Republican Budget Senators:  Governor’s Budget Solution Due May 22 Must Include Restraint of Budget Excesses and Creative Solutions Or It Will Be Dismissed

The following was released today by Senator Steven Oroho (R-24), Senator Declan O’Scanlon (R-13), Senator Michael Testa (R-1), and Senator Sam Thompson (R-12), the Republican members of the Senate Budget & Appropriations Committee:

The State’s budget has been significantly impacted by COVID-19. Revenue losses through the end of FY 2021 will be severe and there is a need for additional relief for impacted people and businesses. There is broad and bipartisan recognition of this reality in the Legislature and among the public.

For the past two months, the Governor has provided no public accounting or explanation of the budgetary impacts of COVID-19. Despite holding daily press briefings attended by various cabinet officials, the Treasurer has not been invited to a single briefing to explain budget impacts for the public or, more importantly, to answer reporters’ questions about what steps, if any, are being taken to address these impacts.

Instead of sharing with the public meaningful information about the budget challenge and substantial steps to address it, the Governor has simply stated in recent weeks that “revenues are falling off the cliff.” He has quietly demanded the Legislature immediately give his administration unfettered authority to borrow for operating expenses and tax already-suffering citizens even more. And he has alluded to the threat of firing public safety employees and health care staff if he doesn’t get his way.

The Governor is statutorily required to provide a report on the budget impacts of COVID-19 and his proposed solutions by Friday, May 22. The report must include meaningful proposals to restrain budget excesses and set forth common-sense solutions.

In advance of that report, the Republican members of the Senate Budget Committee issued the following joint position statement. It puts the Governor on notice that a report that simply explains impacts to the State budget of COVID-19 and again threatens layoffs if he is not given more tax increases and expanded borrowing will be summarily dismissed. It also offers common-sense options that the Governor, thus far, has ignored.

Their position statement appears below:

We fully understand the State’s budget is being impacted by COVID-19. The State is losing many billions of dollars of revenue due to decreased economic activity. There are significant increased cries for help – financial and otherwise – from people and businesses. The State budget is badly broken and needs to be fixed.

We fully appreciate that the challenges we face are enormous. We were tentatively informed weeks ago by Treasury personnel that the potential loss of revenue by the end of FY 2021 could be $7.8 billion. Last evening, we learned from press accounts that Treasury shared a $10 billion estimate of revenue losses with the financial markets in response to federal legal requirements requiring transparency. In recent days, the Governor has been summarily suggesting a $20-30 billion State budget hole at various briefing events in the context of asking for more federal assistance and demanding authority to borrow more than $9 billion for operating expenses. Also, this week, Treasury released a report that April revenue declines were extraordinary, though much of the declines are temporary as extended income tax and business payment deadlines shifted revenues from April into July.

We appreciate the administration is having challenges putting a fine point on revenue losses and clearly communicating them. But the larger point remains. We are painfully aware that billions of dollars of lost revenue will not be recovered. We understand the revenue losses will continue through the next fiscal year. And we are aware solutions are needed.

We have worked in a bipartisan spirit to address the health challenges of COVID-19. And we will work in a bipartisan spirit to rebalance our State’s badly broken budget, so it can continue to support services people expect to receive.

However, it is imperative that the budget presentation the Governor is required by law to present by May 22, not simply mimic his approach to the budget challenge to date. His approach has been to: 1) demand more federal funding while publicly attacking those whose support is needed; 2) push the Legislature to authorize, with no transparency, almost $10 billion dollars of borrowing for operating expenses in a way that nonpartisan lawyers have determined to be unconstitutional with an irresponsible 35-year repayment scheme; 3) embrace no alternative common-sense ideas that have been advanced by Republicans, Democrats and independents; and (4) dangle the threat of mass layoffs of police and front-line health care workers if the Legislature doesn’t rubber-stamp his plan.

To date, we have worked well with Senate Democrats in efforts to address the COVID-19 crisis. We fear the Governor is on a path of simply repeating his past irresponsible demands. If he does, we will work with Senate Democrats to advance a different approach to solving the budget challenge. Unlike the Governor, we would push for reasonable spending restraints and creative nontax solutions first, as part of a more common-sense and pragmatic approach.

