New Jersey details financial strains from coronavirus
New Jersey may be facing a more than $10 billion shortfall through the end of next fiscal year from the economic shockwave of the COVID-19 pandemic, according to State Treasurer Elizabeth Maher Muoio.
In a voluntary disclosure statement to bondholders Wednesday evening, the New Jersey Department of the Treasury detailed the financial toll of the health crisis on state revenues. All non-essential New Jersey businesses were closed on March 21 as part of the state’s effort to combat spread of the virus.
Muoio estimated in the bond document notice posted on the Municipal Securities Rulemaking Board’s EMMA system a $2.757 billion, or 7%, drop in 2020 fiscal year revenues compared to what was projected in Gov. Phil Murphy’s initial budget proposal, unveiled Feb. 25. Revenues for the 2021 fiscal year are forecast to fall $7.346 billion, or 17.8%, from the original budget proposal.
“Based on a wide variety of economic assumptions, the state of New Jersey may be looking at a combined $10.104 billion revenue shortfall over the remaining months of fiscal year 2020 through the end of fiscal year 2021,” Muoio said in a statement. “In order to address this unprecedented fiscal crisis, it will require extremely difficult decisions in the weeks and months ahead, which will necessitate a combination of critically needed borrowing, budget and appropriation adjustments, and more robust federal assistance.”
The latest revenue estimates were based on an assumption of there not being a resurgence of statewide COVID-19 cases later this year and didn’t factor in revenue raisers proposed in Murphy’s $40.9 billion 2021 budget plan, such as a millionaire’s tax that would net the state around $500 million.
Murphy and state lawmakers extended the 2020 fiscal year by three months to Sept. 30 to account for COVID-19-related revenue losses and liquidity challenges from a later tax-filing deadline of July 15. The final state budget is expected to differ greatly from the original spending plan to factor in revised revenue estimates and a nine-month fiscal year. The Murphy administration is scheduled release an updated budget report to the state legislature on May 22.
Murphy has also proposed legislation to authorize up to $9.2 billion of borrowing under the Federal Reserve's Municipal Lending Facility that will directly purchase up to $500 billion in short-term debt. The Democrat governor also froze $920 million in spending appropriations last month in anticipation of looming economic obstacles.
New Jersey was downgraded one notch by Fitch Ratings on April 21 to A-minus from A, due largely to low reserve levels. The Garden State’s general obligation bonds are rated A3 by Moody's Investors Service, A-minus by S&P Global Ratings and A by Kroll Bond Rating Agency. S&P and Moody's both revised the state's outlook to negative from stable in April.