Should New Jersey borrow money for operating expenses? Senate President Stephen Sweeney thinks New Jersey will probably have to borrow something to make up for the massive loss of state revenues caused by the coronavirus shutdown. But he’s in no hurry.
During a town hall webinar with NJBIA and the State Chamber of Commerce earlier this week, Sweeney said he wanted to see how much money can be cut and saved in the state budget through his Path to Progress reforms and how much assistance the state may get from Washington before borrowing money.
The Assembly has passed legislation that would allow the state to borrow up to $14 billion in bonds with up to 35-year maturity periods. This includes federal government funding set aside for states to borrow in the short term to address the crisis.
New Jersey revised its budget schedule because of the pandemic, stretching the end of the current fiscal year from June 30 to the end of September and then making FY 2021 a nine-month fiscal year beginning Oct. 1. Normally, FY 2021 would begin on July 1, when the state is required to have a new budget in place for the coming year.
With the extra time to craft a spending plan, Sweeney wants to take the opportunity to fix some aspects of New Jersey’s financial structure that are at the root of state’s fiscal problems. One such bill is his plan to restructure the health plans for teachers to save taxpayers and teachers money. The measure has passed the Senate.
“It’s time to start moving forward with things that can save money,” Sweeney said.
Sweeney also thinks it’s too soon to give up on Washington bailing out state governments that have had to shut down their economies for two months. Legislation sponsored by U.S. Senator Bob Menendez of New Jersey is gaining momentum in Congress, Sweeney said. It would provide $500 billion to states to make up for lost tax revenue.
“I’m hoping that by not rushing into the borrowing, we don’t turn the federal government away from helping us out,” Sweeney said.
Additionally, borrowing money now puts an added spending burden on the state in the future, which is very uncertain. What if the state’s economy doesn’t bounce back the way government officials expect? Then the state is saddled with billions in new debt without the revenues to support it, Sweeney said.
On top of that, legislators are dealing with a unique budget situation. They still have to put a spending plan in place for what is now the remaining three months of FY 2020—July, August and September. Sweeney said the Legislature is going to need more information from the Murphy administration on what the state’s revenues are.
“No one has a crystal ball, but that doesn’t mean you cannot try to project out and look at what could be the future and what the concerns are,” Sweeney said. “I want to know what we’re walking into, and right now, we don’t have a clue about what we’re walking into.”