Gov. Phil Murphy, who is slowly beginning to tout his experience as a banker at Goldman Sachs, drew from that knowledge Tuesday when he told an audience of business leaders that the state’s $10 billion surplus is necessary for the state to have in reserve to battle against any unforeseen crisis.
Such as the collapse of Silicon Valley Bank.
Murphy, speaking at the ReNew Jersey Business Summit & Expo at Harrah’s in Atlantic City, said the mini-banking crisis, as he called it, is a reason for states to have a large reserve.
“As I noted in my address — and directly, so as I didn’t want any signals to be crossed — the budget is designed precisely to ensure the state is ready to step in to backstop any economic downturn,” he said.
“The surplus is also the bag from which any economic safety nets will be deployed, should we need them.”
Murphy said those who think the surplus is too high — and there were plenty in the audience — were missing the potential of such a problem.
“Here’s the reality, even with a modest downturn, minimizing the impact to New Jersey’s economy — to your businesses and our families — could easily eat up half of that surplus practically overnight,” he said.
“If we were to spend this money down right now, it wouldn’t be available to mitigate even a slight recession. That’s exactly the way the prior government, governors and legislators acted. It’s exactly why in past recessions we were slow to act, and even slower to recover.”
The business leaders at the event did not agree.
Tom Bracken, the CEO of the New Jersey Chamber of Commerce, said Murphy bragged about having a $6.2 billion surplus last year — when we appeared to be headed to a recession. Why, he asked, does it need to be $10 billion at a time when the economic future is brighter, even with the SVB collapse.
“I understand you need to have a reserve, but the other side of that is, by investing in some of the things that need investments in, you might prevent the ultimate reason to tap those reserves,” Bracken said.
“Anytime you have cash and you have needed investment, you have to weigh the value of investing versus the value of letting it smolder.
“I don’t think there’s been a proper analysis on what are the things that could be invested in — and what impact they could they have on the economy. I think everybody’s scratching their head about $10 billion.”
Bill Hagaman, the longtime head at Withum and now a global chairman at HLB International, said he knows a good place the surplus could be spent: the Unemployment Insurance fund.
“I think we need a rainy-day surplus,” he said. “The question is: Do we need a $10 billion surplus or a $5 billion surplus? And what are the choices you make to get to get to the $10 billion? I think not funding the Unemployment Insurance fund while we have a $10 billion surplus is not a fair choice.”
Michele Siekerka, the head of the New Jersey Business & Industry Assocation, said lowering the surplus would raise the governor’s stature in the business community.
“I still remain convinced that it’s an oversized surplus when you still have a lot of pain in the business community,” she said. “You could put some money into an extension of ANCHOR — making only small businesses eligible. You could replenish the UI fund, just for small businesses.
“If you want to send a strong message to the small business community, and he’s on the edge of doing that, you need to offer more than a big surplus to the small business community.”