New CARES Act guidance coming next week, Murphy says

Gov. Phil Murphy expects the U.S. Treasury to put out new guidance that may give states more freedom on how to spend aid money made available through the Coronavirus Aid, Relief and Economic Security Act early next week.

“We’ve made some good progress,” the governor said at Friday’s COVID-19 briefing. “They’re coming out with more guidance — I think early week. We just hope that guidance allows us to use all the money we need to use from that.”

Guidance issued by the Treasury in April explicitly barred states from using money awarded under the CARES Act to make up for revenue lost because of the pandemic.

Put another way, the $1.8 billion New Jersey received under the act can only be used for new expenses related to the crisis and not ones that received an appropriation during the current fiscal year.

While the guidance was in line with federal lawmakers’ intent, Murphy and others in the state railed against the decision, warning that New Jersey may have to return the money it was awarded.

It’s still unclear exactly how pockmarked the state’s budget is, and the governor’s figures on how much federal aid the state needs have varied wildly in recent days.

Initially, Murphy said the state would need roughly $4 billion in direct aid to weather the storm. More recently, that number has shot up to between $20 and $30 billion.

There’s been no clear explanation on the shift, though Murphy suggested the revised figures account for reduced revenues and increased expenses through the end of the next fiscal year.

“The hole is enormous,” Murphy said. “Our best guess is that hole, between now and the end of next year’s fiscal year, so this is between May 1 of 2020, and June 30 of 2021 is somewhere in that range, and we can’t say a pinpoint — a hole of $20-$30 billion, either created by increased expenses, foregone revenues or a combination of each”

Other states are projecting budget shortfalls equal to between 10% and 20% of their total spending, though it’s New Jersey has been hit harder by the pandemic than every state apart from New York.