State has spent just $1.1B in federal pandemic aid after nearly two years, auditor says

Nearly two years after receiving $6.2 billion in federal pandemic aid, New Jersey has spent only a fraction of the funds while inflation has eroded the purchasing power of the remaining money.

New Jersey has specific plans for $5.2 billion of that pot of cash, but a report by the state auditor transmitted to lawmakers Thursday found the state has spent just over $1.1 billion of it. 

“It’s been an utter snail’s pace,” said Sen. Michael Testa (R-Cumberland), a frequent critic of the administration’s use of federal funds.

The list of items that have had funds committed but not spent includes some of the largest allocations of federal money made by the state.

As of March 31, the auditor’s report says, the state had spent none of the $305 million set aside in July 2022 to create 3,300 affordable housing units.

Allocations for capital construction at Rutgers University and for water infrastructure improvements statewide — the budget approved last June allocated $300 million to each — also remained entirely unspent.

A spokesperson for the governor said state fiscal recovery funds — state and local relief included in the $1.9 trillion American Rescue Plan — were not intended for immediate use.

Unlike other portions of the stimulus funding, which were intended for immediate and short-term COVID-19 response and recovery needs and which the state spent in about two years, fiscal recovery funds were intended for “long-term strategic recovery and resilience,” said Jennifer Sciortino, the spokesperson.

Sciortino added many of the projects slated to receive the federal funding — especially those involving construction — are “simply of a longer-term nature.”

Certain other projects, especially those involving construction, could have back-loaded costs that are only realized once lengthy approval and procurement processes are completed.

State Republicans have long criticized the pace at which the administration has spent the federal funds, and the minority party has previously put forth its own plan for the money that included hundreds of millions to defer unemployment insurance tax hikes on businesses and additional funding for schools, among other things.

“Unfortunately, Trenton Democrats refused to listen, and many serious problems that could have been addressed with these funds remain inexplicably unresolved,” said Sen. Declan O’Scanlon (R-Monmouth), the chamber’s GOP budget officer.

Inflation has stripped away a significant portion of value from the state’s pool of American Rescue Plan dollars since New Jersey received $6.2 billion from the federal government in May 2021.

That money is worth 10.7% less in February than it was when the state first received the funds, based on the consumer price index for urban wage earners and clerical workers. That’s a purchasing power decline of roughly $540 million.

Under federal rules, ARP funds must be allocated by the end of 2024 and disbursed by the end of 2026, but those rules are not immutable.

US. House Republicans have suggested a federal clawback of unspent pandemic aid as part of a deal to raise the debt ceiling, Punchbowl News reported Thursday.

“That was the risk the Murphy administration has been taking by letting these funds sit idle for two years,” Testa said. “And I think the federal government can easily look at the $10 billion surplus that the state of New Jersey now has and say, ‘Look, you don’t really need this money anymore.’”