Murphy signs $9.9B borrowing bill, NJ Republicans sue in court to block it

Daniel J. Munoz//July 17, 2020

Murphy signs $9.9B borrowing bill, NJ Republicans sue in court to block it

Daniel J. Munoz//July 17, 2020

Gov. Phil Murphy approved a bill Thursday evening allowing the state borrow up to $9.9 billion to aid its COVID-19-ravaged budget—only for the state Republican party to file suit soon after, arguing that the move is unconstitutional.

GOP lawmakers and the state’s Republican Party filed the suit Thursday evening at the Mercer County Superior Court. It lists the New Jersey State Republican Committee and GOP lawmakers from both the Assembly and Senate.

The borrowing plan would sidestep voter approval – typically required when the state bonds money – and could leave New Jersey’s taxpayers on the hook for upward of 35 years.

Under the deal that Murphy struck last week with Assembly Speaker Craig Coughlin, D-19th District, and Senate President Stephen Sweeney, D-3rd District, the state would bond up to $2.7 billion through September – the end of the three-month extension of the current budget – and another $7.2 billion between Oct. 1 and the end of June 2021.

The pandemic has ground economic activity to a halt, causing billions of dollars in state tax revenue to dry up. Murphy plans to cut or delay $5.3 billion through Oct. 1, and the state is facing a $7.2 billion budget hole.

But Murphy has indicated it’s “too early to tell” how the borrowed money would be spent.

A four-person panel in the state Legislature would have to okay any borrowing and accompanying spending that Murphy wants to pursue. Coughlin and Sweeney will likely be two of the members, along with Senate Budget Chair Paul Sarlo, D-36th District, and Assembly Budget Chair Eliana Pintor-Marin, D-29th District.

Gov. Phil Murphy speaks at his daily COVID-19 press briefing at the War Memorial in Trenton on June 3, 2020.
Gov. Phil Murphy speaks at his daily COVID-19 press briefing at the War Memorial in Trenton on June 3, 2020. – RICH HUNDLEY, THE TRENTONIAN

“The passage of this legislation is an important step in New Jersey’s recovery from the economic ravages of the COVID-19 pandemic,” Murphy said in a Thursday evening statement, hours after the Legislature sent him the bill. “While this is by no means a silver bullet, the ability to responsibly borrow is essential to meeting our fiscal needs in the coming year.”

Parts of the borrowing, done under a Federal Reserve program, would be paid back in between three to five years; bonding through the private market could take decades to pay back.

The measure was passed in the Assembly hours after the Senate approved it, along party lines in both houses, with the Democratic majority supporting the bill, aware of the looming legal challenge.

Proponents argue that the plan is necessary to keep afloat a vast array of public and social service programs, ranging from K-12 education to police and emergency services, teachers, and the state’s pension payments.

But according to one report from the state Legislature’s nonpartisan Office of Legislative Services, the state could not bond out money to use for general operating expenses, and doing so would be unconstitutional.

The Republican legal challenge cites that OLS opinion, as well as a 2004 state Supreme Court case limiting how the state could use borrowed money.

“The Constitution of the state of New Jersey does not allow you to do what you’re proposing to do,” Assemblyman Jay Webber, R-26th District, said during the Thursday floor debate in the lower house.

Republicans also worried that the bill would lead to tax increases, and the legislation does in fact allow for the state to increase the property and sales tax rates if it cannot come up with the money to finance the debt.

Assemblywoman Eliana Pintor Marin, D-29th District.
Pintor Marin

Sarlo assured on Thursday and during a Senate hearing earlier in the week that tax increases, at least for now, are being kept off the table.

Still, Murphy and Democrats in the Legislature argue that the state constitution will be on their side in this matter, with Pintor-Marin, during the Assembly session, citing a legal opinion from the state attorney general’s office that backs the plan.

“[W]hat’s your plan B, folks out there? What else do you think we should be doing? It’s just ridiculous the absence of viable alternative public policy from folks who are whining about this,” Murphy responded earlier this week.