Many county and municipal governments have wisely shaped up their finances in anticipation of the fallout from New Jersey’s shutdown to slow down COVID-19 cases.
For three weeks, Gov. Phil Murphy instead seemed to count on getting a federal bailout to avoid a fiscal crisis.
He started with an Oval Office meeting with President Trump where he said New Jersey could need $20 billion to $30 billion — more than three-quarters of its entire current budget.
Murphy said if the state doesn’t get the money, layoffs of the very workers most needed by the public — police, firefighters, emergency medical staff and state workers processing unemployment claims — may be necessary.
Yet even though numerous state offices and services were shut down as part of Murphy’s three-month (so far) emergency order, none of their workers were laid off or even given furloughs. Last week he said state employees could take time off without pay if they want to, so-called voluntary furloughs.
Murphy recently even used Atlantic City to justify federal aid, telling The Press: “We need the federal government to come in with a very big number at the state level, and that will allow us to do everything we need to do with Atlantic City.” That can’t be very persuasive given the city’s well-publicized history of corruption and near-bankruptcy despite billions in revenue from casinos.
Finally, on Friday afternoon heading into the Memorial Day weekend, the Murphy administration announced steps it will take to get through the rest of this fiscal year, whose end has been pushed back from June 30 to Sept. 30.
Of $5 billion in avoided spending until then, only $1.3 billion will be spending cuts. The rest will be kicking the can down the road and into the next fiscal year budget starting Oct. 1.
The spending cuts are mainly $1 billion that Murphy previously had frozen, including for Homestead property tax relief, college operations such as Stockton University’s second phase in Atlantic City and combating opioids. Also cut will be funds to make four-year colleges free for some and expand pre-kindergarten.
Spending delayed until October includes nearly $1 billion for the public workers pension fund, nearly three-quarters of a billion in school aid, a third of a billion in municipal aid and an extra $114 million subsidy for now nearly empty NJ Transit.
This is far from the demonstration of fiscal responsibility that would make the state’s strongest case for federal assistance. The state said its revenue this fiscal year is down $2.7 billion and forecasted next year’s $7.2 billion lower. Much larger spending cuts are needed and possible, given Murphy’s additional $2.6 billion in spending his first two years in office and proposal to increase the next budget from the current $38.7 billion to $40.9 billion.
New Jersey already has received from the federal government $1.7 billion for its hospitals, $1.4 billion for NJ Transit, $280 million for K-12 school districts and $50 million for small businesses.
Residents also receive the CARES Act direct payments of up to $1,200 each and $600 a week in extra unemployment benefits.
A bipartisan bill in the U.S. Senate looks like New Jersey’s best hope for a federal bailout not conditioned on fiscal responsibility. That would determine aid based on three factors that favor New Jersey — population (11th highest), coronavirus infection rate (2nd highest COVID-19 case rate) and depth of revenue loss (deep due to lengthy shutdown of state).
Such federal help, however, won’t address the dire fiscal problems state government has created over many years — excessive and deepening debt, and massively underfunded and overpromised pensions and health benefits for government workers. In a state already among the highest taxing in the country, those can only be addressed by a fiscal discipline so far almost entirely lacking among state leaders.