NJ Legislature, ECONOMIC OPPORTUNITY FOR ALL
Bond Buyer: New Jersey lawmakers put off decisions with stopgap budget
By Andrew Coen
New Jersey bought some time with its three-month stopgap budget, deferring significant expenses that push off challenging decisions for lawmakers until they craft a 2021 spending plan.
The $7.6 billion stopgap budget, covers the period from July 1 through Sept. 30, delays nearly $2 billion of scheduled spending into the fiscal year beginning in October from their normal September due date. The deferrals, which include a $951 quarterly pension payment and $461 million school aid payment, sets the state up for a potential liquidity crunch this fall, according to S&P Global Ratings credit analyst David Hitchcock.
“That’s not a long-term strategy, but in the short run it should help them address their cash flow issues,” Hitchcock said. “There are going to have to be some hard decisions made for the 2021 budget.”
New Jersey lawmakers chose to extend the 2020 fiscal year calendar by three months from its scheduled June 30 end to allow the state more time to gauge the economic fallout of the COVID-19 pandemic. State Treasurer Elizabeth Maher Muoio has estimated a $10 billion revenue loss through June 30, 2021, from numbers in Gov. Phil Murphy’s initial budget proposal, unveiled Feb. 25.
The three-month budget leaves New Jersey with “minimal” budgetary reserves — just $494 million on Sept. 30, according to Hitchcock. The state is slated to receive $2.4 billion federal CARES Act funding that cannot be used for budget relief, only COVID-19-related expenses.
Regina Egea, president of the conservative-leaning Garden State Initiative, said the Murphy administration needs to implement serious spending cuts or risk an exodus of taxpayers. She noted, the state has more than 1.2 million workers unemployed and the business climate was unattractive prior to the health crisis.
“This gap budget was another opportunity for our state government to address their structural imbalances but instead deferred over $2 billion of cost into the already revenue-stressed fiscal 2021,” Egea said. “The question post-pandemic for businesses and taxpayers is will they stay and demand change in how their government operates, or flee to other states that provide greater fiscal responsibility and economic opportunity.”
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