Governor Murphy, Economic Opportunity for All
Bond Buyer: Murphy’s New Jersey budget prompts second-guessing
By Paul Burton
New Jersey’s proposed budget features an odd mix of dynamics that include a pandemic, an election year, massive borrowing, significant federal aid and a major pension liability problem.
Gov. Phil Murphy’s $44.8 billion fiscal 2022 plan before lawmakers would raise spending by more than 10% and earmark about $6.4 billion toward pensions in what would be the Garden State’s first actuarially required contribution in 25 years.
Murphy, a first-term Democrat, is up for re-election this November as is the entire state legislature.
New Jersey Gov. Phil Murphy said the large pension payment reflects “delinquencies of the past 25 years.”
Pension shortfalls have made New Jersey one of the lowest-rated states.
While administration officials have touted the pension payment as a step in the right question, the response in the capital markets is largely wait-and-see, especially in light of the state’s $4 billion issuance of COVID-19 emergency deficit bonds in November.
“Just because they fully funded [pensions] a year early doesn’t impress me that much, when they also have other questions, such as how are they going to maintain spending levels once the federal money goes away and $4 billion has to be repaid,” said Howard Cure, director of municipal bond research for Evercore Wealth Management.
“I think it is challenging. In any budget you want to look at what’s necessary versus one-time.”
Murphy’s plan would also boost aid to school districts by $578 million; provide direct payments of up to $500 for low- and middle-income families; and $200 to $275 million for small businesses. There is no increase in municipal aid.
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