Republican Budget Members Outline Responsible Plan for $6.5 Billion of ARP Federal Relief Funds

The Republican members of the Senate Budget & Appropriations Committee outlined a proposed framework for the State of New Jersey to responsibly utilize $6.5 billion in new federal relief funds with legislative approval.

With more than $3 billion of the funds to be received by the State in the next 30 days, the legislators challenged the Murphy Administration and Democratic legislative majorities to propose their own plans, debate them publicly, and appropriate the funds in a transparent and open process that gives the public a chance to be heard.

“The Murphy Administration dropped the ball in its handling of the $2.4 billion of CARES Act funds that came to New Jersey last April,” said Senator Declan O’Scanlon (R-13). “He sat on the money for months and then used it to pay for ordinary government expenses rather than helping people. With another $6.5 billion in federal relief coming to New Jersey, we can’t afford to let him make the same mistake on an even bigger scale. Our plan is the first step in reasserting the Legislature and public into the appropriations process.”

Last year, Senate Republicans urged the Governor to get the billions of CARES Act funds out the door quickly to support the small businesses, unemployed workers, and struggling tenants and landlords who needed help.

Instead, Governor Murphy spent little of the federal funds for more than half a year. A report released by the State Auditor at the beginning of October revealed that barely 10% of the CARES Act funds had been spent by the end of September. When the funds finally were spent, much went to paying for ordinary operating costs and interest on unneeded borrowing, rather than helping people who were suffering.

Based on that experience, the legislators are pushing to remove language from the FY 2022 State Budget that gives the governor unilateral authority to spend federal relief funds. They also will introduce a stand-alone bill requiring legislative approval to appropriate those funds.

“Because Governor Murphy wasn’t capable of managing federal relief funds effectively, more than one-third of New Jersey’s businesses shut down and more than 2 million New Jerseyans lost their jobs while waiting for help that never arrived,” said Senator Michael Testa (R-1). “The governor’s failures last year demonstrate why the Legislature must remove his authority to spend relief funds without legislative oversight and approval. The Legislature is a co-equal branch of government that must play a role in approving the expenditure of vitally important federal relief funds. We will not claim ours is a perfect plan, but it can be a starting point for a public discussion to prevent critical relief from being unnecessarily delayed or squandered as occurred last year.”

The Republican Budget Committee members said it’s important to address the issue now with New Jersey to receive approximately $6.5 billion in direct federal relief under the recently approved American Rescue Plan Act (ARP).

They proposed the following dedication of the ARP funds to meet the current and projected needs of residents, businesses, schools, and taxpayers:

• $2.5 billion over three years to restore stability to the Unemployment Insurance Fund. $1 billion would be dedicated to retiring debt before interest incurs, while $1.5 billion would prevent employer tax increases that otherwise would occur over the next three years starting this July.
• $1.5 billion over three years for capital projects by the State, public and private schools, institutions of higher education, local governments, libraries, authorities, and third-party service providers in lieu of issuing more debt or increasing user costs for critical services.
• $1 billion over the next year for business and nonprofit assistance for employers still recovering from COVID-19 revenue losses. To date, assistance provided by the Murphy Administration has been little more than symbolic.
• $500 million to modernize the State’s antiquated computer systems, including those that handle unemployment claims, Motor Vehicle Commission transactions, and 9-1-1 calls. Many of the existing systems are decades old and have proven to be inflexible in times of crisis when they are needed most.
• $500 million to expand mortgage and rental assistance programs that have been restricted to renters with very low incomes and support other short-term social services programs that address the various needs of people struggling disproportionately from COVID-19 impacts. Current programs are inadequate and will lead to hardships, including a surge of evictions, foreclosures, and landlord bankruptcies that would remove rental properties from the affordable housing stock.
• $500 million for public schools to prevent the school aid cuts proposed by Governor Murphy for three years. Without this funding, approximately 200 school districts would have their State aid cut while they are struggling with the extra costs and impacts on students resulting from the pandemic.

“Our plan puts the $6.5 billion of federal funds to use in a responsible way that will help New Jersey overcome the challenges of the pandemic,” said Senator Steven Oroho (R-24), the Republican Budget Officer. “We address both current and future needs to support New Jersey’s recovery, and propose modernizing the unemployment and MVC computer systems that have caused unnecessary pain for millions of New Jerseyans over the past year. If we don’t undertake those costly upgrades now when we have the money, they’re unlikely to happen any time soon.”

The senators warned that Governor Murphy’s budget proposal for FY 2022, which increases spending by 10% over this year, is built on non-recurring revenues that could lead to tax hikes in future years.

They said it’s imperative that federal relief funds not be employed in a way that might contribute to creating a fiscal cliff that could hurt taxpayers and prevent the New Jersey economy from recovering.

“By proposing to spend down billions in surplus and borrowed funds next year, Governor Murphy is already setting New Jersey up for tax increases in two or three years that could impede our recovery,” added Senator Thompson (R-12). “That situation could become dramatically worse if one-time federal relief funds are used to create or expand State programs that won’t have a source of funding in future years. That’s why we want to dedicate most of the ARP funds to providing direct relief to New Jerseyans now, preventing harmful tax increases, and funding important capital and IT modernization projects that we otherwise couldn’t afford.”