This story was written and produced by NJ Spotlight. It is being republished under a special NJ News Commons content-sharing agreement related to COVID-19 coverage. To read more, visit njspotlight.com.
Federal pandemic-response legislation that could play a key role in determining how well New Jersey’s finances hold up during the ongoing health crisis was formally introduced in the U.S. Senate on Monday.
The bipartisan bill co-sponsored by U.S. Sen. Robert Menendez (D-NJ) calls for nearly $500 billion in federal aid to be provided to state, local and county governments as they continue to contend with the effects of the pandemic, including significant revenue losses.
The federal dollars would be distributed using a formula that would take into account several factors that should put New Jersey in line to see significant aid, including total population and COVID-19 infection rates.
The bill would also allow the funding to flow more freely to the county and local level, something that could also benefit communities in New Jersey that are facing serious financial hardships during the pandemic.
Laying off public workers?
The measure’s introduction comes as Gov. Phil Murphy has repeatedly been saying that the state may have to enact widespread public-worker layoffs because revenues are “falling off the cliff” in New Jersey.
Menendez spoke about his bill during a conference call with reporters on Monday. He portrayed its bipartisan backing as an important factor as the sponsors now try to move it to the finish line in the Republican-controlled Senate.
“This isn’t a blue-state or red-state issue,” Menendez said. “This is an American issue, and it requires a national response.”
Billions of dollars in coronavirus-relief funding have already flowed into New Jersey following the enactment in late March of the $2 trillion federal CARES Act. Initial aid recipients include New Jersey hospitals, $1.7 billion; New Jersey Transit, $1.4 billion; and K-12 school districts, $280 million. Another $50 million is also being provided to the state’s small businesses, and many residents are also receiving direct stimulus payments from the federal government.
But Murphy, a first-term Democrat, has complained about tight restrictions that were placed on other pots of federal aid, and local officials have also decried rules that have further limited distribution of CARES Act funding.
Last week, the Democratic-controlled U.S. House of Representatives approved another coronavirus-relief measure that totals $3 trillion. Among other initiatives, the House measure would fund a second round of direct stimulus payments to taxpayers. It would also provide more than $850 billion in direct aid to state, county and local governments.
Letting states go under
The House bill, however, was passed largely along party lines, suggesting it is unlikely to advance in the GOP-dominated upper chamber. In addition, Senate Majority Leader Mitch McConnell (R-KY) has also been more skeptical about providing aid to states, and at one point suggested some should be allowed to go bankrupt, which is something that would not be allowed under current federal law.
Under the bipartisan bill that’s being sponsored by Menendez and U.S. Sens. Bill Cassidy (R-LA), Cindy Hyde-Smith (R-MS) and Susan Collins (R-Maine), among others, the nearly $500 billion in aid would be distributed using a formula that would consider three factors: population, COVID-19 infection rates and the depth of any revenue losses.
“Our state and local governments can’t do this alone,” Menendez said as he discussed the ongoing state and local response to the pandemic during Monday’s call.
“Our response to this crisis must put people over party,” he said.
U.S. Rep. Mikie Sherrill, a sponsor of an identical House version of the bill, offered a similar message.
“We have to work together to support our state and local governments,” said Sherrill (D-11th).
Other bill sponsors include U.S. Sen Cory Booker (D-NJ) and U.S. Rep. Josh Gottheimer (D-5th).
New Jersey has been among the hardest-hit states, with more than 140,000 positive COVID-19 cases reported through Monday, resulting in a reported 10,435 fatalities. Unemployment filings have also risen dramatically since mid-March as the pandemic has spread across the state from north to south.
COVID-19 and tax collection
The pandemic has also begun to hit the state’s typical revenue cycle as an April 15 deadline for paying both personal income taxes and corporate-business taxes was pushed back to July 15 this year. Many businesses deemed “nonessential” by Murphy’s administration have also been closed for weeks to help slow spread of the disease, further impacting tax collections.
According to new state budget projections that were released by Murphy’s administration last week, nearly $2 billion has been shaved off an original revenue forecast for fiscal year 2020 that was written into the $38.7 billion spending bill the governor approved last June. In addition, the administration is projecting total revenues will drop to $33.8 billion in fiscal 2021, which begins this fall.
In addition to repeatedly calling for increased federal aid to help the state navigate the pandemic, Murphy has also been urging lawmakers to approve an emergency borrowing plan to help offset projected revenue losses. But his plan has stalled in the state Legislature as some lawmakers have raised concerns about the potential for tax hikes, while others have questioned whether the plan violates strict borrowing limits written into the state Constitution.
Last week, lawmakers sent the governor a bipartisan bill designed to help state and local governments in New Jersey cut millions of dollars from their budgets during the pandemic by allowing for a partial furloughing of public employees. However, Murphy has yet to take any action.
Also sitting on the governor’s desk is legislation seeking to loosen borrowing restrictions for municipal and county governments to offset pandemic-related revenue losses and still-emerging spending needs.