The Assembly Budget Committee voted on June 1 to permit the state to issue $5 billion in general obligation bonds as well as borrow from the federal government to balance the state budget.

The committee released A-4175 by a 9-4 vote. The bill would authorize the state to borrow up to $5 billion by selling bonds. It also authorizes the governor to apply for additional federal stimulus loans for the benefit of the state or local government units.

A-4175, also known as the New Jersey COVID-19 Emergency Bond Act, is scheduled to be considered by the full General Assembly on June 4. If passed, it will go to the state Senate where Senate President Steve Sweeney has been noncommittal on the proposal. The Senate Budget and Appropriations Committee also heard testimony from the treasurer on June 1. Without voting, committee members asked whether the state should  consider further budget cuts, or furloughing state workers, before borrowing money.

As reported last month, the state treasurer is anticipating a budget shortfall of close to $10 billion over the remainder of this fiscal year, which ends on Sept. 30, and the next, which ends June 30, 2021. The treasurer recommended several cuts to get the state through to Sept. 30, including canceling a planned $336 million increase in state aid for school districts.

However, these cuts represent only a fraction of the hole that needs to be filled. Gov. Murphy has suggested the state may need to borrow billions to help the state recover from the pandemic. A-4175 would give him the authority to borrow from both the federal government and the bond market.

The borrowing proposal allows for up to $5 billion in state general-obligation bonds to be issued. It also permits the state to borrow additional funds from the federal government, including on behalf of local governments. According the state treasurer, New Jersey would be eligible for approximately $9 billion, though she did not anticipate applying for the full amount. The bill gives the Murphy administration the authority to pay off the bonds over 35 years, according to a June 2 article in NJSpotlight.com. The loans from the federal government would be due in three years, though the state could refinance that debt through the bond market at that time.

Many, including Sweeney, the Office of Legislative Services and Republican lawmakers, have raised questions about the constitutionality of balancing the state budget through bonding debt without voter approval. In fact, bonding to balance the state budget had previously been declared unconstitutional during the McGreevey administration. However, advocates of Murphy’s plan believe the emergency nature of this bonding will allow it to pass constitutional muster.

Electronic Procurement In other legislative news, the Senate Community and Urban Affairs met last Wednesday and advanced the “Electronic Construction Procurement Act” (S-2085). Under the bill, all state contracting units would be required to use an electronic procurement process for public works construction contracts whenever such a project requires public advertisement. While the use of electronic procurement would be required for state agencies, the bill is permissive for school districts and other local governing units, such as counties and municipalities.

The electronic construction procurement process to be used by boards of education would be the process developed by the director of the Division of Local Government Services to implement a 2018 law known as “Local Unit Electronic Procurement Act.” That law permitted local units to use electronic procurement practices for the purchase of utility services, the sale of surplus property and any other purpose authorized by the local governing body. S-2085 explicitly extends authorization to use  electronic procurement for construction projects.

Importantly, if any local governing body chooses to use the electronic procurement process, the bill prohibits the unit from incurring any costs or fees related to its use, such as any cost or fee related to the use or purchase of any required equipment or software. Therefore, the legislation will not impose any costs on schools districts. In addition, official NJSBA policy holds to the belief that boards of education should be able to take advantage of electronic procurement technology and practices that result in streamlined purchasing procedures and more efficient use of taxpayer funds. Therefore, the NJSBA supports the bill, which may now be posted for a Senate floor vote.

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