N.J.’s Waning Virus Crisis Casts $10.1 Billion Gap as New Menace
(Bloomberg) -- It took a pandemic to propel Governor Phil Murphy to his highest approval ratings ever. That support may be short-lived as the first-term Democrat confronts the depth of New Jersey’s fiscal crisis.
In the coming months, Murphy will consider tax increases and spending cuts to fend off what he calls “financial Armageddon” -- a $10.1 billion revenue shortfall through June 2021 that may grow if the coronavirus resurges. Already, critics say Murphy is reopening businesses too slowly and counting prematurely on uncertain state borrowing and federal grants.
At his daily briefings, the former Goldman Sachs Group Inc. senior director cheers New Jerseyans for enduring his March 21 lockdown and other precautions that have slowed Covid-19’s spread. Murphy garnered 77% approval in a May Rutgers-Eagleton poll, up 25 points from a year ago.
In a state second only to New York for virus infections, New Jersey is well on the mend, with hospitalizations 85% below an April peak. But 28% of the state’s workforce have filed for unemployment benefits, and Murphy has yet to name a target date for the resumption of unrestricted business operations. Almost 13,000 New Jerseyans have died of Covid-19, and many health experts expect cases to spike later this year.
“This is a real-life battle to save lives, even as we begin restarting our economy,” Murphy said on Tuesday.
New Jersey’s scrappy, straightforward political culture tends to cast even its heroes in a short-lived glow.
Republican Governor Tom Kean left office in 1990 after two terms with approval above 60%, putting him among the state’s most popular chief executives but well short of his 79% first-term high. His successor, Democrat Jim Florio, raised taxes almost immediately after taking office, setting him up for 18% approval and a single term in office. Republican Chris Christie’s post-Hurricane Sandy leadership sent his approval above 70%, but he plummeted to 15% in the wake of the George Washington Bridge traffic-jam scandal.
For Murphy, it’s been a rocky few weeks. He drew criticism on social media for attending Black Lives Matter rallies this month in defiance of his own ban on mass gatherings. Some local officials tried to skirt his graduation and indoor dining bans, forcing Murphy to shut them down with court orders. A former assistant health commissioner, in a whistle-blower lawsuit filed on June 16, alleges that he was fired after he denied scarce coronavirus tests to the family of a top Murphy aide.
And lawmakers from both parties say the governor’s plan to borrow at least $5 billion has no shot at Senate approval, even though it won the Assembly’s blessing on June 4.
“We will come to an agreement on borrowing, but how much and how are we paying it back?” Senate President Steve Sweeney, a Democrat who has refused to post the bill, said in an interview. “I have an obligation to my caucus and the public to say, ‘These are the taxes we’re going to raise.”’
Murphy on Tuesday announced a cost-savings agreement with the Communications Workers of America, which represents 35,000 state employees, for furloughs and deferred wage increases. He said details would be released after a union vote later this week.
“Do we have big structural deficits? Yes, we do -- we had them before Covid-19,” Murphy said at his briefing. “We were on a journey. We had a plan. We’ll continue, God willing, on that plan.”
Critics say savings could have happened five weeks ago, when the legislature sent a bipartisan furloughs bill to his desk. Meanwhile, they say, New Jerseyans have been in the dark about a return to normal.
“Everybody understood the decisions he had to make early on,” Senate Minority Leader Tom Kean Jr., a Republican from Westfield and the former governor’s son, said by telephone. “Since then the approach is not to be coordinated, not to be straightforward.”
Murphy has said that without borrowing, plus billions of dollars in federal aid, New Jersey will have to fire half its 400,000 state and local employees, including police, health workers and others who are helping to stanch the virus’ spread. Federal grants are no sure bet, as Republican congressional leaders say they won’t let states plug budget holes with help from U.S. taxpayers. And the New Jersey constitution disallows the use of borrowing for budgets -- priming any such plan for a court challenge, although Murphy is putting faith in an emergency clause.
“I hope the Senate gets there soon,” Murphy said of borrowing legislation.
New Jersey is in the second phase of a four-step reopening, with crowd limits and other health precautions in place for automobile sales, daycare, nonessential retail, outdoor dining, swimming, elective surgery, pet grooming and worship services. Indoor dining and casinos, when they restart on July 2, will be capped at 25% capacity.
Employees still are being encouraged to work remotely; gyms and overnight camps remain off limits; and grade schools, if they restart in-person learning in September, will have vast restrictions.
The governor has been criticized by Republican and Democratic lawmakers for not publicly disclosing how fluctuating virus figures -- daily hospitalizations, say, or infection rates -- inform his reopening decisions. “Data determines dates,” Murphy says at his press conferences. A Bloomberg request for the information, made under the state’s public-records law, was denied on June 19 as overly broad.
In a June 19 letter to Murphy, Senate Republicans said the administration had yet to distribute more than $1 billion from the CARES Act, and asked that it be channeled to small businesses.
“Many businesses, including gyms and health clubs, remain closed completely with no revenue at all to support their recurring expenses,” the Republicans wrote. “As a result, more are going out of business permanently each and every day.”
Murphy’s chief counsel, Matt Platkin, said the administration had presented lawmakers with a plan for such spending and was awaiting feedback.
Meanwhile, Kean and Sweeney were among lawmakers who received an anonymous letter, purportedly by health department insiders, questioning decisions on personal protective equipment, testing, nursing-home risks, contact tracing and reopening. On June 15, NorthJersey.com and NJ.com reported on taped internal audio discussions that included Health Commissioner Judith Persichilli criticizing some department operations.
In a June 16 whistle-blower lawsuit, former Assistant Health Commissioner Christopher Neuwirth said he was fired after he refused a request by state police Superintendent Patrick Callahan to give test kits to the family of George Helmy, Murphy’s chief of staff. Murphy declined to comment on the lawsuit, but praised the two aides and Persichilli.
“I literally don’t know where we would be in this state without Pat Callahan and George Helmy,” Murphy said at a news conference. They, along with Persichilli, were “heroes,” he said.
Florio, the Democratic governor ousted on tax increases, said controversy was a natural offshoot of crisis. Murphy, he said, was displaying “toughness and collegiality.”
“He’s being fairly firm in terms of not opening things too rapidly and he’s working very hard on economic growth,” Florio said in an interview. “You’ve got to be a little bit pragmatic in terms of not banging your head against the wall. He’s trying to strike that balance.”
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