N.J. Sees $10 Billion Gap Growing With One in Nine Jobless

(Bloomberg) -- New Jersey, confronting a projected $10.1 billion revenue shortfall through fiscal 2021, expects an even bigger hole if the new coronavirus resurges toward year’s end, as some health experts expect.

State Treasurer Elizabeth Muoio, in live video testimony before the state Assembly budget committee, said the shortage could grow another $1 billion should the state reverse its progress on slowing the virus’ spread.

Her update came as Governor Phil Murphy said more than one in nine New Jersey residents, or 1.17 million people, are now without a job. He said 911,000 people in the state were on unemployment.

Muoio said the state has spent about $500 million fighting Covid-19, which has taken the lives of 11,401 in the state. The number of new cases rose by 1,261 to 157,815, an increase of 0.8% that outpaced the prior seven-day average of 0.6%.

Next week, the full Assembly is scheduled to vote on Murphy’s pitch to issue billions of dollars in short- and long-term debt, including the U.S. Federal Reserve’s Municipal Liquidity Facility, to patch the budget holes.

“Without more robust and flexible federal aid -- as well as the ability to borrow -- additional, substantial cuts will be necessary to produce a balanced FY 2021 budget,” Muoio said. If the $2.4 billion received so far isn’t spent according to U.S. Treasury guidelines, she said, “it may result in the claw-back of these funds.”

Muoio forecast a fiscal 2020 ending balance of more than $1 billion less than originally expected. By June 30, the typical last day of the spending year, the state expects to have $344 million on hand, she said. On Sept. 30 -- the last day of a fiscal year extended in an emergency step by the governor -- the total should be $494 million.

Not Advisable

“That type of surplus balance might have been customary during the last administration, but it’s anything but advisable,” said Muoio, a reference to thin year-end cushions during Republican Governor Chris Christie’s two terms, when revenue routinely failed to hit targets.

Muoio last week announced $5 billion in cuts and delayed spending through June 2021. If more federal cash isn’t forthcoming, Murphy has warned, the public workforce will be slashed.

A $951 million pension payment, due in September, will be paid the next month, according to a revised spending plan. Other September-to-October deferrals include $467 million for school aid; $354 million for municipal property-tax relief; $250 million for special education; and $28 million in budget aid to distressed cities.

Muoio said the state is going to require federal assistance and the ability to access borrowing facilities in order to meet its obligations. “We are eager to disburse these funds where they are needed most,” she said.

At his daily news briefing, the governor said the state’s testing capacity is “almost exploding.” One day last week, the state reported in excess of 30,000 tests conducted -- a sign, Murphy said, that New Jersey can reach his goal of 20,000 daily tests by month’s end. Broad testing and contact tracing must be in place, he says, before the state can fully reopen.

Over the past 24 hours, 287 hospitalized patients were discharged. But Murphy said 365 new admissions were data his administration was “very much looking at,” because it was an unusual spike. It was too early to say whether that figure represented a reversal of the virus’ slowdown in New Jersey, he said, but he reiterated the need to continue social distancing.

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