The New Jersey Supreme Court on Wednesday upheld the state's authority to sell nearly $10 billion in bonds to fill a COVID-created fiscal hole, finding that the pandemic created the kind of emergency the state's constitution envisioned.
The COVID-19 Emergency Bond Act, signed into law last month, lets the state issue up to $9.9 billion in bonds in the current and next fiscal years, subject to the approval of a commission controlled by the legislature. (The limit was tied to the state's estimate of the revenue shortfall the pandemic caused.)
When he signed the bill into law in mid-July, Gov. Phil Murphy said "the ability to responsibly borrow is essential to meeting our fiscal needs in the coming year." Legislators and others warned at the time of massive budget cuts, layoffs and deep reductions in school aid if the state could not issue bonds to cover the economic devastation the pandemic caused.
But Republican lawmakers and party officials immediately challenged the measure, saying it violated constitutional prohibitions on using borrowed funds for state operating expenses.
The court, in its ruling Wednesday, found that the coronavirus pandemic was the kind of emergency the state constitution's authors had in mind when they included exceptions in the document.
But the court did say it would require the governor and the treasurer to certify the state's revenue and shortfall every time they went to the market to borrow, and that no borrowing would be allowed over and above the shortfall directly caused by the impacts of COVID-19.
"I am grateful for this decision," Murphy said at a Wednesday news conference. "We were right collectively in our decision to take this step."
Among other effects, Murphy said this ruling would let the state fully fund schools in the new budget to be presented in two weeks.