NJ Spotlight: NJ’s big borrowing deal comes under fire

By John Reitmeyer

During testimony before lawmakers Tuesday, Gov. Phil Murphy’s treasurer repeatedly defended a decision to issue nearly $4 billion in debt without voter signoff last year in response to the coronavirus pandemic.

New Jersey’s fiscal outlook has seen a major turnaround in recent months thanks to a flood of federal aid and rebounding revenue collections. Where once it predicted a fiscal emergency, Murphy’s administration is now forecasting a surplus of more than $6 billion.

But that surplus and that rise in tax revenues were not evident in November when the emergency bonds were issued, Treasurer Elizabeth Maher Muoio told lawmakers on the first day of hearings for the governor’s spending proposal for the coming fiscal year.

At that time, the state was entering a second surge of COVID-19 cases and a period of “great economic uncertainty,” Muoio said to members of the Senate Budget and Appropriations Committee.

“We couldn’t simply say, as some are now suggesting, ‘let’s wait until later in the fiscal year to make the decision to borrow,’” she said.

But Republicans countered during a subsequent question-and-answer session by pointing to other forecasts that suggested a better outlook was building. One GOP senator called the decision to borrow a “dramatic overreaction.”

Another said Treasury officials made it impossible for Murphy, a first-term Democrat now seeking reelection, to live up to a promise to pay down the debt early if the state’s fortunes improved because the bonds were ultimately issued as “noncallable.”

“Well, I’m glad you don’t work for me,” said Sen. Sam Thompson (R-Middlesex) during one of the more contentious moments of the hearing.

A tense hearing

The emergency borrowing — and the accuracy of the administration’s revenue forecasts that supported it — were among several hot topics of discussion during Tuesday’s hearing.

Others included the latest revenue estimates from the nonpartisan Office of Legislative Services and the potential that a significant “fiscal cliff” may yet have to be confronted once the borrowed money and federal aid runs out.