Gov. Phil Murphy signed into law Thursday the New Jersey COVID-19 Emergency Bond Act, which authorizes the state to borrow up to $9.9 billion to address the unprecedented fiscal crisis that has arisen as a consequence of the COVID-19 pandemic.
“The passage of this legislation is an important step in New Jersey’s recovery from the economic ravages of the COVID-19 pandemic,” Murphy said in a statement. “While this is, by no means, a silver bullet, the ability to responsibly borrow is essential to meeting our fiscal needs in the coming year.”
Under the law, the state has the authority to issue bonds totaling $2.7 billion for the remainder of the extended Fiscal Year 2020, which runs through Sept. 30, and up to an additional $7.2 billion for the nine-month Fiscal Year 2021 that runs from Oct. 1 to June 30, 2021.
The state is authorized to borrow either through the issuance of general obligation bonds that can be sold to investors or through the federal government’s Municipal Liquidity Facility, which was established to help states and local governments across the country deal with the fallout from the global pandemic. The state is also authorized to refinance bonds issued pursuant to the bond act.
Debt service on this bond issuance will be repaid through the state’s General Fund.
The bill faced plenty of criticism from business groups — and Republicans, both of which argued that borrowing this much money would saddle the state with debt for generations. Whether the state will borrow all $9.9 billion — and there’s reason to believe it won’t — remains to be seen.
After signing the bill, Murphy stressed that the state plans to borrow only what is necessary to speed New Jersey’s recovery from this unparalleled recession.
“The current economic crisis is virtually unprecedented in both its severity and swiftness,” he said. “Our unemployment numbers and drop in revenue have both far outpaced the worst months of the Great Recession, so, while we see this bill as an important step, our ultimate recovery will depend on a number of factors, including additional federal aid and savings within state government.”
The law also establishes the Select Commission on Emergency COVID-19 Borrowing, comprised of two members of the Senate selected by the Senate president and two members of the Assembly selected by the speaker, which must approve any proposal to issue bonds prior to their issuance.
The bill was sponsored by Senate President Steve Sweeney (D-West Deptford) and Sen. Paul Sarlo (D-Wood-Ridge) in the Senate and Assemblywoman Eliana Pintor Marin (D-Newark) and Assemblyman John McKeon (D-Madison) in the Assembly.
“This will give us the ability to provide the resources needed to respond to crisis economic conditions resulting from the coronavirus,” Sweeney said. “It also includes a process to ensure responsibility in managing public finances as we work through the fiscal problems that are not fully known. We want to be responsive to financial needs, but we also have to be fiscally responsible and recognize the long-term consequences of actions we take.”
Sarlo, chairman of the Senate Budget and Appropriations Committee, agreed.
“We must keep New Jersey’s economy moving and we have to continue to provide the government services that are so important during the pandemic,” he said. “While we understand the need for emergent financing to help with the economic recovery, we still have to be responsible with added debt. This is uncharted territory, so we have to monitor fiscal conditions as we make decisions on borrowing.”