TRENTON, NJ - The New Jersey Supreme Court Wednesday rejected state Republicans' effort to halt Gov. Phil Murphy's plan to borrow upwards of $9.9 billion by selling long-term bonds to replace lost tax revenues blamed on the coronavirus pandemic.
Murphy's intention is to balance the state's 2020-21 budget - as required by the state Constitution - with.funds raised by the bond sale. Upwards of $9.9 billion - the amount may be less, dependent on projected tax revenues - will be used to maintain funding of key programs, avoid deep budget cuts and prevent layoffs, according to Murphy and Democratic legislative leaders.
Murphy will introduce next year's state budget later this month.
The governor applauded the decision during his COVID-19 press conference Wednesday.
“The alternative would have been something that no one up here would have wanted to experience,” he said. “Our schools can be funded, our residents and communities can be protected, and our state can move forward.”
The vote was unanimous. Chief Justice Stuart Rabner, who wrote the opinion, called the case "unprecedented."t
Murphy signed the “New Jersey COVID-19 Emergency Bond Act” bond act into law last month after the Democratic-controlled state Senate (22-15) and Assembly (46-26) approved the borrowing plan, prompting the GOP lawsuit.
“Statutes challenged on constitutional grounds can be declared void only if their ‘repugnancy to the constitution is clear beyond reasonable doubt," according to the opinion, “Plaintiffs have not met that heavy burden.".
The state Republican committee, GOP lawmakers, and former state Assemblyman and declared gubernatorial candidate Jack Ciattarelli filed the lawsuit against Murphy last month, citing a 2004 Supreme Court decision, - Lance vs. McGreevey -, that successfully -challenged then-Gov. Jim McGreevey's plan to borrow $2.2 billion to balance the state's budget.
The state Supreme Court ruled that borrowing plan as unconstitutional.
Republicans believed that precedent was enough to block Murphy's plan, but their arguments were rejected by the court.
During the hearing last week, Republicans had argued the state is prohibited from borrowing money to pay for routine budget expenses. The only way to do that is to trim the budget or increases taxes, according to their suit.
New Jersey cannot borrow to pay for government’s ordinary operations, and the way to respond to such a fiscal emergency is to raise taxes or cut spending, according to state Sen. Michael Testa, R-Cumberland, who represented the Republicans in front of the Justices.
“The framers did not intend to give the state a blank check whenever an unspecified emergency arises,” he argued.
"Over the course of the past few decades, our state Supreme Court has gotten it so very wrong on key issues like school funding and high-density housing. The shining exception was the 2004 Lance v. McGreevey decision to constitutionally prohibit borrowing to balance our state budget and bonding without voter approval," Ciattarelli said following Wednesday's ruling.
Ciattarelli, a Hillsborough resident hoping to win the Republican primary in June, 2021, has been an outspoken critic of the bond sale.
"That is why it is so infuriating and disappointing to see the Court reverse course and approve Governor Murphy's reckless $10 billion borrowing scheme today, he continued. "Let me be blunt - the Court got this wrong and the consequences for generations of taxpayers will be catastrophic," he added.
"Today's decision is another slap in the face to New Jersey taxpayers who have for too long been victimized by irresponsible Trenton politicians," Ciattarelli continued. "Politicians who, along with Trenton special interests, have disadvantaged working men and women, seniors on fixed incomes, and businesses large and small for two-plus decades.
"The Court's unwillingness to play their role in ending this madness makes one thing very clear: we need a new Governor, a new Legislature, and a new and a grassroots movement to make it happen," Ciattarelli said. "That includes a Constitutional Convention that empowers people to take back our state. We need to fix New Jersey, and I am more determined than ever to see that we do."
The Supreme Court Justices in their decision said whatever money is borrowed is to be spent only “to meet the emergency."
Their ruling also requires State Treasurer Elizabeth Muoio to certify the state's revenue figures and the shortfall resulting from the pandemic before the state can issue bonds.
The State can borrow from public or private lenders, or choose to tap into the Federal Reserve’s Municipal Liquidity Facility.
“In other words, if, at the time the State seeks to borrow money or issue bonds, the Governor or the Treasurer certifies that the shortfall resulting from the pandemic is estimated to be $7 billion, the State cannot borrow more than that amount,” according to the court decision.
Borrowing requests must also be approved a committee of four lawmakers, two from the Assembly, two from the Senate, which was specified in the law passed last month.
The $9.9 billion figure is derived from the Treasury Department's estimates of what tax collections through June 30, 2021, would have been before the economic downturn caused by the epidemic and the after effects.