Court Upholds Law Approving $10B in Debt, but Places Limits

Calling it an “unprecedented” ruling, New Jersey’s Supreme Court on Wednesday unanimously upheld a law authorizing the governor to borrow nearly $10 billion to close budget gaps opened by the coronavirus outbreak.

The ruling is a victory for Democratic Gov. Phil Murphy and the Democrat-led Legislature, which passed the law to close what Murphy said is a roughly $10 billion budget gap through June 2021.

It’s a defeat for the state Republican Party, which had filed the suit challenging the law, arguing that it violated part of the constitution that holds debt cannot be counted as revenue in the annual budget process.

“Statutes challenged on constitutional grounds can be declared void only if their ‘repugnancy to the constitution is clear beyond reasonable doubt,'” the court’s opinion said. “Plaintiffs have not met that heavy burden.”

The court attached some strings to the authorization for $9.9 billion in debt. The justices say the money must be spent “to meet the emergency.”

They also imposed a new requirement on the administration, specifically calling on the treasurer to certify the state’s revenue figures and the shortfall resulting from the pandemic before each batch of borrowing.

“In other words, if, at the time the State seeks to borrow money or issue bonds, the Governor or the Treasurer certifies that the shortfall resulting from the pandemic is estimated to be $7 billion, the State cannot borrow more than that amount,” the court wrote.

The state GOP swiped at the court, suggesting it was a political decision.

“This decision confirms that all three branches of the New Jersey state government are firmly in the grasp of the Democrat Party,” party chair Doug Steinhardt said in a statement. “The only way to put an end to out of control spending is to send more Republicans to Trenton.”

Murphy, speaking in Trenton at an unrelated event, said the ruling means the state budget he will unveil on Aug. 25 can move forward. He said the funds would be used for schools and to help protect residents, but he wasn’t specific beyond that.

“I am grateful for this decision because we knew that not only were we right in our decision to take this step … but also because the alternative would have been something that no one up here or anywhere wanted to experience,” Murphy said.

Murphy will be unveiling a new fiscal 2021 budget this month because he and lawmakers extended the previous fiscal year due to the outbreak. The fiscal year typically ends June 30.