New Jersey legislative leaders on Monday gave final approval to $4.5 billion in new state debt they and Democratic Gov. Phil Murphy sought to plug budget holes stemming from the coronavirus outbreak.
The four-person Select Commission on Emergency COVID-19 Borrowing unanimously approved a resolution that signs off on the new debt, which amounts to nearly 10% of the state’s overall budget.
The new borrowing means the state can continue to fund programs touted by Murphy, like pre-k and community college, but it also means the state is taking on more debt at an estimated 2.5% interest rate in addition to the $44.4 billion in bonded debt it already owes.
The lion’s share of the $4.5 billion in debt will go toward funding the state’s K-12 school formula, or about $2.3 billion. Also getting funded is medical education, health care subsidies and services for maternal, child and chronic health care.
Murphy praised the approval Monday during a separate news conference on the virus. Responding to critics who opposed the borrowing, he cited the economic decline caused by the response to the virus.
“None of us wake up reflexively, ‘Hey gosh let’s go out and borrow a bunch of money,’” he said. “To say this is unusual would be an understatement.”
The commission stemmed from legislation enacted this summer to authorize up to nearly $10 billion in emergency debt because of the economic fallout on the state’s budget from the COVID-19 response.
The governor estimated a nearly $5 billion budget shortfall, and proposed the debt as a way to close the gap. Republicans opposed it and sued, taking their case to the state Supreme Court, which ruled in Democrats’ favor. The court, though, attached strings to the spending, requiring that it be related to the emergency.
Just a handful of members of the public spoke during Monday’s commission meeting.
Anthony Russo, the president of the Commerce and Industry Association of New Jersey, was among them. He specifically questioned whether the debt was indeed related to the emergency.
“In a nutshell I can tell you the budget is very confusing. It’s not easy to read as far as tracking the money,” he said.
Senate President Steve Sweeney, one of the members on the commission, defended the spending as part of getting ready for another coronavirus spike.
“We’re preparing for a second wave,” he said after the commission voted.
The debt has been factored in to the nine-month budget that is currently sitting on Murphy’s desk. He’s expected to sign it into law Tuesday.
The other commission members were fellow Democrats Assembly Speaker Craig Coughlin, Assembly budget chairwoman Eliana Pintor Marin and Senate budget chairman Paul Sarlo.