Gov. Phil Murphy’s administration and New Jersey’s Democratic legislators are prepared to move forward with the largest borrowing scheme in state history. They are seeking to raise $10 billion through bonding to fund state spending over the next 12 months.
This fiscally irresponsible plan could cost New Jersey taxpayers tens of billions of dollars in debt and interest payments over the next 35 years, depending on the interest rate. They will say, “It’s a good time to borrow, because interest rates are low.”
First, the credit rating agencies already have New Jersey on a negative credit watch for a downgrade. Ask them to show us an independent, public-market offer from a reputable buyer to support their low-interest rate assumption.
Second, long-term borrowing to pay for operating costs is a sign of a bankrupt entity. How many more signs do they need? Obviously, this borrowing would impose a massive cost on every state budget for a generation, guaranteeing a huge tax increase.
Back in 1997, my predecessor, the late Sen. Bob Littell, called another ill-advised borrowing plan “wacko.” Decades later, New Jersey taxpayers are still paying that debt off. The current proposal, which is almost four times bigger, is wacko on steroids.
That’s likely why the Democrats are seeking to fast-track this proposal to enactment over the next few days without putting this measure before voters for approval, as our New Jersey Constitution requires. They know a ballot initiative proposing such a massive amount of borrowing would likely go down in flames if voters were given a choice and provided a real truth-in-lending disclosure that is required when you go for a loan.
Instead, they’re taking the same route that former Gov. Jim McGreevey’s administration took in 2004, when it sought to borrow nearly $2 billion without voter approval to fund state operating expenses. When its proposal was challenged, the New Jersey Supreme Court reaffirmed in Lance v. McGreevey that debt cannot be used to balance a state budget and fund general spending, as the Murphy administration is seeking to do today, at yet a significantly higher amount.
Even knowing that their proposal is unconstitutional and certain to face a legal challenge, the Democratic administration and Legislature continue to plow ahead, claiming there is no other option. But that simply isn’t true.
The Murphy administration has repeated dire warnings that New Jersey is in such a deep fiscal hole that massive public worker layoffs will be necessary if it doesn’t get this supersized borrowing. Its actions, however, tell a much different story.
Just last month, the Murphy administration approved a deal with the Communications Workers of America that guarantees that none of its 40,000 members in state employment will face layoffs in the coming year. In exchange for ironclad job protections, all they had to do was agree to defer one of their cost-of-living adjustments from this year until next year.
In a great example of kick-the-can-down-the-road budgeting, the agreement simply delays a 2% cost-of-living allowance to 2021, when CWA members will get two such raises during the year. Nothing in the agreement would prevent anyone in civil service from getting their 4% annual step increases, which are raises that occur on the anniversary of an employee’s hire.
In short, tens of thousands of state employees will simply have their raises trimmed from 6% to 4% over the coming year, then get the 2% back months later. If our budget situation was truly as dire as they claim, they should have frozen all wages and salaries for state workers for the foreseeable future, as we suggested and as many, many of our residents are experiencing or even worse. They didn’t listen, however, and now the hole we’re in is deeper as a result.
We also sent to Gov. Murphy’s desk a bipartisan bill back in May that Democratic legislators said could have saved taxpayers $750 million if enacted quickly. That responsible plan could have furloughed idle state, county and local employees who were sitting home for months, unable to work, yet still collecting their regular paychecks at taxpayer expense. We missed the opportunity to shift much of that cost to the federal government and produce significant budget savings all around the state.
Instead, the administration is now beginning to furlough employees, just as government offices are beginning to reopen. This nonsensical plan will produce questionable savings, if any, while impacting the state’s ability to catch up on months of important services required by New Jerseyans that backed up while government offices were closed. After massive lines formed at Motor Vehicle Commission agencies upon reopening, the administration was forced to cancel furloughs for agency workers that had been planned at the worst possible time.
The chaos at the MVC is just one more example of the Murphy administration’s COVID-19 response, including as it relates to fiscal matters, being too little, too late.
Nobody should be deceived into thinking that turning a blind eye to this unconstitutional borrowing plan will prevent the governor from proposing tax increases, as well. In fact, he’s all but confirmed that “revenue raisers” are in the works.
The killer combination of debt and tax increases that the Murphy administration supports will hurt taxpayers today, next year and for decades and decades to come.
Sen. Steve Oroho (R-Sparta) is the Republican budget officer and sits on the Joint Budget Oversight, Budget and Appropriations and Economic Growth committees. This op-ed was first published by NJ Advance Media.