden administration under the American Rescue Plan. Those funds come with dozens of pages of fine print and restrictions, and broadly speaking can only be used to finance the state’s COVID-19 response and make up for lost revenue.

“I don’t want to make the same mistake New Jersey has made far too often in the past … you find some source, an unexpected source of funding, and historically we spend like drunken sailors,” Murphy said at an unrelated event at Camden on the morning of June 1. “We don’t do the responsible, right thing to map out a multi-year plan.”

His office has not yet released an outline of how the $6.4 billion from the White House will be spent, and the funds are not included in Murphy’s proposed $44.8 billion spending plan, which would run from July 1, 2021, to June 30, 2022.

Over achieving

Murphy, lawmakers and other state officials warned of dire economic pains and collapses in state revenues amid the mass business closures put in place to halt the spread of the pandemic. Instead, the exact opposite came to fruition.

Both the New Jersey Treasury and the non-partisan Office of Legislative Services – financial analysts for the executive and legislative branches, respectively – are slated to present the state’s fiscal situation to lawmakers on June 9.

Their estimates presented this spring for the June 30 closing balance – when the fiscal year closes – were much higher than what was in Murphy’s February budget address.

On top of that, State Treasurer Elizabeth Maher Muoio told lawmakers on May 17 that the numbers they give in June “will increase by hundreds of millions of dollars due to the federally induced surge in consumer spending,”

“What we’re dealing with is truly an anomaly,” Assemblyman Jon Burzichelli, D-3rd District, who heads the Assembly Appropriations Committee, said in a phone interview last month. “We have to make decisions that will pay dividends for decades. But we can’t just live happy and fat.”

Republican lawmakers lamented the state’s current budget, which the governor signed in September 2020, as rife with so-called “pork spending,” or that did not reflect the state’s dire finances. During budget talks last September, they accused Democratic officials of packing unnecessary spending into the state’s $40.7 billion budget, which runs through June 30, 2021.

Senate Budget Chair Paul Sarlo, D-36th District, admitted he was “very concerned” about “spending on new programs that we’re not going to be able to afford in the future.”

That means using surplus or ARP money to pay down more expensive debt and alleviating structural deficits – or bills that don’t necessarily have the funds to support them – Sarlo said last month. With $44 billion in debt, New Jersey is one of the most indebted states in the nation.

Murphy agreed with some of the concerns Sarlo expressed, that the state cannot spend more than it will down the road.

“We’re allowed to spend ARP [funds] over three years. We also don’t want at the end of those three years, have set up a lot of programs where the federal money goes away and we’re caught left holding the bag,” the governor said in Camden.