New Jersey Gov. Phil Murphy’s $48.9 billion proposed budget for fiscal 2023 continues the policy of more debt defeasance and less reliance on bonding.
Murphy delivered his fifth
This is in addition to the $3.7 billion appropriated last year.
To date, New Jersey has retired more than $3 billion in debt principal and interest, saving taxpayers over $600 million, according to the state.
Murphy's budget also forecasts that New Jersey will save about $2.2 billion by using debt prevention funds to support capital construction on a pay-as-you-go basis, rather than issuing bonds.
"Retiring debt ahead of schedule is a sound practice. The move frees up capacity for future projects," John Hallacy, founder of John Hallacy Consulting LLC, told The Bond Buyer. "At the same time, it is imperative to find ways to grow the economy."
The proposed budget includes investments in the state’s transportation infrastructure and NJ TRANSIT rail and bus system, and plans to use debt avoidance funds for capital improvement projects, including the restoration of Newark Penn Station.
Under the budget, NJ TRANSIT’s operating budget would rise to its highest level ever, increasing $106 million in fiscal 2023, a total increase of $450.4 million since Murphy’s first budget was presented in 2018.
This aims to support improvements that would make commuters' rides better. NJ TRANSIT’s new agreement with the Turnpike Authority will also provide a dedicated funding stream.
"Having commuted on NJ Transit since 1984, I fully appreciate the system needs more investment," Hallacy said. "The consideration now is to right-size the system while striving for optimal performance."
The commuter rail system's bread-and-butter demand for commuter service to Manhattan has been dramatically reduced by the shift to working from home started by the pandemic.
On March 2, Moody's Investors Service raised New Jersey’s
"Credit upgrades are a welcome relief and will set the stage for lower cost financing in the future," Hallacy said.
New Jersey is rated BBB-plus by S&P Global Ratings, A-minus by Fitch Ratings and A by Kroll Bond Rating Agency.
“It is great to listen to a budget address against the backdrop of the state's first credit upgrade in 17 years,” Assembly Budget Committee Chairwoman Eliana Pintor Marin, D-Essex, said in a statement. Murphy is a Democrat, and the party controls the legislature.
“The discussion now is how to wisely steward growing surplus revenues and continue growth, rather than struggling to find cuts or tax increases to protect essential programs.”
On Monday, the state Assembly’s Commerce and Economic Development Committee met to hear testimony about $3 billion in state debt which was defeased through the Debt Defeasance and Prevention Fund.
"This was a really smart thing for our state to do," said Assemblyman Roy Freiman, D-Somerset. "The idea of effectively managing debt is a no-brainer."
Geoffrey Stewart, managing director of PFM Financial Advisors LLC, told the panel the rating upgrade will have a multiplier effect.
“When your ratings improve, your future borrowings will be at lower interest expenses,” he said. “You can already see it as some of the state’s bonds are trading at what they call a more narrow credit spread.”
Murphy's budget includes property tax relief, a record level funding for schools and increased investment in higher education and affordable housing. The plan also proposes a record surplus of $4.2 billion, almost twice the size of the surplus proposed in last year’s budget.
Additionally, it allocates a $6.82 billion payment to the state’s pension fund, the second straight year it will meet 100% of the actuarially determined contribution.
Senate Republican Leader Steven Oroho said the amount of tax relief in the budget was underwhelming compared to a GOP proposal called “Give It Back.”
The Republican tax credit plan would return $3 billion to about 4 million taxpayers by giving them refundable credits of $1,000 when they file their 2021 tax returns next month.
“New Jerseyans who are feeling the impact of soaring inflation in their family budgets need tax relief now,” said Oroho. “Gov. Murphy’s plan to make people wait until 2023 for rebates is too little, too late.”
