Supreme Court to Hear Republican Lawsuit Over Murphy's Signed $9.9 Billion Borrowing Plan
As the legislation was being passed, Doug Steinhardt, a partner at Florio Perrucci Steinhardt Cappelli Tipton & Taylor, who is also chairman and general counsel to the New Jersey Republican State Committee, announced the filing of a lawsuit challenging it. The Supreme Court took the case Friday.
July 16, 2020 at 02:03 PM
7 minute read
*This story was updated Friday afternoon, when the Supreme Court issued an order taking up the lawsuit challenging the borrowing bill.
On Thursday Gov. Phil Murphy signed a controversial measure authorizing the state to borrow up to $9.9 billion to plug a massive revenue shortfall resulting from the pandemic-induced lockdown that had shut off many tax revenue streams since early March. An expected lawsuit challenging the legislation quickly followed, and on Friday the Supreme Court announced it will exercise jurisdiction over the matter and hear arguments early next month.
"The passage of this legislation is an important step in New Jersey's recovery from the economic ravages of the COVID-19 pandemic," Murphy said in a release sent out just after 6 p.m. Thursday. "While this is by no means a silver bullet, the ability to responsibly borrow is essential to meeting our fiscal needs in the coming year."
Earlier the Senate and Assembly approved the same bill after some debate in each house, while the New Jersey Republican State Committee made good on its intention and sued the governor.
On Friday Supreme Court Chief Justice Stuart Rabner issued an order in the matter of New Jersey Republican State Committee v. Philip D. Murphy. "Ordered the matter shall be set down for oral argument at 10:00 a.m. on Aug. 5, 2020," wrote Rabner. "Plaintiffs shall file a brief on or before 4:30 p.m. on July 24 and defendant shall file a response brief on or before 4:30 p.m. on July 31." The Chief Justice also ordered counsel for the plaintiffs and defendant to appear for a conference call with the Clerk of the Supreme Court at 3 p.m. last Friday.
S-2697, the "New Jersey COVID-19 Emergency Bond Act," was approved 22-15 around noon the day earlier largely along party lines in the upper chamber. Every Republican—minus Sen. Steven Oroho, R-Sussex, who was absent due to hip surgery—voted against it, as did two Democrats, Sen. Dawn Addiego, D-Burlington, and Nia Gill, D-Essex, who broke ranks. There were three abstentions.
Hours later the 80-member Assembly took up an identical version of the bill, A-4175, and approved it by a vote of 46-26 around 3 p.m.
Just after 6 p.m. the governor announced he had signed it. The legislation authorizes bond borrowing of up to $2.7 billion for the remainder of the extended fiscal year 2020, which ends Sept. 30, and up to $7.2 billion for FY2021, which begins Oct. 1 and runs through June 30, 2021, for a combined amount of up to $9.9 billion to be issued over the two periods.
Murphy said the state is authorized to borrow either through the issuance of general obligation bonds that can be sold to investors or through the federal government's Municipal Liquidity Facility, which was established to help states and local governments across the country deal with the fallout from the global pandemic.
The state is also authorized to refinance bonds issued pursuant to the Bond Act, while debt service on the bond issuance will be repaid through the state's General Fund.
Murphy stressed that the state plans to borrow only what is necessary to speed New Jersey's pandemic recovery. "Our unemployment numbers and drop in revenue have both far outpaced the worst months of the Great Recession. So while we see this bill as an important step, our ultimate recovery will depend on a number of factors including additional federal aid and savings within state government," the governor said,
Introduced on July 10, the measure was fast tracked by legislative leaders and Murphy for two reasons: the urgency of plugging the budget shortfall to keep state government operating for the next fiscal year, and the threat of a pending lawsuit by the Republican State Committee, which contends the measure is unconstitutional and requires voter approval
On June 29 both chambers approved a temporary spending plan, or stopgap budget, to keep state government fully operational over the next 90 days from June 30 to Sept. 30 as they work towards a new fiscal year budget. Tax coffers were dramatically impacted by the governor's public health emergency declaration on March 9 and subsequent executive orders that virtually shut down all work offices and businesses due to COVID-19.
Senate President Steve Sweeney, D-Gloucester, said earlier in the week—in an effort to marshal support for S-2697 during the Senate Budget Appropriations Committee hearing on Tuesday—that even if the $9.9 borrowing bill passes both houses Thursday, which it did, that he still expected a lawsuit to be filed. Sweeney said the state couldn't afford to wait through months of litigation to get the needed funds given the enormity of the fiscal crisis.
The lawsuit came Thursday afternoon.
Days earlier it was Sweeney who announced in a release that he, the governor and Assembly Speaker Craig Coughlin, D-Middlesex, had reached an agreement on legislation to authorize the state to borrow in amounts up to $9.9 billion to address the financial crisis created by the coronavirus outbreak.
But there's a key caveat. Sweeney said every borrowing request needed the approval of a legislative commission comprised of him, Senate Budget Committee Chairman Paul Sarlo, D-Bergen, and two members of the Assembly who are yet to be selected by the Speaker, to move forward.
That four-person panel, called the Select Commission on Emergency COVID-19 Borrowing, would have to approve each request to borrow with a majority vote.
Despite the commission's check on spending, Republicans called the bill premature and excessive. At Thursday's voting sessions they took turns grilling the respective budget chair in each house, asking how the money would get repaid, alleging taxpayers would be on the hook for decades to come, and claiming by its sheer size the bill would push the state off a fiscal cliff.
Sen. Michael Testa, R-Cape May, a partner at Testa Heck Testa & White in Vineland, said approval of the bill was akin to "allowing Gov. Murphy to give a giant middle finger to taxpayers of this state." Testa's firm is representing the Republican State Committee and other plaintiffs in the lawsuit.
Meanwhile, Assemblywoman Serena DiMaso, R-Monmouth, the deputy Republican whip, urged Assembly Budget Chair Eliana Pintor Marin, D-Essex, the primary sponsor of A-4175, to provide records of Murphy's recent deals—with the Communications Workers of America over revised furlough and layoff rules and cost-of-living adjustments announced last month, and with New Jersey Education Association over teacher health benefits reached in early March.
"I want to know how those deals affected the budget that we're looking at now," DiMaso said during floor debate. "I can't support this bill."
But despite the Republican protests, the bill ultimately prevailed by sizable majorities in both houses. All 25 Republicans in the 80-member Assembly voted no, but only one Democrat broke ranks, resulting in the 46-26 tally to pass it.
Like clockwork, an hour after the Assembly cleared out, Doug Steinhardt, a partner at Florio Perrucci Steinhardt Cappelli Tipton & Taylor, who is also chairman and general counsel to the New Jersey Republican State Committee, sent out this Tweet:
"Today, at about 4 pm, the @NJGOP, represented by @senatortesta & his law firm, joined w/ Senate & Assembly Republican leadership & hard working #NJ families & sued @GovMurphy to stop his ill-advised and unconstitutional borrowing. We will take back our State. #NJGOP #LeadRight"
The 30-page Republican complaint was filed in Mercer County Superior Court, Law Division, under docket number MER-L-1263-20.
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