Come on, Governor Murphy, admit you were wrong to borrow billions | Notice
By Serena DiMaso
New Jersey’s revenue forecast continues to improve. It makes it even more ironic that Gov. Phil Murphy is still proud of strong investor demand in the bond market when he decided to accumulate government debt last year.
Murphy said investor confidence was a sign New Jersey is financially strong, even though the original reason for its borrowing was that the state was financially weak due to its forecast for earnings during the Depression.
As a result, Murphy proudly issued debt that the government did not need, and investors saw an opportunity. The only reason for the high demand from confident investors is that the borrower has good credit or it is foolish to be exploited for profit.
It’s no secret that New Jersey is one of the most indebted states in the country. This is one of the reasons the credit bureaus gave the state a negative financial outlook last year and downgraded the state’s credit rating a few weeks before the bonds were issued. Bad credit was certainly not the reason investors wanted to buy New Jersey debt.
Investors knew what Murphy didn’t: that state revenues would be much more profitable than predicted, and that there was a good opportunity to make a profit at taxpayer expense. This has turned out to be true and New Jersey’s income outlook continues to improve.
It was clear for months before Murphy borrowed the money that income was getting better and better. There was no reason to think the income trend would suddenly end. It was improving despite a second wave of COVID-19 cases. According to the Legislative Services Office, it was quite clear that Murphy’s low estimates were “significantly flawed.”
Instead of seeing revenues plummet to $ 30 billion, as Murphy predicted last summer, or $ 9.9 billion as his administration argued in the state’s Supreme Court in support of the borrowings, or the $ 4.3 billion finally certified before issuing bonds, New Jersey actually had a year surplus. Two tax hikes helped raise the cost of health care by a combined $ 513 million.
New Jersey is also expected to have a massive surplus this year – around $ 6.3 billion, and quite possibly more. The dirty secret is that the surplus is mostly made up of debt from bonds. Only about $ 2 billion of the currently forecast surplus comes from income growth. The amazing part is that Murphy’s proposed budget spends $ 4 billion more than budgeted revenue, and this deficit is funded by, you guessed it, the excess that is two-thirds of the debt!
Even if we wanted to pay off this bad deal sooner, we can’t. In fact, Murphy was unaware of the terms of the bond issue, according to Treasurer Elizabeth Muoio during a Senate budget hearing. Murphy said, and the Special Commission on COVID-19 Emergency Borrowing has been advised, that the borrowing must come from the municipal liquidity facility and that they will be paid off as quickly as possible to avoid adding debt. in the long run to one of the nation’s most indebted states per capita.
I don’t think it was the Monday morning quarterback to criticize Murphy’s decision to borrow as income rolls in and the state can’t afford more debt.
It’s like saying that Pete Carroll made the right choice to pass instead of giving the ball to Marshawn Lynch over the Super Bowl 48 goal line or that the Packers made the right decision to hit a basket while losing to the Buccaneers towards the end of the last NFC Championship game.
We all know those decisions were wrong when they were made and we all know those decisions turned out to be wrong. Borrowing was a bad decision when it happened, and it turned out to be a bad one.
At least some people, like the non-partisan Office of Legislative Services, a handful of Democratic lawmakers, can act like decent adults and admit that Murphy and his team made a mistake.
Only one other state in the country has borrowed, and not a single other state has decided to extend its fiscal year. New Jersey was an outlier because every other state knew what we all know now: those decisions were bad decisions.
However, Murphy and his administration stubbornly refuse to admit their mistake. They lie to everyone when they say it was the right decision and they always think it was the right decision. Unless Murphy thinks his administration’s income projections were correct and the OLS was wrong at the time, and the OLS turned out to be right, it takes some sort of stubborn arrogance to defend an obvious error in judgment.
Leaders change their minds and admit when they are wrong. Fools never will.
Republican MP Serena DiMaso represents the 13th Legislative District, which includes parts of Monmouth County. She is also a member of the Assembly’s Budget Committee.
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