NJ Budget Brief: Most of $2.4 Billion of CARES Act Funding Remains Unspent by Murphy Administration

In April, the State of New Jersey received a $2.4 billion block grant from the federal government under the CARES Act to fund emergent needs related to the coronavirus crisis.

The express language of the CARES Act requires states to use these federal relief funds to help people, businesses, and local governments impacted by COVID-19.

Since April, the United States Treasury Department has provided a variety of frequently updated guidance documents that detail the many ways that states can employ these relief funds in compliance with the clear requirements of the CARES Act.

Other states have followed that guidance to put the CARES Act relief funds they received to productive use. New Jersey has not.

According to a report issued yesterday by the New Jersey State Auditor, barely 10% of the $2.4 billion of CARES Act funds has been expended by the Murphy Administration as of September 30.

A review of the State’s accounting system on October 6 by legislative staff found that more than $1.5 billion of the $2.4 billion block grant remains untouched in a State Treasury account.

With regards to the $900 million balance, much was simply transferred to other departmental accounts where the funds remain unspent, as verified by the State Auditor, despite promises from Governor Murphy to fund various relief efforts.

Murphy Administration’s CARES Act Inaction Has Hurt Local Governments & Communities

The ability of CARES Act block grant recipients to share relief funds with local governments has been clear since April under the existing federal law and the initial guidelines released from the U.S. Treasury Department.

In fact, many of the nine counties that received CARES Act block grant funding directly from the federal government have been distributing money to their local governments for the past several months.

Despite this, New Jersey has repeatedly failed to meet the emergency funding needs of local governments:

• In April, New Jersey received a $2.4 billion block grant from the federal government under the CARES Act. Since then, Governor Murphy has delayed allocating and spending the vast majority of the relief funds for their intended purpose while seeking a change in the federal law that would allow him to divert billions directly into the State Budget.
• In May, under considerable public pressure to put the CARES Act relief funds to use, Governor Murphy promised to allocate $250 million to a new “Local Government Relief Fund” that would “improve public health services.” Despite the governor’s promise, the fund was never created and no money was spent.
• In August, Governor Murphy reduced his original commitment of $250 million to support the emergent needs of local governments by more than half to $120 million, and changed the name of the promised fund to the “Local Government Emergency Fund,” claiming the money would support “towns’ needs for public health resilience.” Once again, the promised fund has not been created and no money has been spent.
• In September, the nonpartisan Office of Legislative Services (OLS) posed a question about the string of unfulfilled promises and the intended future use of the $120 million promised to local governments. Murphy Administration officials in the Department of Community Affairs responded: “The Administration is developing an application for the Local Government Emergency Fund…subject to future statutes that modify the federal CARES Act, new federal appropriations, confirmation of actual expenditures incurred, the identification of additional unmet COVID-19 needs, and new guidance from the U.S. Treasury.”

Clearly, Governor Murphy’s strategy of hoarding money in the hopes the federal law will change continues, even while local governments sorely need funding to affirmatively support business reopenings, enhance cleaning of public places, and facilitate and enforce social distancing in public places.

Murphy Administration’s CARES Act Inaction Has Hurt Employers & NJ’s Economy

Consider the following with respect to small businesses and nonprofits, including restaurants, gyms, theaters, and mom-and-pop Main Street businesses that desperately need financial help to survive, which could be provided through the CARES Act:

• In April, the New Jersey Economic Development Authority (EDA) announced a support program for small businesses that ran out of money within an hour of the application process opening. Despite the great demand for emergency business assistance, Governor Murphy initially refused to make any CARES Act money available to fund additional grants, instead directing the EDA to solicit donations.
• The Governor eventually announced he would make a total of $50 million – and later $100 million — available for emergency business grants from CARES Act funding. However, the funding was to support a weak program that was designed in April, when businesses closures had lasted less than one month. This limited funding is far less than what is needed to prevent closings of restaurants, theaters, and other small businesses and nonprofits that have faced severe financial challenges due to ongoing restrictions imposed by the governor through executive orders.
• The Governor vetoed legislation that would have made $100 million of additional CARES Act funding available to small businesses, including restaurants and other hospitality service businesses and nonprofits.
• Not surprisingly, the Murphy Administration has failed to develop a transparency website that has been promised for months by Governor Murphy to show how CARES Act funding is being spent to meet the emergent needs of New Jersey due to the coronavirus.

While other states have made far more funding from their CARES Act block grants available to help businesses and nonprofits to survive and safely reopen, New Jersey has billions sitting unspent in State accounts.