Repubican opponents of New Jersey Gov. Phil Murphy’s proposal to borrow up to $9.9 billion for offsetting COVID-19-related revenue losses was argued before the state’s highest court Wednesday and they said the state’s constitution and past legal precedent should prevent the plan from proceeding.
“The framers did not intend to give the state a blank check whenever an unspecified emergency arises,” Michal Testa Jr., attorney for the New Jersey Republican State Committee, said during New Jersey Supreme Court oral arguments Wednesday.
The case, which was heard via Zoom, focused on debt legislation Murphy
The Murphy administration is pursuing borrowing options as the state grapples with severe economic headwinds from COVID-19 resulting in lengthy closures of non-essential businesses after the virus’s outbreak began in March.
The New Jersey Republican State Committee filed a lawsuit in response to the bill
Testa, who is also Republican state senator, said the New Jersey COVID-19 Emergency Bond Act violates the appropriations clause of the state constitution and the court’s 2004 opinion in a
While justices in the 2004 case did not shut down a $2 billion bond issuance Gov. Jim McGreevey had already executed during the middle of a fiscal year, Testa noted the court’s decision also outlined strict guidelines saying bond proceeds should not be counted as “revenue” in future fiscal years.
“Pursuant to the proposed act, bond proceeds will be placed into the state’s general fund as revenue which is in direct conflict with the Lance holding,” Testa said. “The constitution of 1947 was written to be understood by the voters that approved it rather than those that would make a fortress out of a dictionary therefore it is unfathomable that the framers contemplated borrowed monies to be considered revenues.”
The Murphy administration is pursuing borrowing options as the state grapples with severe economic headwinds from COVID-19 resulting in lengthy closures of non-essential businesses after the virus’s outbreak began in March.
State Treasurer Elizabeth Maher Muoio
New Jersey Assistant Attorney General Jean Reilly argued on behalf of the Murphy administration the state constitution provides exceptions for GO borrowing to sustain operating costs without voter authorization during a major emergency such as COVID-19. She noted that efforts to mitigate the virus through social distancing measures and closing certain businesses have compounded the state’s fiscal struggles.
“The crisis here is of a scope comparable to only two other events in New Jersey’s 244-year history, the Civil War and the Great Depression, and all three crises have some common features that aren’t present with more run-of-the mill occurrences such as hurricanes or snow emergencies,” Reilly said. “Here the emergency precisely is not only a fiscal one, it is a fiscal one that is defined by the loss of revenues because it is a direct consequence. It’s caused directly by the pandemic.”
Marc Pfeiffer, assistant director of Rutgers University’s Bloustein Local Government Research Center, said it is tough to get a reading on how court will rule since the justices tested both attorneys with tough questions. He noted that the vast majority of the justices were not on the bench during the 2004 Lance case and they make seek a more middle of the road decision based on prior rulings.
“The court has often surprised me because they don’t always take the conventional thinking route,” Pfeiffer said.
If approved by the court, the bonding legislation permits the state to borrow up to $2.7 billion by the end of the extended 2020 fiscal year on Sept. 30 and $7.2 billion for the shortened 2021 budget cycle from Oct. 1 through June 30. Pfeiffer said expects the court to issue a decision before Murphy is scheduled to release his updated 2021 fiscal year budget on Aug. 25.
Fitch Ratings
New Jersey had $44.4 billion of outstanding bonded debt as of June 30, 2019, according to the state's latest annual debt report.
