N.J. Supreme Court says $9.9 billion borrowing plan is constitutional

Inside the New Jersey State House building in Trenton. (Julio Cortez/AP Photo)

Inside the New Jersey State House building in Trenton. (Julio Cortez/AP Photo)

A New Jersey law that would let the state borrow $9.9 billion to stave off the fiscal emergency caused by the coronavirus pandemic is constitutional, the state Supreme Court ruled Wednesday.

The opinion will allow Gov. Phil Murphy to borrow billions of dollars to spend on recovering from the COVID-19 outbreak, which caused state tax revenues to nosedive and produced record-high unemployment in the state.

“I am grateful for this decision because we knew that not only were we right in our decision to take this step,” Murphy said at his Wednesday coronavirus briefing, “but also because the alternative would have been something that no one up here, or anywhere, would have wanted to experience.”

The lawsuit, brought by the New Jersey Republican State Committee, aimed to block the borrowing plan which it said was ill-defined and would saddle the state with years of debt that was not approved by voters, as is normally required. The state constitution does allow for some borrowing under an “emergency exception.”

“Now we have a real emergency, and it’s a taxpayer emergency,” said Assembly Republican Leader Jon Bramnick, reacting to the ruling.

However, the court, in its unanimous verdict, also put a new restriction on the law that would bar the state from borrowing the full amount allowed by the law if revenue projections improved.

Chief Justice Stuart Rabner, who wrote the court’s opinion, noted that the state treasurer has already revised down the projected shortfall from $9.9 billion in May to $9.2 billion in June.

“To avoid borrowing in excess of what the law allows, and to be faithful to the Emergency Exception [in the state constitution], the State cannot issue bonds or borrow funds beyond the actual fiscal exigency caused by the pandemic,” Rabner wrote.

“In order to satisfy those concerns, it will be necessary for the Governor or the Treasurer to certify publicly the State’s projected revenue and consequent shortfall ‘as a result of the COVID-19 pandemic’ before each tranche of borrowing.”

Rabner also noted that any money borrowed should only be used to pay for things directly related to the emergency, but said it was up to lawmakers to keep spending in check.

“At a minimum, any borrowing under the Act must relate to or provide for the pending emergency. We defer to the Legislature as to which programs will best respond to the pandemic, provided the choices do not run afoul of the Constitution,” he said.

The legal battle over the borrowing plan also foreshadowed a political fight that will gain momentum in the coming months. Murphy is up for reelection in 2021, and New Jersey GOP Chairman Douglas Steinhardt is rumored to be considering a run for the Republican nomination. Former Assemblyman Jack Ciattarelli, the only confirmed gubernatorial candidate on the Republican side, joined the case as a “friend of the court.”

Though Murphy applauded the decision, he added that it would not be enough on its own to propel New Jersey to a full recovery from the financial damage wrought by the pandemic.

“Even with this decision, we are not declaring victory. We have a long road still to travel,” he said. “We still need the federal government to step up and provide direct assistance to us and our fellow states. This cannot continue to twist in the political winds.”

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