Lawmakers took the first step toward approving a landmark plan by Gov. Phil Murphy to borrow $5 billion for plugging massive holes in the state budget, left there by the COVID-19 economic recession.

On Monday, the Assembly Budget Committee approved Assembly Bill 4175, which lets the state borrow $5 billion in bonds to shore up its own finances. It passed in a 9-4 vote with majority Democratic support—the four committee Republicans voted against the measure.

Murphy last month proposed borrowing that amount from a Federal Reserve program that was rolled out to provide the state with immediate cash as the global pandemic and government response to it shut down most businesses, shattering commerce and cratering tax revenue.

The central bank plans to buy roughly half a trillion dollars from state governments through December.

Murphy’s proposal, and the legislation, counts on constitutional authority granting the governor emergency war powers to borrow vast sums of money during a natural disaster without voter approval.

“Without more robust and flexible federal aid, as well as the ability to borrow, the cuts that will be required to produce a balanced … budget will be devastating,” State Treasurer Elizabeth Maher Muoio told lawmakers on Monday.

That could mean cuts to property tax relief, higher education, Medicaid funding, teachers, and public safety services like police officers and firefighters, Muoio and Murphy have argued.

Responses to the pandemic by Murphy and other governors nationwide have entailed placing states on near-total lockdown and closing businesses, with restrictions only gradually lifted in recent weeks. The strategy has shown many signs of working, but in the process ground commerce to a halt—driving unemployment up to record-highs and causing major reductions in revenue from taxes on corporations, income, sales, gas, casino and lottery tickets, along with fares and tolls.

Treasury officials within the Murphy administration predict that through Sept. 30, – which makes up the three-month extension of the current budget year – the state will face a $2.7 billion revenue shortfall, and another $7.3 billion between then and June 30, 2021, the end of the next fiscal year.

That doesn’t include the potential billions of dollars shelled out on the state’s response to the virus, including prevention, treatment and preparation for a widely expected second wave later this year.

The bonds would have to be paid back in three years, which could be extended to five years, after which the bonds would have to be refinanced.

Muoio and other treasury officials on Monday did not offer specific dates on when they would borrow or when the money would show up in the state’s coffers. But it could take “at least five to six weeks to get everything in place to allow us to present our program to the Federal Reserve,” Muoio said. “Then we would have an approximately two-week approval process, and then we would be able to go into the market.”

And widely-expected legal challenges to the move – over whether Murphy overstepped his constitutional authority – could likely add months to that timeline.

“To have this thing tied up in court, and when it loses, I think people are going to regret it,” Assemblyman Hal Wirth, R-24th District, said on Monday.

Muoio, when pressed, would not say whether the money would come through to the state by Sept. 30.

“That’s the question,” she said, “We’ve been asking about this legislation for a while now.”

The bill has the backing of Assembly Speaker Craig Coughlin, D-19th District, and is scheduled for a full-floor vote on Thursday.

Coughlin’s counterpart in the upper house – Senate President Stephen Sweeney, D-3rd District – has shown cautious support of the financing scheme, but it is not clear whether he would approve the full $5 billion. Still, he conceded that borrowing is inevitable.

There are currently no hearings scheduled on the Senate side.

Under the proposal, rates would be set at 2.8 percent, and the treasurer maintained “it is urgent that we take advantage of the favorable rate.”

Many towns unable to borrow money by themselves, who’ve also seen property taxes and other revenue evaporate during the pandemic, would borrow the money through the state government, which would in turn be on the hook for those funds.

The bill would be backed by the “full faith and credit” of the state government, meaning that state officials and lawmakers could raise the sales tax and even local property taxes to ensure payments are made.

The state would be allowed to borrow up to $9 billion, but treasury officials maintained that the total sum would be much closer to the $5 billion figure outlined in the legislation.

“We’re going to try to be as judicious as possible,” Muoio added—though the state won’t know how much money it is working with until the July 15 state income and corporate tax income filing deadlines.

Most of the money would be used in the 2021 fiscal year, which runs Oct. 1 to the end of June 2021.

On May 22, the administration said that without any federal aid or the ability to borrow, it would have to cut or delay $5.3 billion in expenses through Sept. 30. Of that, $3.2 billion – such as pension payments –would be delayed until Oct. 1. So, a sizable chunk of the bond money could be sunk into making those payments, and funding many basic government services beyond constitutionally required expenses such as the school funding formula, debt service and public worker retirement payments.

“If we didn’t have this cash and Oct. 1 arrived, we’d be in an immediate” spending freeze, according to Muoio.

New Jersey already owes roughly $44 billion from other bonds and borrowing done in previous decades.

Should the state borrow this money, state officials and lawmakers are anticipating even further credit downgrades from the three main Wall Street rating agencies. New Jersey’s already suffered a combined 12 downgrades in the past decade, 11 of which were due to tens of billions of dollars in unfunded pension obligations.