Laura Gunn, the director of government relations for the New Jersey Chamber of Commerce, and Chris Emigholz, the vice president of government affairs for the New Jersey Business & Industry Association, both urged a state Senate committee to rethink the plan to allow the state to borrow approximately $10 billion.
Their efforts went for naught.
In an 8-3 vote, the Senate Budget & Appropriations Committee approved a bill authorizing the state to borrow up to $9.9 billion, with the consent of a legislative panel, to address the financial crisis created by the coronavirus outbreak.
In testimony before the committee, Gunn said borrowing would have a devastating impact for years to come and said it should only be used as a last resort.
“We understand why the state believes it needs to borrow money, but we must strongly suggest that the state do everything in its power to make cuts, and approach the upcoming fiscal process with a bare-bones budget, before digging New Jersey into a deeper hole of debt,” she said.
“Borrowing almost $10 billion would put an enormous burden on the state in many aspects. This move would create additional debt service that would need to be paid in each future budget cycle for the next few decades. It would also put New Jersey at an even bigger disadvantage when it comes to affordability and competitiveness, not to mention have a negative effect on our bond rating.”
Emigholz said the legislation (A-4175/S-2697) could still result in many hundreds of millions of dollars in additional debt service costs for the next 35 years — hurting the state’s affordability and competitiveness for generations to come.”
“New Jersey was already challenged with affordability and regional competitiveness issues before the COVID-19 pandemic, and it is important to get this right to ensure that we do not compound what our business community has long struggled with as we start to shift to recovery,” he said.
Emigholz called for limiting the length and amount of what is borrowed, and the pursuit of “real spending cuts and structural reforms” before relying on more borrowing that is necessary.
He also recommended that any long-term borrowing come with a multiyear fiscal plan that:
- Accounts for how bonding funds will be spent;
- Establishes why it is needed;
- Determines what cuts are planned so the state can afford the future debt service;
- Includes a glidepath to allow the state to wean off the bonded funds to avoid a fiscal cliff.
Gunn said the state should exhaust all other options first before borrowing any money, naming a number of options, including using CARES Act funding. So far, the state appears to have used little of the $2.4 billion it was allocated — and more is expected to come during a potential “Phase 4” bill this month.
Other things noted by Gunn include:
- Cuts and furloughs: The business community had to make the extremely difficult decision to lay off or furlough many of its workers due to a lack of revenue. Many businesses — including chambers of commerce — did not qualify for or receive money from the Paycheck Protection Program to keep employees whole. We would expect the state to make similar decisions and take advantage of the recently approved furlough legislation to save money.
- Path to Progress recommendations: State Senate President Steve Sweeney (D-West Deptford), Sen. Steve Oroho (R-Sparta) and many others worked hard to analyze the state’s fiscal issues and came up with a series of recommendations — many of which the state chamber supported. We would encourage the state to revisit those action items and implement them as soon as possible to fix the state’s fiscal crisis.
- Zero-based budget approach: This requires starting with a clean slate, getting rid of anything that is not necessary for right now, and justifying the need for each expenditure. We cannot compare this budget to last year’s budget. And we certainly cannot consider a budget this coming fiscal year with all of the initiatives that were proposed pre-COVID.
Both Gunn and Emigholz acknowledged there may be a very real need for borrowing — they just don’t think it should be the first step to take right now. They worry they will lead to big tax increases, many of which will fall on the business community.
“It has been acknowledged many times that the state’s problem is not a revenue problem, but a spending problem,” Gunn said. “By taking these steps, we can remove pressure from the ongoing budget dilemma that we encounter every year and avoid significant tax increases across the board.”