Assembly Republicans continued to push against a borrowing plan the chamber is expected to approve Thursday, claiming Gov. Phil Murphy and the state’s Democratic lawmakers would use the bill to enact new taxes and increase existing ones.
“This is a massive tax without any — without any — changes with respect to spending, no changes with respect to capping state revenues, no reforms that the Republicans have pushed for for years,” Assembly Minority Leader Jon Bramnick said during a press call Thursday. “It is a tax that the Murphy administration would like to rush through under the title of COVID-19.”
The plan, which does not contain a tax increase, would allow the state to borrow up to $5 billion to plug budget holes caused by the state’s virus-fueled fiscal tumble.
As written, the bill’s debt service would be repaid by revenues from the state’s sales tax, though it also includes a provision saying that the payments could be supplemented by surcharges on property taxes and personal property if sales tax revenues are insufficient to cover the costs.
But that language, which has appeared in other borrowing bills, is far from uncommon.
“In the past, it may have been boilerplate and probably had no meaning because there was either a revenue stream or, historically, you were in an economy that paid back the bonds. This is $5 billion worth of bonds with no specific revenue stream, so you tell me where you’re going to get it,” Bramnick said. “That’s why I’m so worried about a wealth tax.”
The bill does not contain figures for any prospective tax increases, and both Bramnick and Assemblyman Jay Webber (R-Morris Plains) said tax hikes would need to be enabled by separate bills.
Bramnick, who is considering a gubernatorial bid, said the Assembly GOP would sue if the bill was signed into law. Former Assemblyman Jack Ciattarelli, who is running for the Republican nod to take on Murphy next year, has already promised to sue if the bill is enacted.
The bill could become a cause for worry if sales tax revenues fall short of their new, significantly lower projections and Murphy is forced to increase taxes elsewhere to manage the bond debt.
Faced with a multi-billion-dollar budget hole in the early 1990s, then-Gov. Jim Florio turned to tax hikes to balance the budget.
Voters rewarded him by ousting most statehouse Democrats and, in 1993, by electing Christine Todd Whitman to replace Florio as governor.
Bramnick is predicting an even greater backlash this time.
“This makes Jim Florio look like he’s a fiscal conservative,” Bramnick said.
There are also concerns about the constitutionality of the bonding measure.
Though some loopholes exist, the state constitution requires voters to approve bonds worth more than 1% of the state budget. The $5 billion sought by Murphy and Assembly Democrats easily clears that hurdle.
Past that, the use of borrowing to plug budget holes may not pass constitutional muster, a point Republicans were eager to make.
“Revenue does not include proceeds from borrowing, and the Lance v. McGreevey decision is clear,” Webber said, referring to 2004 New Jersey Supreme Court decision that said funds obtained by borrowing could not be treated as revenue and, therefore, could not be used to balance the budget.