BUSINESS & ECONOMY

Leaders reach borrowing deal with governor

BY David Cruz, Senior Correspondent |

“We’re out of money. Folks have to understand that.” Governor Murphy did not equivocate. The economic impact of this pandemic is just now starting to be felt. The agreement among the big three to allow the governor to borrow, up to $9.9 billion, comes with some caveats and the potential for a serious legal challenge.

“I would not want to be in the position to manage this. There’s no easy solution, and no painless way through it,” said John Reitmeyer, budgets and finance writer for NJ Spotlight.

The deal represents a compromise, mostly on the governor’s side. It allows for the governor to borrow funds either from the bond market or from a program set up by the Fed to lend to distressed states, like New Jersey. The state can borrow $2.7 billion for the current budget, which has been extended to September 30, and the remainder, around $7.2 billion over the next fiscal year. Any spending will have to get the approval of a four-member Select Commission on Emergency COVID-19 Borrowing, which will likely include Speaker Craig Coughlin, Budget Chair Eliana Pintor Marin from ther Assembly and Senate Budget Chair Paul Sarlo and Senate President Steve Sweeney.

“I held back for a while because I wanted to make sure the legislature was on equal footing with the administration, which it is now, and we can’t ignore that we have to fix this, ” said Senate President Steve Sweeney.

Assembly Speaker Craig Coughlin added, “it is an extraordinarily compelling time and something that is unprecedented. It is something that I know I didn’t want to do and I suspect I can speak for the governor and the senate president in saying that they wouldn’t have chosen to borrow $9.9 billion for no reason. We’re doing it to try to get through this time.”

But Republicans say the deal is crazy expensive and against the state constitution, which requires that voters approve borrowing of this magnitude and also restricts this kind of borrowing to capital projects – bridges, schools, roads, etc. evenin an emergency. Senate Budget Committee member Declan O’Scanlon says Republican lawmakers will sue to stop it. “You’re not allowed to use borrowed money to balance the budget, so that’s a big problem. The other problem is that, when you’re going to do general obligation debt, we are very clear that the voters need to approve it before you saddle the voters with tens of billions of dollars and that’s what this is going to be when this is all added up – any debt actually – the voters have to approve.”

“This really will be a noteworthy case if it gets this far because it will test exactly what the constitution allows in terms of relaxing the state’s tight restrictions on borrowing and spending during a time of emergency and it will determine whether we are still in fact in an emergency in New Jersey,” added Reitmeyer.

Senator Sweeney concluded, “I’m not a lawyer; I’m not a judge and I know we’re going to be going to the supreme court. What I’m hoping is that, once the Republicans file suit, that the chief justice will take the case and hear it quickly.”

Because, if the Republicans prevail, Plan B is going to be a lot more tough to swallow. The borrowing bill will get a hearing tomorrow before the Senate Budget Committee, and could see a vote, maybe even in both houses, on Thursday.