New Jersey lawmakers have approved a plan to borrow up to $9.9 billion to help close a budget hole caused by coronavirus, but that comes on top of existing state debt that is more than five times the state budget.
In a report posted last night, News 12 New Jersey raised a red flag on state debt as Gov. Phil Murphy says he is still finalizing his new state budget, which is due by Aug. 25.
The report featured NJBIA’s Chris Emigholz, who pointed out that New Jersey’s total debt is around $215 billion, with about $45 billion in bonded debt and about $170 billion in pension and health benefit liabilities plus other non-bonded debt.
Emigholz said the debt problem grew over decades, with governors and legislators from both parties contributing to it along the way.
“The NJBIA has been warning the state about the fiscal cliff, pointing out that the debt has ballooned 382% from 2007-2017,” News 12 correspondent Alex Zdan reported.
Meanwhile, debt comes with interest, which adds to the cost of borrowing money. Emigholz said if Murphy borrows the full $9.9 billion that’s been authorized, taxpayers would have to pay $500 million to $700 million a year more in debt service. That is on top of the debt service payments in the area of $4 billion per year and the pension payments we already make that are now abut $5 billion are projected to grow to over $7 billion.
Too much debt and the required payments to cover it will crowd out other pro-growth investments that New Jersey wants state government to make and/or lead to higher taxes, Emigholz says.