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Before the Murphy administration can start borrowing money to plug state budget gaps, a challenge to the new law has to get past the New Jersey State Supreme Court, which yesterday heard arguments for and against this unprecedented authority.

Last month, lawmakers approved a law allowing the state to borrow nearly $10 billion to cover the tax revenues lost as a result of the coronavirus. Republican legislators voted against the bill, and some of them have joined the New Jersey Republican State Committee to challenge the law’s constitutionality.

As NJ101.5 correspondent Michael Symons reported this morning, the state constitution has a “debt limitation clause” that limits long-term debt to 1% of the state budget, unless voters approve it. The Murphy administration, represented by Deputy Attorney General Jean Reilly, argued that the borrowing is permitted under the “act of God” exception since the coronavirus pandemic is what caused the economic shutdown in the first place.

The Republican State Committee, represented by Senator Michael Testa, R-1, said that while the pandemic could not have been anticipated, the possible fiscal damage that could be done to the next budget is not an emergency.

Republicans also pointed out that based on the Lance v. McGreevey precedent, bond proceeds can’t count as budget revenues for operational expenses as this bonding is trying to do.

NJBIA raised concern before the Legislature about the bond act because of its size and questioned how much would even be needed. Many, including NJBIA, believe that Congress should eventually provide funding to help state governments meet the budgetary constraints brought on by COVID-19. Additionally, the association believes the budget has more room to cut, since Governor Murphy has increased spending by 18% in his first two budgets.

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