New Jersey officials announced Wednesday that the state plans to sell $2.5 billion of debt to fund school construction, with Gov. Jon Corzine’s administration to file legislation on the borrowing proposal in February.

A court mandate requires the state to fully fund school facility infrastructure projects in 31 special-needs areas called Abbott districts. The latest borrowing plan comes at a time when New Jersey is looking at ways to reduce its debt burden, with lawmakers and the administration pushing an initiative to require that all non-revenue debt be subject to voter approval. However, the Abbott laws do not require school construction debt to pass via referendum, and the $2.5 billion will be backed by dedicated income tax revenue.

Sen. Leonard Lance, R-Warren and Hunterdon, expressed his disappointment with the announcement during a Senate Budget and Appropriations Committee meeting on Wednesday and said New Jersey residents should weigh in on how the state should best fund school construction.

Lance and committee chairwoman Sen. Barbara Buono, D-Middlesex, raised the issue of selling $2.5 billion of bonds before a panel of administration officials including Corzine chief of staff Bradley Abelow, acting Treasurer David Rousseau, and state finance director Nancy Feldman.

“In litigation on this, the [state] Supreme Court permitted the schools construction borrowing, but it by no means said that we had to do it [without a referendum], and anybody who reads the decision otherwise is not reading it accurately,” Lance told the panel. “We could ask the people themselves whether they would approve $2.5 billion in additional borrowing for schools construction, and that is my considered judgement because this will add to our already overburdened indebtedness in this state. I’m very disappointed to see this and certainly, we as a committee, we will be asking the attorney general about it.”

On Tuesday, the attorney general’s office, on behalf of the administration, sent a letter to the New Jersey Supreme Court indicating the administration’s plan to issue $2.5 billion of debt to finance school construction. On Wednesday, the court heard oral arguments in a motion filed by the Educational Law Center that seeks to compel the state to explain how it will fully fund all Abbott districts.

Abelow said the court has been asking the administration for more than a year how the state plans on financing school infrastructure costs. The chief of staff stressed that if New Jersey does not borrow to meet the court mandate, the financing will need to come from general fund revenue.

“If we were not to issue debt, we would be back before the Legislature at the order of the court … and seek this amount of funding from the general fund, which again I suggest would be an extraordinary difficult task for this body to face,” he said.

While the New Jersey Schools Development Authority, which oversees school construction, has $1.7 billion of remaining bonding capacity, those funds have already been designated for projects within SDA’s portfolio. The authority does not have funds to finance future school infrastructure development, including 27 projects the authority deferred in April 2007 due to lack of funds.

In 2000, lawmakers authorized $8.6 billion of bonding for schools as part of the resolution of the Abbott litigation. The New Jersey Economic Development Authority sells school construction bonds on behalf of the SDA.

Wednesday’s budget committee meeting lasted nearly five hours as the senators questioned panel members on Corzine’s proposal to restructure debt. That initiative includes set toll increases that would back $37.6 billion of debt to pay down half of New Jersey’s $32 billion of outstanding debt, defease toll road debt, and help finance transportation infrastructure throughout the state. The governor has yet to file legislation on his debt restructuring proposal, and Sen. Buono said she called the meeting so the committee can begin to analyze the plan.


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