Examples of shortcomings in the Governor’s approach to the fiscal crisis to date have included:

• Failing to use any of the $2.4 billion the federal government gave the State through the CARES Act to help businesses and local governments more quickly and safely reopen our economy and society.  The Governor has hoarded these funds in the hopes Congress will change the law to allow him to use the money to plug State budget holes. As of today, none of the funds have been expended and no plans for using them to reopen our economy and society have been announced. Changing course would help stem avoidable revenue losses that the Governor decries.
• Failing to implement a furlough program of public employees who have not worked for two months and who will likely continue to be unable to work in the weeks or months to come. Most public employees are working hard – some harder than ever and their efforts are appreciated. But hundreds of Motor Vehicle Commission staff and other nonessential staff, though no fault of their own, have jobs that do not allow them to work from home. The Governor even failed to embrace a special furlough program being advanced by Senate Democrats, with broad bipartisan support, that would have saved more money by tapping into federal dollars to pay 100% of expanded unemployment benefits and protect public employees’ pensions and seniority rights. Failure to embrace this approach has missed an opportunity to save hundreds of millions of dollars for the State budget in a way that has no disruption to essential services and only minimal – if any – impacts to public employees.
• Failing to reassign idled employees to the critical task of acting on unemployment applications. We have worked with Senate Democrats to pass legislation to make it clear to the Governor that he can reassign some idled employees in lieu of furloughing them without violating civil service laws. We bet most of the public employees idled through no fault of their own would welcome the important work of helping their struggling neighbors by pitching in to get long-neglected unemployment claims approved. Aside from getting billions of dollars of aid out more quickly which is fair for those who need help, it will help the economy and revenue collections when it is needed most. The Governor has failed to support the effort and it languishes because of his inaction.
• Failing to aggressively pursue a strategy of keeping in New Jersey the existing taxes paid by New Jersey residents who work from home for New York corporations. Income earned while working in New Jersey belongs to New Jersey in many cases, but New Jersey just keeps looking the other way while New York collects taxes from people who haven’t stepped foot in New York in months, and who will likely more frequently work from home in the future. The administration’s silence is staggering, but made all the more infuriating in light of New York’s recently taking aggressive and unfair steps to tax the income of health care workers who went to New York to help them in their time of need. The least we could do is take reasonable steps to ensure that New York is not abusively and unlawfully collecting taxes from people who are working in New Jersey.
• Failing to notify schools that that they should not be passing budgets and taking steps based on State aid increases the Governor proposed back in February that were as high as $53 million and 44% for select districts. Continuing to provide increases to any district that was to receive an increase, but at more sustainable rates, would save more than $300 million. We all want to see larger increases for our school districts, but all of us understand these extraordinary times require any increases to be far less than desired.
• Failing to creatively allocate pension fund appropriations (without any reduction in the total amounts), to pension systems whose employees’ benefits draw down relatively more federal funding reimbursements. For example, redirect funds that would go to the pension system for judges (which receive very little federal support) and put that money into the pension system that supports rank and file State employees (who work at many of the State agencies trigger benefit reimbursements by the federal government.) Doing so could generate considerably more federal fund reimbursements (potentially $100 million) under existing law – without having to ask Congress for permission.
• Failing to even ask unions to come to the table and allow for freezes in pay for only those employees who are not on the front-line of the COVID-19 response. Freezes would not impact public safety and health care workers. Such a freeze would free up significant funds for relief for those who are suffering. We believe our union rank and file members would be willing to accept at least this small shared sacrifice to help their neighbors if asked.

The options above would substantially address our budget challenges. Will these steps alone fully address our problem? No. But they can be built upon with other ideas. These steps are substantial, and other common-sense steps focused on restraint can build upon them and must constitute first steps.

We hope the Governor’s report on May 22 does not lazily dismiss these and other common-sense approaches advocated by others to fix what everyone knows is a badly broken budget. And we expect the Governor will use the vast resources at his disposal to be more creative than to just unsustainably tax, borrow, and threaten layoffs.

Supporting these proposals as part of his report on May 22 is critical. Doing so will strengthen the Governor’s likelihood of receiving more federal aid. And it will, establish an opening for the Legislature to even consider a constitutional, more limited, and far more responsible use of debt as part of a broader solution. His failure to do so will result in no one to blame but the Governor himself.

We hope the Governor’s proposal and report on May 22 prioritizes solutions short of taxes and borrowing, for this would demonstrates reasonableness and responsibility. If it does not, we will not support it. And we will work with our Democrat Senate colleagues to fill the void in leadership. Our taxpayers and residents needing help deserve no less.