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.
A year after the first cases of the coronavirus brought on statewide shutdown orders to curb new infections, New Jersey’s economy may no longer be in a freefall, but thousands of residents remain out of work and many small businesses are still struggling for survival.
The crush of unemployment benefits triggered by the pandemic also exposed a woefully overburdened unemployment system, and is an ongoing a source of complaints from many of those who are still seeking benefits as they look for jobs.
At the same time, billions of dollars in aid has been pumped out through the unemployment system over the last year, helping to sustain the more than 1.5 million New Jersey residents who’ve received jobless benefits at some point during the pandemic.
And state lawmakers are still working to get more significant funding approved to upgrade the technology that backs up the beleaguered unemployment system, a full year after the health crisis began.
Efforts to provide more state support to businesses that have been barraged during the pandemic, and the restrictions on economic activity implemented in response to it, also remain ongoing. Both Gov. Phil Murphy and lawmakers have put forward separate small-business aid proposals in recent weeks.
But amid those efforts there are also fears that they may not provide enough support to fully “supercharge” the state economy when it needs it most.
Estimate that 30% of small businesses are gone
Some business leaders are urging Murphy and legislative leaders to do more immediately, citing the loss of an estimated 30% of the state’s small businesses within the last year.
“This is a ‘now’ issue,” said Tom Bracken, president of the New Jersey Chamber of Commerce. “It doesn’t get any worse than what we are experiencing right now. What are we waiting for?”
Meanwhile, the state itself is in the unlikely position of having significant resources on hand to help, due, in part, to emergency borrowing that took place without voter approval last year when the Murphy administration was projecting “historic” revenue losses that have not fully materialized.
So instead of having to manage deficits this year, the budget Murphy proposed last week calls for record spending during what’s expected to be a robust recovery phase, backed in part by the amassing of record budget reserves.
A year after COVID-19 was first identified in New Jersey, the state has recorded nearly 800,000 cases and almost 24,000 fatalities linked to the disease, according to the latest data tracked by the Department of Health.
In addition to the health crisis itself, the pandemic triggered a record-setting economic downturn in New Jersey.
So far, more than $23 billion in unemployment benefits has been distributed to more than 1.5 million New Jersey residents over the last year, according to the state Department of Labor and Workforce Development.
And while there have been some signs of economic recovery in recent months, nearly 11,000 new unemployment claims were filed during the week that ended on Feb. 20, according to the state’s latest figures, demonstrating the lingering economic effects of the health crisis.
During the earliest weeks of the pandemic a year ago, the weekly claims for benefits surged to record-high levels, with over 200,000 residents seeking benefits in some weeks. The state’s unemployment rate also rose to near 17% by June. It has since been more than cut in half, but remains higher than before the pandemic began.
During the worst months of the job crisis, New Jersey’s outdated unemployment system was heavily strained, with out-of-work residents howling on social media and elsewhere about not being able to get through to someone to file a claim.
As the backlogs piled up, lawmakers proposed spending federal coronavirus aid money to improve the technology that backs up an unemployment system, which had long been identified in need of an overhaul. Months later, their bill providing $50 million for improving the technology is still making its way through the legislative process.
Blaming the feds
Meanwhile, the Murphy administration has cast blame on federal unemployment laws and the broader federal unemployment system. Both play a big role in determining how much and when aid can be distributed to New Jersey’s jobless residents.
Murphy has also set aside nearly $8 million in his proposed $44.8 billion spending plan for the 2022 fiscal year to upgrade the technology that’s used to administer jobless benefits. But administration officials have also suggested it will take substantial federal reform to really fix all the problems.
“There’s no doubt people have problems getting through on the phone (and) people have problems understanding what’s on the website, but the big-picture problem here is the federal unemployment system,” state labor commissioner Robert Asaro-Angelo said during a recent interview on NJ PBS.
On the employer side of the economy, billions of dollars in state and federal coronavirus aid have been provided through numerous programs to help prop up businesses that have faced significant struggles since the pandemic took hold across the state.
