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Gov. Phil Murphy. (Photo: Kevin Sanders for New Jersey Globe)

Murphy holds the line on borrowing despite rosy revenues

Office of Legislative Services says $4 billion in bonded funds not needed

By Nikita Biryukov, April 07 2021 4:11 pm

Gov. Phil Murphy declined to say whether he, like Senate President Steve Sweeney (D-West Deptford), regretted bonding $4 billion to plug a hole in the state’s revenues that never fully materialized Wednesday.

The governor argued the state needed the money when the bonds were sold in November, when prospects of a new round of COVID-19 stimulus were still low.

“What was the world like then? I just want to remind everybody of that. Donald Trump claimed he won the election and was going to litigate that, literally and figuratively, right up until inauguration day,” Murphy said. “We had two runoffs in Georgia that were not taking place until Jan. 5th, and you had an avowed leader in the Republican caucus, Mitch McConnell, saying there was no way there would be any state and local aid.”

But in the months since, it’s become clear that, between billions of dollars in forthcoming federal aid and revenues that outperformed doom-and-gloom projections, the state does not need the $4 billion.

The Office of Legislative Services said as much during a Senate Budget Committee Hearing Tuesday, calling the funds “not essential” to this year’s appropriations bill, though Treasurer Liz Muoio said the administration stood by its decision to borrow.

“With all due respect to the Monday morning quarterbacking, we make the decisions at the time we make them based on the best information we have,” Murphy said, and earlier, “This thing had epic consequences. I haven’t heard so much Monday morning quarterbacking since Howard Cosell retired.”

Republicans opposed using borrowing to fill the state’s budget holes last year, and their criticism of the program has redoubled in recent days after revenue projections from OLS and amended projections from the Treasury showed higher revenues than anticipated.

They saw vindication, having attempted to block the borrowing through an unsuccessful legal challenge that wound its way to the New Jersey Supreme Court, arguing the bonding was unconstitutional because the bonds were not approved by voters.

“Going back to last July, we had clear signs the State’s financial picture was better than expected despite the Murphy Administration’s measures that needlessly destroyed so many businesses,” Senate Republican Budget Officer Steve Oroho (R-Franklin) said in a statement Tuesday. “The governor stuck by his false projections to secure approval for unnecessary tax increases and an otherwise unconstitutional borrowing scheme to build a massive surplus that he could spend while he runs for reelection.”

Democrats in the legislature have turned cold shoulders to the bonding. Senate President Steve Sweeney last month said he regretted borrowing $4 billion, and State Sen. Dawn Addiego (D-Evesham), a member of the Budget Committee, reiterated her opposition to the proposal at Tuesday’s hearing.

The debt, carrying an interest rate of about 2%, is noncallable, meaning it cannot be paid off early. Some opponents have called that a mistake, saying the state should have issued callable bonds so it could clear its debt early.

But Murphy, who spent 23 years at Goldman Sachs, said the money could still be useful even if the borrowing didn’t prove necessary. Those funds, he said, could be used to pay down the other, higher-interest debts the state’s carrying.

“We’ve got $400 million of debt avoidance in our budget, things like the South Jersey wind port, SDA projects,” Murphy said. “That’s another option that you can forgo and save money as a result of that.”

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