Democrats in the state Legislature approved and Gov. Phil Murphy signed a law they believe lets them borrow $10 billion to cover state government spending and impose new taxes to repay the debt.
Earlier this year, the state treasurer estimated that revenue would fall $10 billion short due to the shutdown to slow the spread of the coronavirus. That is resulting in big declines in state government’s corporate and business tax revenue.
But instead of prudently reducing spending as other states have done — Oregon ordered 17% cuts in all departments, Ohio froze hiring and cut spending $750 million — Murphy and fellow Democrats have made more borrowing their first choice.
Republicans and others are suing to block the borrowing binge, asserting it is unconstitutional.
One basis for a lawsuit is that voters have overwhelmingly required the debt-burdened state government to get public approval before more major borrowing. In 2018, for example, voters needed to approve $500 million in debt to expand vocational schools; the year before they got a say about borrowing $125 million for library construction.
This new scheme would dwarf other debt questions put before New Jersey voters and comes on top of more than $200 billion in existing debt and pension and benefits promises to government workers that are 50% higher than the average for all other states.
The borrowing plan was panned in a commentary last month by two good-government advocates — Thomas J. Healey, senior fellow at Harvard’s Kennedy School of Government, and Regina Egea, president of the independent Garden State Initiative on economics. They urged “belt-tightening” instead of “saddling every citizen of New Jersey, especially our children, with repaying the huge tab.”
The pair noted that the law allows for sales tax increases and a new statewide property tax, similar to language used in lesser debt issues to get more favorable terms from lenders, but said this time it would be used. “Truth is, taxpayers will be required to foot the bill through an increase in the sales tax and/or an additional property tax surcharge.”
Senate President Steve Sweeney indicated during a hearing on the debt scheme that when the borrowing is proposed, he could seek new cost-saving reforms. Sorry, but the lack of any progress toward his avowed goal of bipartisan budget reform makes such a hope for future fiscal responsibility not credible.
The public has stated clearly that major new borrowing must be submitted to voters for their approval. If the voice of the people means anything in New Jersey, their Supreme Court must uphold their law specifying that voice on new debt.
Beyond the law there is a moral issue as well. State government’s borrowing — which was out of control long before the COVID-19 crisis — is literally robbing future residents and businesses so politicians and their chosen beneficiaries can live beyond their means now.