In testimony before the Senate Budget & Appropriations Committee today, the New Jersey Business & Industry Association said a bill authorizing $10 billion in bonding is excessive and premature at this time and should be accompanied by a multi-year fiscal plan establishing what state spending will be reduced to pay for its debt service.
NJBIA Vice President of Government Affairs Christopher Emigholz said despite the presence of a safeguard legislative panel to approve borrowing within the COVID-19 Emergency Bond Act, the legislation (A-4175/S-2697) could still result in many hundreds of millions of dollars in additional debt service costs for the next 35 years.
“Borrowing definitely has a place in government fiscal policy, but NJBIA and taxpayers have many concerns about its improper and/or excessive use that could hurt New Jersey’s affordability and competitiveness for generations to come,” Emigholz said.
“New Jersey was already challenged with affordability and regional competitiveness issues before the COVID-19 pandemic, and it is important to get this right to ensure that we do not compound what our business community has long struggled with as we start to shift to recovery.”
In his testimony, Emigholz expressly detailed the importance of waiting to borrow anything beyond short-term notes for cash flow and the Federal Reserve’s Municipal Liquidity Facility until the full scope of New Jersey’s needs is identified.
“It is premature to issue any long-term bonds until we fully know how much budget support may come from the federal government and what the annual tax revenues coming on July 15 look like,” Emigholz said. “On top of that, New Jersey’s three-month state budget is already set with a surplus, so there is no need for any borrowing before October 1.
“Therefore, there is time to wait to ensure we only borrow what is absolutely necessary.”
Emigholz also called for limiting the length and amount of what is borrowed, and the pursuit of “real spending cuts and structural reforms” before relying on more borrowing that is necessary.
He also recommended that any long-term borrowing come with a multi-year fiscal plan that:
- Accounts for how bonding funds will be spent
- Establishes why it is needed
- Determines what cuts are planned so the state can afford the future debt service
- Includes a glidepath to allow the state to wean off the bonded funds to avoid a fiscal cliff.
“We also need to focus on a safe reopening and recovery plan for New Jersey businesses that generate the very tax revenue that is missing, so that less borrowing is needed,” Emigholz said.
To see Emigholz’s full testimony from today, click here.