New Jersey officials say a newly-launched federal lending program needs to make more funding available to help their state, which is battling one of the worst COVID-19 outbreaks in the country.
Funded through the $2.7 trillion federal stimulus package approved late last month, the U.S. Federal Reserve Municipal Liquidity Facility (MLF) program will back up as much as $500 billion in lending to states, counties and cities to help them deal with major budget emergencies during the pandemic.
Under the terms of the program, cities and towns in New Jersey are excluded from seeking relief due to population criteria: cities with populations over 1 million residents and counties with over 2 million people.
In the Garden State, which is home to 8.94 million people, there are 85,301 confirmed cases and 4,202 coronavirus-related deaths, as of April 19.
Pascrell: It’s ‘a good start’
While the MLF program is “a good first step that will do much good,” Rep. Bill Pascrell said “it must go further.”
Pascrell sent his second letter on April 17 to Federal Reserve Chairman Jerome Powell urging him to revise the program’s terms to allow more cities and counties to participate, saying that without help, communities will face service cuts and tax increases.
The impact, Pascrell said, “may take tolls on essential services that will take years to undo and make the ensuing recession even more protracted and painful than that which followed” the 2008 recession.
“Despite wrestling with one of the worst outbreaks in the nation, large counties like Bergen County are ineligible to apply for municipal debt relief in new rules set by the Federal Reserve,” Pascrell said in a press release.
As of April 20, Bergen County has 12,639 confirmed coronavirus cases—the tenth most in the country—and 767 reported deaths. Pascrell’s hometown, Paterson, the third largest city in New Jersey, just surpassed 2,800 infections.
“Under the Federal Reserve’s MLF program, neither are permitted to seek relief to help shoulder their debts incurred,” Pascrell said.
Pascrell added: “The current structure of the MLF excludes regions of America badly impacted by the pandemic and leaves their local governments more vulnerable, including, perilously, all of the top 35 most populous African American cities in the nation.”
“The insidiousness of this virus is that it is not impacting select segments of our country: all places, large and small both, are under threat and under siege,” he said. “Yet, despite this equality of danger, and while all 50 states can participate in it, the Federal Reserve’s MLF program only allows cities with at least one million residents and counties with at least two million residents to apply for relief. Under Census estimates, that would render just 10 cities and approximately 45 counties eligible for help. This is insufficient.”
More Money Needed
Pascrell also called for additional funding, saying $500 billion is “a good start” but “is too small and must be raised.”
“As individual incomes and business revenues collapse, financing needs of state and local governments will come under increasing pressure,” said the representative. “These municipalities will need the ability to manage the shortfalls of the moment while refinancing longer maturity debts under difficult or even unattainable terms.”
“It is a false choice to make these governments balance decisions to fight the virus and its impacts now against fears of making harsh reductions to services that Americans rely on in their daily lives later,” he said.
Direct State Aid
Gov. Phil Murphy is also calling for the federal government to make direct state aid more of a priority.
During his COVID-19 media briefing on April 18, Murphy warned of “historic” layoffs if New Jersey doesn’t receive some help.
“We need both direct financial assistance to states from a bill passed by Congress and signed by the President and we will need bonding flexibility in either case,” the governor said. “I would just plead with folks on both sides of the aisle to get to that reality sooner than later and make that happen.”
“Let me just tell you what the alternative will be, particularly if we can’t borrow money. We will have layoffs that will be historic in the history of our state, at the state level, at the county level, and at the local level, Murphy said. “That’s what’s at stake. I don’t know how many, but it is big, big numbers.”
Given the state’s declining tax revenue, it could need to borrow as much as $9 billion from the Federal Reserve, according to the governor.
Murphy said has spoke with New York Sen. Chuck Schumer the day before, who reported “there is not momentum right now in Congress to put significant amounts, or any amount of money, into direct state aid.”
“That would lead unequivocally to a national disaster,” he said.
Schumer is among a growing number of legislators who have urged Powell to expand eligibility for the MLF program.
Murphy said New Jersey will continue to review the Federal Reserve’s program.
“I was very happy to see Speaker (Craig) Coughlin say that he was looking forward to working toward a responsible plan. I think that’s a good word to use. We need that now, more than I thought we did 24 hours ago, when you hear that Congress isn’t finding—and I’m not going to get political here, but there’s one part of Congress in particular that doesn’t see the wisdom to put direct money into states,” he said.