At $215 billion, New Jersey’s debt is now 5 times the state’s total budget
New Jersey’s debt is set to increase over the next year, with up to $9.9 billion worth of borrowing due to COVID-19. This comes as Gov. Phil Murphy says he is still finalizing his new state budget, which is due by Aug. 25.
“I don’t have the number off the top of my head, but we’re one of the most indebted states in America relative to our [gross domestic product],” Murphy said on Tuesday.
Chris Emigholz of the New Jersey Business and Industry Association has gone through eight state budget cycles under former Gov. Chris Christie and Murphy when he was the budget director for the Senate Republicans. He says that New Jersey’s total debt is around $215 billion.
“That’s more than five times our state budget,” he says.
Emigholz says that of the $215 billion, about $45 billion is in bonds issued by the state, most for school construction and transportation projects.
“The bigger driver and the reason we’re at this fiscal cliff in indebtedness is the non-bonded debt is about $170 billion,” he says.
The biggest chunk of the debt is from pensions owed to police and firefighters, along with health insurance obligations to teachers and state workers.
The NJBIA has been warning the state about the fiscal cliff, pointing out that the debt has ballooned 382% from 2007-2017.
“We had two-plus years of dogged refinancing, being smart. I’m not patting ourselves on the back. We got elected for a stronger, fairer New Jersey. Also, a stronger, fairer state,” Murphy said.
Emigholz says, “I think you can probably point back to a lot of governors that let debt grow more than they should, let spending grow more than they should. There's a lot of people to blame on both parties and I don't think anyone deserves all the blame.”
With the governor preparing to borrow nearly $10 billion over the next 16 months to close a COVID-19 budget gap, all of the debt will need to be paid back.
“If they’re going to borrow $9.9 billion, the fullest amount, then it’s probably in the ballpark of $500-$700 million a year in debt service,” says Emigholz.
Emigholz says that the concern now is that eventually debt and pension obligations could take up as much as a third or half of the state’s total budget.
Murphy signed the borrowing authorization into law earlier this month. There is no word yet on when bond notes could be issued.