New ideas are continuing to emerge to confront the looming state budget crisis that New Jersey and all states will face due to COVID-19’s impact on the economy and state tax revenues.
Gov. Phil Murphy has discussed the possibility of New Jersey borrowing billions to shore up the state budget. In fact, he even floated a draft bill to the Legislature earlier this month.
Borrowing for operating expenses certainly has its concerns – both legally and as good fiscal policy – but these are unprecedented times. The state constitution does include an allowance for bonding without voter approval “to meet an emergency caused by disaster or act of God.” And borrowing to avoid an onerous tax increase and/or spending cuts detrimental to the economy may be preferable to some taxpayers.
However, all taxpayers should be very concerned about New Jersey’s already substantial debt problem –and the notion of adding anything to that without first addressing our state’s structural spending problems in a significant way.
Senate President Steve Sweeney also pushed two ideas this week to shore up the state’s budget.
One proposal was to partially furlough some public employees unable to fully perform their job to take advantage of currently generous unemployment benefits paid by the federal government. These workers could make more money while New Jersey’s government could save taxpayer dollars to fill in expected COVID-19-created budget holes.
The Senate President also advocated for a federal Pension Infrastructure Finance and Innovation Act (PIFIA) that he has discussed with other states. PIFIA would provide $500 billion in federally financed low-interest loans to state and local governments to stabilize their pension plans and provide for new infrastructure investments.
This would protect state and local budgets and stimulate the economy at the same time. Senate President Sweeney hoped to see this idea included in future federal COVID-19 relief.
NJBIA appreciates these outside-the-box budget ideas and will continue to monitor them. We hope the necessary federal support for our state budget will come to fruition, and New Jersey policymakers can find that right combination of spending cuts/reforms, borrowing and revenue raisers that will least burden the already struggling business community as we recover from this crisis.