TRENTON, NJ - The New Jersey Supreme Court will hear arguments on Aug. 5th from declared GOP gubernatorial candidate Jack Ciattarelli and his legal team against Governor Phil Murphy's plan to borrow $9.9 billion to balance the state budget,
Ciattarelli, a Hillsborough resident and former state assemblyman and Somerset County freeholder, insists what Murphy is attempting is not only unconstitutional, but would bankrupt taxpayers and future generations of New Jerseyans.
Murphy signed the bill authorizing the "New Jersey COVID-19 Emergency Bond Act” last Thursday after it was approved by the state Senate (22-15) and state Assembly (46-26). It caps borrowing at $9.9 billion through June 30, 2021 with approval by a committee of four lawmakers, two each from the Senate and Assembly. Murphy has not indicated how much the state might borrow.
Ciattarelli joined the state Republican Committee and other lawmakers immediately afterward to challenge the borrowing plan; Ciattarelli had been threatening to do so since April.
The plaintiffs will argue the borrowing plan is unconstitutional, according to Ciattarelli, based on the outcome of a 2004 court case.
The lawsuit states: “Plaintiffs seek a declaration that the challenged bill signed into law on July 16, 2020, violates the Constitution of the state of New Jersey, as well as a permanent injunction against further infringement of their rights under these clauses, enjoining defendant from enacting into law and/or enforcing the bill and from passing any further orders or rules similar to the invalid ones described in this action, along with any and all relief the Court deems equitable and just.”
Ciattarelli cites a 2004 New Jersey Supreme Court decision that blocked then-Gov. Jim McGreevey from borrowing $2 billion to balance the state budget. The justices voted 4-1 against McGreevey.
"That is a very powerful precedent," Ciattarelli said.
The plaintiff in the 2004 case was then state Senate Minority Leader Leonard Lance; the Hunterdon County Republican went on to serve five terms in the House of Representatives before he was defeated for re-election in 2018 by Rep. Tom Malinowski, D-7th.
"The governor is going to argue these are extenuating circumstances and because they are he should be allowed to borrow to balance the state budget but there is a very compelling case from 2004, Lance vs. McGreevey where the New Jersey Supreme Court ruled that bond proceeds cannot be used as revenue to balance the state budget," Ciattarelli said. .
"That's what it boils down to," he added. "We're going to say there is a legal precedent.". . .
"By the time this 10 billion bond issue is paid back over 35 years, the interest and principal will be in the billions which isn't fair to current taxpayers or future generations of New Jerseyans," Ciattarelli said Tuesday night.
"What I remind people is that at the height of the Great Depression, we closed a $6-11 billion budget gap without borrowing a dime or raising taxes a single penny in New Jersey," Ciattarelli said. "To the best of my knowledge, we are the only state in the union that is borrowing money in this way to balance its state budget," Ciattarelli added.
"The governor needs to tighten his belt and cut expenses. He needs to make the hard decisions."
Ciattarelli said Murphy could decide to skip paying into the state's public employee pension system for one year to effect savings.
"That would produce more than 50 percent of the savings we need to get through the next fiscal year," Ciattarelli said. "Some might suggest it is bad fiscal policy to skip a pension payment; I say it is worse fiscal management to borrow money to make that same pension payment."
Under the law signed by Murphy last week, the state has the authority to issue bonds totaling $2.7 billion for the remainder of the extended Fiscal Year 2020, which runs through Sept. 30, 2020, and up to an additional $7.2 billion for the nine-month Fiscal Year 2021 that runs from Oct. 1, 2020 through June 30, 2021, for a combined amount of up to $9.9 billion to be issued over the two periods.
“The passage of this legislation is an important step in New Jersey’s recovery from the economic ravages of the COVID-19 pandemic,” Murphy said. “While this is by no means a silver bullet, the ability to responsibly borrow is essential to meeting our fiscal needs in the coming year.”
The state is authorized to borrow either through the issuance of general obligation bonds that can be sold to investors or through the federal government’s Municipal Liquidity Facility, which was established to help states and local governments across the country deal with the fallout from the global pandemic. The State is also authorized to refinance bonds issued pursuant to the bond act.
Debt service on this bond issuance will be repaid through the state’s General Fund.
Murphy stressed that the state plans to borrow only what is necessary to speed New Jersey’s economic recovery.
“The current economic crisis is virtually unprecedented in both its severity and swiftness,” Murphy said. “Our unemployment numbers and drop in revenue have both far outpaced the worst months of the Great Recession so while we see this bill as an important step, our ultimate recovery will depend on a number of factors including additional federal aid and savings within state government.”
Ciattarelli ran unsuccessfully in the Republican Gubernatorial Primary in 2017 against former Lt. Governor Kim Guadagno, winning endorsements from the Republican committees in seven of the state's 21 counties. Guadagno captured 47 percent of the GOP vote, Ciattarelli, 31 percent. She lost the general election to Murphy.
On Jan. 21, the 58-year-old kicked off his second campaign seeking the Republican nomination to run against Murphy in the 2021 election. He made his formal announcement at the Eisenhower Elementary School in Raritan, which he attended. In later years, he got his start in politics as a member of the Raritan Borough Council.
Ciattarelli's campaign office is on West High Street in Somerville.