The state’s closing balance over the next year is expected to come in at nearly $5.2 billion over what state officials previously expected, completely defying last year’s expectations of a total economic meltdown amid the COVID-19 pandemic.
Analysts at the nonpartisan Office of Legislative Services are expecting $4.7 billion more in the state’s coffers than what it initially projected this spring, adding to an already massive surplus for the state.
According to the New Jersey State Treasury Department, the state is looking at a closing balance of $10.1 billion, up from the $6.3 billion projected in April, which itself was up from the $2.5 billion forecast in October.
They expect a significant amount of the surplus to be spent in the coming fiscal year which starts on July 1, and have $6.9 billion in reserve by July 2022. They raised their outlook for this year’s closing balance by $4.1 billion, and next year’s closing balance by another $1.1 billion.
“We have not only returned to pre-pandemic levels, but we have jumped past those levels,” said New Jersey Treasurer Elizabeth Maher Muoio in her written testimony. “There was no playbook to follow for this crisis.”
“Remarkable, quite frankly,” Senate Budget Chair Paul Sarlo, D-36th District, said during an April budget hearing.
After Gov. Phil Murphy put the state and its economy in a near-total lockdown March through May last year amid the spread of COVID-19, state officials expected a cratering state economy. Tax collections plummeted and unemployment and jobless claims rose to all-time highs. Murphy projected a budget hole between $20 billion and $30 billion, later revising that to $9.9 billion.
Amid the state’s financial uncertainty, Murphy and Democratic lawmakers put together a $4 billion borrowing plan.
Murphy warned that without those funds, and amid uncertainty that they would see any help from Washington, the debt was vital for the state to avoid severe austerity measures.
“I think we sold the bonds on Nov. 18, if I’m not mistaken,” the governor said in April. “What was the world like then … Donald Trump claimed that he had won the election and was going to litigate that literally and figuratively right up until inauguration day. We had two run-offs in Georgia that were not taking place until Jan. 5, and you had an avowed leader in the Republican caucus, Mitch McConnell, saying there was no way there would be any state and local aid.”
OLS officials contend that looking back, “the borrowing was not essential” to balance the state’s books and keep its numbers out of the red.
Now with the state flush with cash, Republicans that sued to block the borrowing proposal are scrutinizing the plans, saying that the state never needed the new debt and that they were justified in their attempts to block it.
Murphy has until June 30 to sign the budget. Senate President Stephen Sweeney, D-3rd District, said he wants to have a budget sent to the governor’s desk to sign by June 21.
State analysts attribute the surge in cash to consumer blitz spending coming out of a year of COVID-19 closures, as well as the $4 billion in borrowed money and federal relief stimulus checks.
What’s more, the state is looking at a $6.2 billion infusion of cash under the federal American Rescue Plan. Lawmakers and the governor’s office are eyeing how the funds should be spent. State officials have not released any official spending blueprint.
“The state Legislature must retain its full power of the purse by requiring our co-equal branch, in its entirety and through regular legislative process, to originate spending proposals for the entirety of the nearly $6.5 billion of federal aid from the most recent COVID-19 relief bill,” reads a June 7 statement from Assemblyman Hal Wirths, R-24th District, and a ranking GOP member of the Assembly Budget Committee.
With upwards of $16 billion in slush money to spend – albeit restrictions that the ARP money has to go towards COVID-19 expenses or to make up for lost state tax revenue – state officials are now setting their sights on how to responsibly use that money.
“We need to be very strategic … it’s got to be long-term investments” like paying down more expensive debt and alleviating structural deficits – or bills that don’t necessarily have the funds to support them – Sarlo said in a May phone interview. With $44 billion in debt, New Jersey is one of the most indebted states in the nation.
Assemblyman Jon Burzichelli, D-3rd District, who heads the Assembly Appropriations Committee, described the state’s fiscal picture as “truly an anomaly.”
“We have to make decisions that will pay dividends for decades. But we can’t just live happy and fat.”
Editor’s Note: This article was updated on June 9, 2021 at 6:22 p.m. to correct the closing balance estimated figures.