Superior Court Judge Mary Jacobson of Mercer County ruling in 2017 that a State “independent” authority can borrow hundreds of millions of dollars without voter approval. This case is different. If this borrowing of $9.9 billion is approved, it will be a direct “sovereign” debt of NJ taxpayers, enforceable with automatic surcharges on every real estate tax bill whenever state funds are insufficient–just like automatic toll and gas tax hikes to pay for debts of Parkway, Turnpike, and Expressway Authority. (Photo by whyy.org)
Governor Murphy’s lawyers are seeking to dismiss a Superior Court lawsuit filed last month to block his plan to borrow $9.9 billion and “no layoff” deal with 40,000 state employees. A motion brought by Assistant Attorney General Jean Reilly will be argued by telephone conference before Mercer County Superior Court Judge Mary Jacobson at 11 AM this Thursday, July 16.
Michael Smith, an Atlantic County taxpayer together with Liberty and Prosperity, a constitutional awareness group, filed the suit last month. They claim these state actions violate the balanced budget requirements of the State Constitution. Since 1844, New Jersey’s Constitution has barred state government from “creating debts and obligations” in future years without voter approval of a ballot question.
The plaintiffs are represented by Seth Grossman, a Somers Point attorney and former candidate for Congress.
“It is obvious that both the $9.9 billion borrowing plan and ‘no-layoff’ deal create debts and obligations in future years.” Grossman said. “Murphy is trying to completely misuse a very narrow exception to the Constitutional requirement of voter approval for debt.
The State Constitution does not require voter approval when “debts or obligations” are created “to meet an emergency caused by disaster or act of God”.
Grossman said, “Borrowing $9.9 billion and keeping employees at full salary for nearly two years when they are not needed are not an emergency. Murphy is not God when he says they are, Grossman said. “Murphy knew since last March that his shutdowns of private businesses would cause a big drop in tax collections”. He has almost 18 months to cut spending and balance the budget now”.
“Murphy created the emergency by insisting that all 40,000 state employees be paid in full even when they were not working. This was done at a time when he wiped out the incomes of hundreds of thousand of people who owned or worked for private businesses.”
“Both Murphy and the CWA union for state employees know this” Grossman said. “That’s why they made this bizarre sweetheart no layoff deal”.
“Under this crazy deal, thousands of state employees are given ten unpaid furlough days in July when they are most needed, to they are required to be paid for the next 18 months when many are not needed”. Grossman said.
“The only reason they did this was so state employees on furlough could collect both state and federal unemployment benefits”.
“Some of them will probably make more money on furlough than they do when they are working” Grossman said.
The balanced budget clause was added to the New Jersey Constitution in 1844. It was done after state governments throughout the United States borrowed heavily and defaulted on their bonds. This caused widespread bank failures known as the Panic of 1837 and years of economic depression.
During the past sixty years, New Jersey Governors and legislators of both parties avoided this constitutional requirement by creating independent “authorities” to borrow without voter approval. Although many debts from these authorities are paid back with taxes and tolls, the State has no legal obligation to do so.
However, if the State borrows money directly through the Constitution, it is required to authorize and automatic statewide property tax surcharge to pay back the loan. This is similar to the automatic gas tax and toll hikes used to pay back debts of the New Jersey Transportation Trust Fund Authority.
Grossman said the lawsuit is just one of several steps planned by his organization to stop the debt. “Even if we lose in the lower courts this year, we can still appeal. Even if we lose there, voters can elect future legislators who refuse to fund unconstitutional debt not approved by voters or use bankruptcy or insolvency to cut state debt. New Jersey already has more than $230 billion in debts and unfunded pension obligations. These debts are unsustainable and will never get paid. Every day we delay addressing this problem means more hardship for more people.