New Jersey Republicans Question Governor’s $9.9 Billion Virus-Debt Plan

(Bloomberg) -- New Jersey Republicans took to the courthouse to try to kill Governor Phil Murphy’s plan to issue as much as $9.9 billion in new debt to address the state’s Covid-19-related budget shortfall.

In a Wednesday hearing before the New Jersey Supreme Court, Michael Testa, a Republican state senator, argued Murphy’s plan violated the state constitution’s debt-limitation clause and rejected the governor’s contention that the move fell under an exception for emergencies.

One of the seven justices challenged the Republican view that the coronivirus crisis didn’t meet the “emergency” standard.

“Isn’t it the nature that every disaster creates the fiscal emergency that is addressed by the debt-limitation clause?” Justice Barry Albin asked. The clause, he went on, was meant to, “under limited circumstances in the Constitution, allow for the raising of money to meet these emergencies caused by disasters, whether it’s war, Depression, or worldwide pandemic. Am I wrong about that?”

Testa said spending directly related to the disease, like protective gear for health-care workers or hospital ventilators, fit that bill, but that Democrats had gone far beyond that. “This crisis doesn’t give the authority to our governor and our legislature to essentially write a blank check to be used for anything,” he said.

New Jersey’s Democratic-controlled senate and assembly last month approved borrowing the funds to make up for lost revenue as the coronavirus pandemic has stalled the economy. The state may issue as much as $2.7 billion of general-obligation debt by Sept. 30 and another $7.2 billion between October and June.

Republicans opposed to the bill have said the added debt will necessitate raising taxes and impose a burden on future generations. They also said allowing the plan to proceed would encourage Murphy and other governors to borrow even more down the line.

Assistant Attorney General Jean Reilly, representing the Murphy administration, said the Republican lawmakers’ predictions that the bill would open “a Pandora’s box of borrowing” were wrong. “The crisis here is of a scope and magnitude comparable only to two other events in New Jersey’s 244-year history: the Civil War and the Great Depression,” she said.

She said the alternative to the bill would be “devastating cuts” to the state budget and increased poverty and unemployment that would prove “a far more grievous legacy” to future generations than increased taxes.

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