State Supreme Court allows up to $9.9B borrowing plan to go forward

The New Jersey State Supreme Court ruled Wednesday that Gov. Phil Murphy can borrow billions of dollars to offset state revenue losses caused by the coronavirus pandemic.

The decision was unanimous — and clears the way for New Jersey to borrow up to $9.9 billion through the end of the next budget cycle, June 2021.

“I am grateful for this decision, because we knew that not only were we right in our decision to take this step, but because the alternative would have been something that no one up here would have wanted to experience,” Murphy said during his COVID-19 briefing on Wednesday.

“This means that when I present my new budget for the 2021 Fiscal Year in roughly two weeks, our schools can be funded, our residents and communities can be protected, and our state can move forward.

“We are going to continue our work to strengthen New Jersey’s fiscal foundation and build on the progress of our first two years. However, I must be clear that even with this decision, we are not declaring victory. We have a long road to still travel.”

Murphy said borrowing was something that no one wanted to do — saying the inaction of the federal government left him no choice.

The ruling was not hailed by everyone.

Jack Ciattarelli, who is seeking the Republican nomination to run for governor in 2021, said — in a tweet — that such borrowing will impact the state for decades.

In the 62-page ruling, Chief Justice Stuart Rabner wrote that the legal issue before the Court was unprecedented.

“Like so much else brought on by COVID-19,” he wrote.

The Court, however, ruled the state could go forth with the borrowing as long as it followed certain parameters. Rabner wrote:

“The Legislature acted on the best information available to it when, on July 16, 2020, it adopted a law that called for up to $9.9 billion in borrowing. The amount reflected current projections around that time. But those projections are likely to continue to change in the weeks and months ahead, as the State Treasurer acknowledges. To avoid borrowing in excess of what the law allows, and to be faithful to the Emergency Exception, we require that the governor or the treasurer certify the state’s projected revenue figures and the shortfall resulting from the COVID-19 pandemic before each tranche of borrowing.

“The state may not borrow more than the amount certified, and not more than $9.9 billion in total. In other words, if, at the time the State seeks to borrow money or issue bonds, the Governor or the Treasurer certifies that the shortfall resulting from the pandemic is estimated to be $7 billion, the state cannot borrow more than that amount.”

“Finally, we read the Emergency Exception in light of the purpose of the fiscal clauses of the Constitution, considered as a whole, and the Framers’ intent. By doing so, we avoid absurd outcomes that would, for example, allow the State to borrow funds to meet an emergency but not be able to spend them. We also give meaning to the underlying purpose of the relevant clauses: to impose discipline on the State’s fiscal practices and provide flexibility to respond to emergencies caused by disaster.

“We therefore conclude that the Act is valid under the Debt Limitation Clause and that the Appropriations Clause does not bar the new law. Subject to certain limits we impose, the Bond Act does not violate the Constitution.”