Budget panel to hear proposal to spend bonded funds
Gov. Phil Murphy defended his plan, saying, “part of the reason why we’ve kept the amount of money in the tank that we have is because we ain’t out of the woods yet.” (Fran Baltzer for New Jersey Monitor)
A bicameral panel will meet Tuesday to approve the first capital expenditures from a multi-billion dollar fund established to reduce New Jersey’s debt.
Gov. Phil Murphy on Friday sent the panel a $435 million proposal for capital spending from a dedicated fund established with billions of dollars borrowed by the state late last year.
Republicans, long displeased with the administration’s slow use of $3.7 billion in COVID-19 emergency bonds issued last year, don’t think Murphy is doing enough.
“It’s late, and it’s inadequate. Even to this day, the plan that Republicans put out months ago is more detailed and more responsible than what the governor’s people put out,” said Sen. Declan O’Scanlon (R-Monmouth), the chamber’s incoming Republican budget officer.
Over the objections of their Republican counterparts, Democratic lawmakers last year passed a bill allowing the state to bond up to $9.9 billion in anticipation of severe revenue shortfalls caused by the pandemic, though the state borrowed only $3.7 billion.
The budget hole never materialized, but because the interest rate on the borrowed money is so low — the bonds’ true interest cost is expected to be 1.95%, Treasury officials have said — the state can save on costs in the long run by using the bonded funds to pay down other, higher interest debt.
The $3.7 billion bond is non-callable, meaning it cannot be repaid ahead of schedule, and little of the money in the New Jersey Debt Defeasance and Prevention Fund has been spent so far.
Officials met in late October to identify roughly $719 million in other bonds that can be paid down early, and the state has since paid down roughly $276 million in bonds, a Treasury spokesperson said. Interest rates on the defeased bonds ranged between 3.25 and 5%.
Gov. Phil Murphy on Monday contested the GOP criticisms, saying his administration’s spending proposals were made cautiously for fear of another wave of COVID-19 infections.
“Not surprisingly, I don’t agree with the criticism that it’s either insufficient or slow,” Murphy said. “As evidence of the past seven days, part of the reason why we’ve kept the amount of money in the tank that we have is because we ain’t out of the woods yet.”
Most of the $3.7 billion debt defeasance fund is dedicated to paying down existing debt, but $1.2 million was set aside for future capital projects to avoid higher borrowing costs.
The administration on Friday announced the first capital projects to be financed using money from the fund. Those include $345 million to cover the bulk of projected construction costs for the New Jersey Wind Port. Of that, $45 million will go to the state Department of Transportation for port-related dredging, and $35 million will go to the South Jersey Port Corporation for improvement costs.
The governor proposed another $90 million will go to Rowan University’s veterinary medicine school and Cooper Medical School of Rowan University.
“There doesn’t seem to be a cohesive plan here, and we’re dealing with debt that’s going to be hanging around our necks, our economy’s necks, and our children’s necks,” O’Scanlon said.
The proposal is likely to sail through the Joint Budget Oversight Committee, which by statute must approve expenditures from the Debt Defeasance and Prevention Fund.
Democrats hold a 4-2 majority on the bicameral panel, and any future proposals will likely receive a favorable regard from the Democratic members.
Murphy contrasted his spending policies with those of prior administrations, who he said “spent like drunken sailors” and used any available money to fill budget holes.
“We’re going to avoid that like the plague and we’re going to do this the right way and the responsible way,” he said.
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