New Jersey lawmakers are working on legislation that would allow the state to meet its most pressing needs by tapping into $125 million of funds originally reserved to pay down long-term debt.
Gov. Jon Corzine carved out a $650 million long-term obligation and capital expenditure fund in the current fiscal 2009 budget, which began July 1, from surplus revenue. That fund is designed to pay down state appropriation and general obligation debt in an effort to decrease the state's annual debt service costs and help finance infrastructure needs.
New Jersey has roughly $32 billion of outstanding debt, including $2.8 billion of GO debt.
A softening economy and a rising home-foreclosure rate in New Jersey prompted the Corzine administration to use $125 million of the debt defeasance fund to help support urgent social services and boost business growth.
"The administration's proposal recognizes that extraordinary times demand extraordinary actions," Treasurer David Rousseau said in a statement. "Using a small portion of a special debt reduction reserve will allow the state to help families in crisis hold onto their homes, put food on their table, find employment, and meet other basic needs."
"At the same time, the fund will continue to fulfill its intended purpose, which is to help reduce the debt burden on the state budget," he added. "New Jersey is fortunate to have access to a resource that will go a long way toward reducing the debt burden of the state and alleviating the effects of the financial crisis on New Jersey families."
The $125 million would be used among four different programs. A $50 million main street business assistance program would offer loans to small businesses and also finance economic recovery fund bonds that will help support school construction projects.
In addition, officials designated $22.5 million for food banks, energy assistance and legal aid and another $12.5 million for mortgage counseling services and foreclosure mediation programs.
The Senate could weigh in on those three initiatives during its next formal voting session on Nov. 24, according to George LeBlanc, budget director for the Senate Democrats. The measures have already passed in the General Assembly.
A fourth program would allocate $40 million towards keeping homeowners who are at the brink of foreclosure in their homes and who meet income thresholds.
Of the $40 million, $25 million would be used for a mortgage stabilization fund to help finance troubled mortgages. Another $15 million would enable nonprofit organizations to buy properties from owners that are about to lose their homes. The nonprofit would then rent the house to the original homeowner for a period of up to three years with the expectation that the owner would buy the home back from the organization.
Senators could also take that initiative up for a formal vote on Nov. 24, though the measure has yet to move through the lower chamber.
By late August, the Treasury Department had identified a slew of GO and appropriation debt defeasance candidates, yet volatile market conditions forced the state to hold off on using the funds to pay down the bonds.