Gov. Murphy Plan To Borrow $5 Billion Without Voter Approval: To “Meet An Emergency”? Or Prop Up Unsustainable NJ Govt. For A Few More Years?

In 1837, America had its first national economic collapse. It began when New Jersey and other state governments had borrowed so much money that they could not collect enough tolls and taxes to pay the money back.  Banks failed and hundreds of thousands lost their savings, homes, and businesses.  Soon after that, New Jersey and most other states adopted new State Constitutions which made it much harder for state and local governments to borrow money so this would not happen again.  The new State Constitution of New Jersey in 1844 required ballot questions and voter approval before the state could borrow money.

Last week, all 52 Democrats in the Assembly voted “yes” for Assembly Bill No. 4175. It is called “New Jersey COVID-19 Emergency Bond Act”.  If approved, that bill would borrow $5 billion through Wall Street bonds plus more money through “federal stimulus loans”.  Because New Jersey state government is already broke, new state taxes would be needed to pay that money back with interest. About 5% or $450 million of the money borrowed would be taken off the top to pay various Wall Street “transaction fees”.

The bill also provides for an automatic new statewide property tax on top of existing local property taxes if not enough state sales and business taxes are collected to pay back this debt.  The state income tax is dedicated to local public schools and property tax relief, and cannot be used to pay back debt.  All 28 Republicans voted “no”.  The bill is now before the 40 member State Senate run by Democratic Party Senate President Steven Sweeney.

Our State Constitution requires voter approval before the State can borrow money.  Bill 4175 approved by Assembly Democrats does NOT call for voter approval.

Our State Constitution was deliberately designed to make it hard for politicians to borrow money.  It requires voter approval so politicians cannot decide on their own to borrow and spend money to get re-elected this year, while having that debt paid back with years of future tax hikes.

The Framers of our State Constitution also knew that if politicians borrow and spend more money than taxpayers can afford, people will stop paying and just walk away from their homes and businesses. That is what happened during New Jersey’s first major financial collapse in 1837.  Banks failed because state governments were unable to repay money they had borrowed.  Many people throughout America lost their savings, homes, farms, and businesses because of this.  Seven years later, in 1844, New Jersey adopted a new State Constitution to stop this from happening again. Dr. Jonathan Pitney was one of the delegates who framed that Constitution.  Later, he built Atlantic City and its first railroad in 1854.

For years, every dollar collected from tolls and gasoline taxes paid for old debts.  Not a nickel was left to build or fix roads or bridges.  Photo by

This week’s toll hikes on the Turnpike, Parkway, and Expressway are a preview of what will happen to all state taxes if New Jersey piles up more debt.  Every year, the NJ collects more than enough money in tolls and gas tax to build and fix every road and bridge we need. Yet, years NJ created a “Transportation Trust Fund Authority” that is now $20 billion in debt. Every nickel of tolls and gas tax money just pays that old debt, together with bailouts for mismanaged NJ Transit. There is no money left to build or fix any roads or bridges!  That is why we now have new gas and toll hikes almost every year. They are used to borrow even more money to do what the more than a billion dollars a year we pay in tolls and gas taxes were supposed to do. That is why Governor Murphy just raised tolls again, even when most people in New Jersey have much less money to pay them!

Governor Murphy does not need to borrow money to make ends meet. He can immediately cut state spending with Executive Orders, just as he used Executive Orders during the past three months to shut down every business in New Jersey.

During the past three months, people who owned or worked in “non-essential” businesses earned little or nothing.  Most government employees got the same salaries and pension credits even when they did not work.   If we “are all in this together”,  shouldn’t the income of government employees be reduced to match the lost income of the “non-essential” taxpayers who pay their salaries?

Having the federal government to bail out New Jersey is no solution.  Many people want to move out of New Jersey because they can’t afford the taxes caused by our corrupt, mismanaged pay-to-play government.  Why move out of New Jersey if big federal tax hikes to bail out New Jersey and other “blue” states turn the rest of America into New Jersey!

Last Saturday, most of the people at our online discussion agreed that we should do everything we can to force a public vote before incurring this debt.  There are four things we can do:

1.  File a lawsuit to stop most of the borrowing, unless it is approved by voters.
2.  Warn Wall Street banks not to sell bonds, since those bonds would be “junk”.  Without voter approval, future State Senate and Assembly members would have every legal and moral right to stop most payments at any time.
3.  Ask all current New Jersey State Senators and Assembly members to publicly pledge not to appropriate any public funds to pay any state government debts not approved by voters.  
4.  Urge support for new candidates who make that pledge, and who run against State Senate and Assembly members who do not. All 120 members of the Senate and Assembly will be up for election next year.

A lawsuit is the first step to forcing a referendum on this debt.  If we want to stop the borrowing, we need to start with a lawsuit.
Our State Constitution has a loophole.  It says that voter approval is not needed to borrow money “for purposes of war, or to repel invasion, or to suppress insurrection, or to meet an emergency caused by disaster or act of God?”

Many would call the Covid19 corona virus a “disaster” or “act of God”.  But is all $5 billion needed  to “meet an emergency”?

Black’s Law Dictionary defines “emergency” as “a sudden, unexpected happening; an unforeseen occurrence or condition. . . a sudden or unexpected occasion for action. . . “
Why is $5 billion needed?

The bill states that between March 16 and March 21, 2020, Governor Murphy issued Executive Orders shutting down all “non-essential” businesses in New Jersey.

Governor Murphy knew three months ago that the state would have “significant reductions in gross income tax revenues, corporation business tax revenues, and sales and use tax revenues” and receipts from “motor fuels taxes. . . casino-related taxes. . . and lottery sales”.

What did Governor Murphy do then to reduce state government spending to match the declines in tax collections caused by his Executive Orders?  How much Federal assistance was given to New Jersey that does not have to be paid back?

The “Emergency Bond Act” proposed by Assembly Democrat does not specify why $5 billion from bonds and more from “federal stimulus loans” are needed to “meet the emergency” of corona virus, or how that money would be spent.

The “Emergency Bond Act” authorizes the state to use new borrowed money to make payments on old borrowed money.  This is what former  Republican Governor Christie Todd Whitman did roughly twenty-five years ago when she had the state borrow money to fund pension obligations, which are a type of debt? Most ordinary citizens know it is wrong, and possibly fraud to take cash advances on new credit cards to make minimum payments on maxed out credit cards.

Is all $5 billion to be borrowed through this “Emergency Bond Act” needed “to meet a real emergency” caused by COVID 19 corona virus?  Or will it be used, like much of the “Superstorm Sandy” relief money to prop up the state’s unsustainable debt and spending for another few years.  Is this part of a scheme to raise taxes for years on “non-essential” private sector business owners and employees, who had big cuts in their incomes, so that all government employees lose nothing?  Even those who didn’t work for three months?

We cannot know without more informaton.  So far, the State has not provided enough information to know how much of the proposed $5 billion loan is needed “to meet an emergency caused by disaster or act of God”, and how much needs a Public Question on the ballot, and  the approval of New Jersey voters.

If the State refuses to provide that information, would you support our efforts to file suit to either get that information, or block the “Emergency Bond Act” unless it is submitted to voters for approval?

Seth Grossman, Executive Director

  • Seth Grossman

    Seth Grossman is executive director of Liberty And Prosperity, which he co-founded in 2003. It promotes American liberty and limited constitutional government through weekly radio and in-person discussions, its website, email newsletters and various events. Seth Grossman is also a general practice lawyer.

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