Good afternoon! My name is Christopher Emigholz, and I am the Vice President of Government Affairs for the New Jersey Business & Industry Association (NJBIA) covering tax, budget and economic development issues. On behalf of our member companies that provide 1 million jobs in our State and make NJBIA the largest statewide business association in the nation, thank you for the opportunity to express our concerns today regarding the borrowing included in the FY2021 state budget. We understand the borrowing is already contained in the balanced budget that passed the Legislature, but we still hope that it can be further limited as the fiscal year advances.
We were opposed to the $4.5 billion in borrowing in the state budget, not because we wanted to slash state spending with an austerity budget, but because the shortfall was never that large since we:
- think revenues could be at least $1.4 billion higher than budgeted per OLS projections
- did not think it appropriate to increase the surplus (a cushion to stabilize the budget in an unexpected crisis, not to build up during that very same unexpected crisis) by over a billion dollars from the start of FY2020 during the current health and economic crisis while simultaneously using very conservative revenue estimates
- were disappointed to see the significant level of new spending unrelated to the current health and economic crisis
The COVID-19 pandemic may have created a shortfall for which borrowing is permissible per the recent New Jersey Supreme Court decision, but that shortfall is not $4.5 billion. The Court said “To avoid borrowing in excess of what the law allows, and to be faithful to the Emergency Exception, the Court requires that the Governor or the Treasurer certify the State’s projected revenue figures and the shortfall resulting from the pandemic before each tranche of borrowing.” A shortfall has two sides, and increased surplus and spending on local projects unrelated to the crisis should not be used to inflate the spending side of that shortfall, and revenue estimates that historically under-perform the OLS projections should not be used to augment the shortfall on the revenue side.
NJBIA asks you to do as much possible to keep the amount the State of New Jersey will borrow to a minimum and only as much as truly necessary. We refer you to Senate President Sweeney’s quote in this past weekend’s nj.com op-ed – “And just because the state borrows the money, it doesn’t mean we will spend it.” Any decrease in borrowing will lessen future debt service and the fiscal cliff resulting from grappling with a future budget after borrowing proceeds have ended. Businesses would rather see tax dollars spent on investments in infrastructure, innovation and workforce development, and we worry that those good investments will get crowded out by significant debt obligations.
The $4.5 billion in borrowing you are advancing today can and should be reduced if:
- state revenues actually reflect the more realistic OLS revenue projections rather than Governor Murphy’s overly conservative estimates.
- Any increase in revenue beyond what is budgeted should translate to less borrowing and not new spending.
- NJ receives any additional federal COVID-19 relief dollars that can be used to balance the state budget.
- Any additional federal dollars that can be used in our state budget should be used to reduce the borrowing and not for new spending unrelated to essential COVID-19 expenses.
- the structural reforms promised at the income tax deal press conference and promoted in Senate President Sweeney’s recent op-ed are undertaken in FY2021 that may reduce state expenses.
- Any savings from these reforms should reduce our borrowing and not lead to new spending.
Additionally on the borrowing, NJBIA was relieved to see that the Murphy administration’s borrowing plans did not appear to rely on 35-year bonds or prohibit early payment, and we hope that it includes consistent payments over the 12 years.
NJBIA looks forward to working with the members of this panel and the entire Legislature to move our state to a more fiscally responsible budget, and we would be happy to take any questions!