State Supreme Court Rules Constitutionality of Bond Act

Statehouse
Murphy
Murphy

Deciding the lawsuit brought by Republicans against Governor Phil Murphy regarding the constitutionality of his $9.9 billion borrowing plan to combat the impact of COVID-19, the New Jersey Supreme Court today sided with Murphy, unanimously ruled “that the Bond Act is constitutional, subject to certain limiting principles.”

In its decision, the court requires the governor or treasurer to certify the projected shortfall and the state can only borrow up to that amount (see below). Statutes challenged on constitutional grounds can be declared void only if their “repugnancy to the constitution is clear beyond reasonable doubt.” In this case, the scope of the COVID-19 disaster allows the borrowing, the Supreme Court ruled.

In short, “plaintiffs [Republicans] have not met that heavy burden”, the court decided.

“I am grateful for this decision because we knew not only were we right… but also because the alternative would have been something no one would have wanted to expeience our schools can be funded our residents and communities can be protected and our state can move forward,” Murphy said at his briefing today. “We are not declaring victory. We have a long road to travel. We still need the federal government to step up and provide aid to us and our fellow states.”

He gave a “shout-out” to senate President Steve Sweeney (D-3) and Speaker Craig Coughlin (D-19) for their help in helping New Jersey slide from a recession into a depression. But he criticized Republican leadership at the federal level, including a plan forwarded by President Donald J. Trump over the weekend and the continuing inaction by the United States Senate.

“No clear guidance and it pushes costs onto the states,” the governor said in reference to Trump’s statement. Noreover, “We need Mitch McConnell to finally get something done. You know that statement, go big or go home? It’s hard to believe this but he went home. Borrowing is not something anyone of us wanted to do, but Washington’s inaction [left us with no choice].”

More on three key limitations in the court’s decision:

First, the Governor/Treasurer must certify revenue shortfalls before borrowing.  Second, the State can’t borrow more than the certified amount.  Third, the borrowing must be related to the pandemic – the borrowing cannot be “solely to maintain the State’s fiscal integrity, untethered to the effects of the pandemic.”

Finally, the court is reading the concept of “related to the pandemic” broadly, to include not just “masks, respirators, and field hospitals, and for direct aid to individuals and families afflicted by the disease,” but also for “public services like education, police, fire, first aid, child welfare, and prisons — to secure the continued functioning of government.”

To avoid borrowing in excess of what the law allows, and to be faithful to the Emergency Exception, the Court requires that the Governor or the Treasurer certify the State’s projected revenue figures and the shortfall resulting from the pandemic before each tranche of borrowing. The State may not borrow more than the amount certified, and not more than $9.9 billion in total. 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.   

 

Steinhardt
Steinhardt

NJGOP Chairman Doug Steinhardt decried the decision.

“This decision confirms that all three branches of the New Jersey state government are firmly in the grasp of the Democrat Party,” said the chairman.
“The only way to put an end to out of control spending is to send more Republicans to Trenton,” he added. “While the State’s Democratic Supreme Court today took a partisan swipe at a common-sense spending issue, the New Jersey Republican Party was compelled to file it and isn’t dissuaded by the result. It was expected. Instead, it motivates us, as it should every New Jersey Republican, to get to work digging out Democrats who supported this $10 billion borrowing boondoggle.”

Republican gubernatorial candidate Jack Ciattarelli likewise bewailed the court’s decision.

Ciattarelli
“Over the course of the past few decades, our state Supreme Court has gotten it so very wrong on key issues like school funding and high-density housing,” Ciattarelli said in a statement. “The shining exception was the 2004 Lance v. McGreevey decision to constitutionally prohibit borrowing to balance our state budget and bonding without voter approval.
“That is why it is so infuriating and disappointing to see the Court reverse course and approve Governor Murphy’s reckless $10 billion borrowing scheme today. Let me be blunt – the Court got this wrong and the consequences for generations of taxpayers will be catastrophic. Today’s decision is another slap in the face to New Jersey taxpayers who have for too long been victimized by irresponsible Trenton politicians. Politicians who, along with Trenton special interests, have disadvantaged working men and women, seniors on fixed incomes, and businesses large and small for two-plus decades.
“The Court’s unwillingness to play their role in ending this madness makes one thing very clear: we need a new Governor, a new Legislature, and a new and a grassroots movement to make it happen. That includes a Constitutional Convention that empowers people to take back our state. We need to fix New Jersey, and I am more determined than ever to see that we do.”

Senator Joe Pennacchio (R-26), New Jersey co-chair (along with fellow state Senator Mike Testa, who

Pennacchio

argued the GOP case before the court) of Trump’s reelection campaign, offered the following reaction: “The New Jersey Supreme Court has granted Murphy request to borrow 10 billion dollars and impose a State property tax to do so. Incredibly it says the Treasurer must certify the need for those dollars in the budget. The Governor of course will just create an inflated budget!!!  A sad day for New Jersey.”

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