Gov. Phil Murphy warned a “financial disaster” is the next surge the state government will have to confront.
“A fiscal disaster is not months away. These decisions will be on our doorstep in literally just a few weeks,” Murphy stated on May 4. “We are on the brink of having to make very tough and quite frankly, very unpalatable decisions.”
The proclamation came as the governor signed an executive order rescinding the state’s Department of the Treasury from having to achieve a nearly $1.3 billion surplus by the end of this current fiscal year.
Tough Financial Choices
“No one has been more committed to restoring our state’s fiscal foundation than I have,” said Murphy. “We have spent the past two years working nonstop to build surpluses and put money aside for a rainy day fund. However, in the absence of significant federal assistance…a $1.28 billion surplus for this fiscal year is no longer realistic.”
The first-term Democratic governor said the severity of the financial crisis is a result of both plummeting state revenues due to the near total shutdown of the economy and the skyrocketing costs of fighting the coronavirus pandemic
Layoffs on the Horizon
“Layoffs (are) already happening at municipal levels,” said Murphy. “This is not a theoretical argument. But I think it’s going to be a question of scale, whether or not this is here and there or if this is a massive, across-the-board reality, and please God it is not that.”
According to Murphy, larger cuts would include police, firefighters, EMTs and paramedics, public health workers, educators and “the hardworking folks processing a mountain of unemployment claims…on the job and working to get us through this.”
The governor said the best way to avoid layoffs on a broad scale rests on the combination of the state’s ability to borrow and federal assistance, specifically an interpretation of The CARES Act allowing the state to use the aid in ways they see fit.
“That’s an important piece, that we get a big bucket of federal direct cash assistance through Congress and a bill signed by the President,” said Murphy, a former executive at Goldman Sachs. “We need the federal government to step forward with significant investment in our states, both red and blue, to prevent our recovery from being held back because we cannot fund it.”
“Across the country, cuts to critical services are inevitable and bankruptcy is not an option.”
To give the state the ability to borrow at rates that are currently very favorable, Murphy called on the state Senate and Assembly to give him the ability to do so.
“We will still need to borrow on a short-term basis to bridge our immediate cash flow needs,” said the governor. “Even Warren Buffett said this weekend, this is a good time to borrow money.”
Additionally, Murphy intends to veto numerous bills approved by the legislature as a result of not having the appropriate amount of money to properly fund the programs.
“I don’t want to veto them. But given our current fiscal situation, I have no other choice,” said the governor