New Jersey Gov. Jon Corzine, along with state and local officials, yesterday touted legislation that would allow $2.5 billion of borrowing for school construction, with a portion of the state's income tax receipts backing the proposed bonding.
Assembly members Albert Coutinho and Grace Spencer, both Democrats, last week filed a bill that would allow the New Jersey Development Authority, which sells debt on behalf of the New Jersey Schools Development Authority, to increase its borrowing capacity for school infrastructure by $2.5 billion. The borrowing would allow the Corzine administration to meet a court mandate requiring the state to allocate additional funds for school construction projects in 31 special districts called Abbott districts.
The governor, also a Democrat, plans to borrow that amount, yet critics say the state should finance school development on a pay-as-you-go basis or place the borrowing plan on the November ballot for voter approval.
After visiting the Oliver Street Elementary School in downtown Newark, a school that was built in 1873 and last underwent renovations in 1922, the governor addressed questions from reporters regarding his plan to borrow the $2.5 billion. Corzine stressed that making annual cash appropriations for school infrastructure, as opposed to borrowing the money, would put stress on the state's already tight budget. Lawmakers are currently working on a $33.5 billion budget for fiscal 2009, which begins July 1, a plan that includes $3.2 billion of cuts to bring expenditures in line with revenues.
"Pay-as-you-go is only going to require that you have to cut expenditures from some place else if you're going to limit what your spending is," Corzine said. "We may very well have to move into that kind of proposal if this is forced onto a ballot and voters turn it down. And then it will be a choice of whether we raise taxes or crowd out something else in the budget which will be very, very hard for the public to understand when it's their program."
Sen. Leonard Lance, R-Warren and Hunterdon, the GOP's senate budget officer, said he prefers that the state evaluate financing school construction through annual appropriations, rather than selling bonds. In addition, the Republican Senator is the co-sponsor with Sen. Raymond Lesniak, D-Union, on a measure that would require that all state borrowing that does not have a dedicated revenue stream, be placed in a referendum.
"I believe that the school construction bond issue should go to the people for their approval," Lance told The Bond Buyer. "I don't want to issue any more debt without voter approval."
Yet Corzine yesterday said that while he is in favor of reducing the state's bonding overall and decreasing the state's dependency on borrowing, it is the best way meet the court's order to fund school construction and fill immediate infrastructure needs. The $2.5 billion raised by borrowing would complete 27 deferred projects and take on another 20 new projects to their full completion, he said. Meanwhile, New Jersey has $32 billion of outstanding debt and debt service costs will take up 8% of the fiscal 2009 budget.
In addition, the governor said the proposed bonding is just a portion of what the Garden State needs overall to upgrade aging school buildings, with the administration pegging those costs between $12 billion to $20 billion. Heading to the municipal bond market would also generate immediate funds to help spur the state's economy, with construction jobs benefiting from the potential $2.5 billion issuance.
"We're taking a small step; it's incremental," Corzine said. "There's estimates anywhere from $12 billion to $20 billion of queued up projects. We're talking about $2.5 billion. We need to get started and it is extremely important to get started at a time of economic recession. We're seeing our unemployment rise, the construction industry is on its back."