NJ Facing 'Jaw-Dropping' Budget Abyss In Wake Of COVID-19

Russ Crespolini
·5 min read

NEW JERSEY - Treasurer Elizabeth Maher Muoio painted a stark picture of the fiscal challenges the Garden State faces in both the near and the long term as impact of COVID-19 on the state coffers is starting to be felt.

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Speaking at Gov. Phil Murphy's Friday press conference, Muoi mentioned that the Department of Treasury has been dealing with the economic crisis caused by COVID-19 behind the scenes for months and was now sharing their projections.

"Our economic analysts, like analysts around the country, have been working around the clock to try to gauge the short and long term impact of this crisis," she said. "Based on a number of economic assumptions, we are now a New Jersey potentially facing a shortfall of nearly $10 billion dollars through the end of fiscal year 2021. That is a jaw-dropping figure."

Murphy himself described the looming economic crisis as an abyss that New Jersey must work to back away from and Muoi noted while there are many moving parts, it is clear that a decline of this magnitude would be worse than the Great Recession.

"When it comes to the sales tax for example, which has obviously been impacted by business closures, we are forecasting a 33 percent decline in collections from May through July over the same period last year," she said. "For context, the worst sales tax month during the great recession from the same time in '08-'09 saw an 18.4 percent decrease."

In order to combat that, Muoi said they already have made some hard decisions:

  • Roughly one billion dollars of appropriations were placed into reserve.

  • Statewide hiring freeze, except for crucial COVID related needs.

  • $500 million in planned spending for this fiscal year placed on hold.

"We are also proposing to deappropriate approximately $1.2 billion dollars which was not an easy choice because it included many priorities shared by everyone," Muoi said. "And additional balances will be held in reserve until we see how the fiscal year pans out."

Rainy Day Is Here

Muoi noted that the current administration had really started to make "great strides" over the last two years to improve New Jersey's fiscal condition.

"Doing it the way most families do. Shoring up our saving, paying our bills and investing wisely," she said. Specifically she hi lighted that:

  • Record payments were made into the pension system to decrease liability.

  • Boosted savings by decreasing surplus significantly

  • Making the first rainy day fund deposit in a decade.

  • Making serious investments in areas that were starved for resources, public education and New Jersey transit chief among them.

"And then COVID came along," Muoi said. "The global pandemic this has sparked has halted this progress in its tracks."

So now the sizeable surplus and rainy day fund will be easily depleted and the administrations is focused on a proposed path through the extended fiscal year, which will now end three months later than normal, on Sept. 30.

"Our hope is by then we will have a handle on what federal assistance we can depend on receiving," she said. "And we will also have a better handle on how the state revenue situation is looking since we extended the tax filing deadline from April 15 to July 15 to help provide some relief for taxpayers."

Regardless of what the numbers show, Muoi said New Jersey needs a multi-faceted approach and it is going to require some tough decisions.

"Like many taxpayers, we, as a state have been living paycheck to paycheck for far too long" she said. "Just like it will be for many New Jerseyans our road ahead is going to require a combination of serious budget tightening, critically needed borrowing and federal assistance. Much more robust federal assistance."

Muoi thanked Murphy for "lobbying for the support we unequivocally need."

"He has been a tremendous ambassador for New Jersey and our needs," she said, noting that the new report being released soon is designed to help New Jersey as we begin to navigate what is essentially uncharted territory.

"I have no doubt we'll get through this as we have many times before. Like the Governor says, we're certainly not going to be spiking any footballs anytime soon. But as he is also fond of saying, we'll get through this together," Muoi said. "At the end of the day, I have no doubt we'll position New Jersey firmly on the road to recovery."

Murphy said that part of the reason he was elected was to restore fiscal sanity and fairness to New Jersey, noting the progress and plans his administration has made in that regard.

"But I'll repeat the phrase from the immortal philosopher Mike Tyson, everyone has a plan until you get punched in the face," he said.

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This article originally appeared on the Chatham Patch