Waiting for help from Washington
And more relief could be on the way for businesses that continue to struggle even as economic restrictions are slowly being eased during an ongoing mass-vaccination effort.
A bipartisan bill introduced in the state Senate would earmark $300 million to help small businesses and nonprofit organizations that have suffered losses over the last year.
Murphy has also recommended earmarking more funding for his administration’s Main Street Recovery Finance Program among a number of economic-recovery proposals in the new state spending plan he put forward last week. That would push two-year spending of state dollars on the Main Street program to $100 million, Treasury officials said.
But Bracken, the state Chamber of Commerce leader, is calling for at least $500 million to be made available right away to businesses in the form of grants and loans. For businesses that haven’t already closed, that level of spending is necessary to help satisfy all the working capital needs to ensure they can come out on the other end of the pandemic intact, he said.
Looking back on the last year, Bracken said the pandemic has “changed the business landscape, permanently.” Many businesses were forced to become more efficient and have learned hard lessons they will carry forward, he said. And it doesn’t make sense to wait until July 1 when the state’s new fiscal year begins to pump out the additional aid that Murphy has proposed for businesses, Bracken added.
“This should be a time when we pull out all the stops and put together a game plan to really supercharge our economy,” Bracken said.
When it comes to the state budget, the outlook has brightened significantly from a year ago, when revenues fell dramatically after the initial shutdown orders, overwhelming the state’s meager budget reserves.
For example, monthly revenues from the sales tax, a significant source of funding for the state budget, plummeted by as much as 30% during the pandemic’s early days, when the shutdown orders significantly restricted economic activity across the state.
But in more recent months, the sales tax has delivered steady year-over-year revenue growth despite the lingering pandemic. Treasury officials have chalked that up, in part, to several rounds of federal stimulus payments and enhanced unemployment benefits sent to New Jersey residents over the last year. Other state tax sources have also outperformed projections in recent months, including the realty transfer and alcoholic beverage excise taxes, and, unfortunately, the inheritance tax.
“It turned out the economic effects of the second surge did not mirror the economic effects of the first surge,” Treasurer Elizabeth Maher Muoio said in a recent interview on NJ PBS.
“We did not see our revenues plummet like we did in the first surge,” Muoio said.
Significant federal aid has also helped support the state budget by funding the state response to the pandemic, including efforts administered by the Department of Health, and easing pressure on New Jersey Transit’s operating budget. More federal aid could be on the way in a COVID-19 relief bill being debated and voted on this week in Washington, D.C.
And then there was the more than $4 billion that was raised through the emergency borrowing that Murphy and lawmakers approved last year, without any sign-off from voters.
A budget surplus
Murphy, who faces reelection in November, is already planning to enter the 2022 fiscal year with some $6 billion in projected budget reserves, a substantial sum for a state that typically runs on a very narrow margin relative to overall spending. But rather than sock away all of those reserves for when the next downturn comes, Murphy is planning to spend down roughly $4 billion of the surplus before the next fiscal year comes to an end on June 30, 2022.
His budget calls for more spending on K-12 schools and public worker pensions, and it would also send out direct payments worth up to $500 to an estimated 760,000 families later this year.
During his budget address, presented online last week instead of before lawmakers due to the pandemic, Murphy said the experiences of the last year have “shaken our state — and our world — to the core.”
“Our hearts may be broken, but we’re not going to cower. That’s never been the New Jersey way,” the governor said.
Murphy’s plan to spend big coming out of the pandemic has been praised by many Democrats and liberal groups. However, concerns about how the state can sustain that high level of spending into the future are already being aired by the governor’s critics, including those who were opposed to taking on the long-term debt last year as part of the state’s COVID-19 response.
“I believe this was a time where New Jersey needed to learn to tighten its belt,” said Sen. Michael Testa (R-Cumberland), who serves on the Budget and Appropriations Committee.