Top state treasury officials plan to meet on Friday to decide whether to formally repay some of New Jersey’s significant debt, debt that has risen after a series of emergency borrowing l year in the midst of the coronavirus pandemic.
Few details were made public about Friday’s meeting, but the agenda lists “authorization to write off certain general state obligations in circulation,” according to the notice, which was posted online by the ‘Office of Public Finances.
The meeting comes months after Gov. Phil Murphy and his fellow Democrats who control the Legislature decided to set aside billions of dollars in a new fund set up specifically to fight state debt.
It also comes nearly a year after Murphy and lawmakers borrowed without voter approval to help support a state budget they believed was wiped out by the pandemic.
Tax revenues to the rescue
Instead, New Jersey benefited from an increase in tax revenue that helped generate a budget surplus of more than $ 10 billion.
Treasury Department officials declined to identify specific bond issues that could be considered for defeasance or setting aside money to repay debt, at Friday’s meeting, which is scheduled for 1 p.m.
According to the notice, the meeting’s agenda will also include a discussion of tax compliance procedures for two recent general bond issues that have raised funds to improve school and library facilities. General obligations are backed by the “full faith and credit” of the state, the safest pledge of repayment.
Members of the public can only attend Friday’s public meeting remotely, according to the notice. Those who wish to do so must dial 1-888-204-5984, then enter the access code 7735595.
Those wishing to comment at the public meeting should also notify the Public Finance Office at least 24 hours before the meeting, by sending an email message to [email protected] Public comments will be limited to two minutes, according to the notice. Written comments can also be submitted to the same email address.
How big is the bond debt?
The state’s grand total bond debt was just over $ 44 billion at the start of the year, when the Treasury released the state’s most recent official report on what New Jersey owes everyone. its bondholders.
This sum is almost as large as the last annual state budget. It places New Jersey fourth among states in the tax-financed gross debt category, according to the Treasury report.
Last year, Murphy and lawmakers added to the state’s debt burden when they borrowed nearly $ 4 billion without voter approval, as they predicted significant revenue losses would be triggered by the pandemic.
These controversial COVID-19 bonds have been structured to prevent early repayment. This means that, although the projected revenue losses may never materialize in full, New Jersey taxpayers remain responsible for reimbursing all of the principal and interest costs related to the pandemic debt issue in the past. 2030s.
But with plenty of other debt issues still on New Jersey’s books – and with plenty of interest probably higher than the roughly 2% the state was billed for COVID-19 debt last year – the Treasury officials predicted that the state could generate significant, long-term. term savings by withdrawing other bonds earlier than expected. Those savings could total up to $ 500 million over the next 10 years, officials said.
Earlier this year, the state’s finances were bolstered by the emergence of a budget surplus of over $ 10 billion. In response, Murphy and lawmakers established, by law in late June, a $ 3.7 billion “Debt Relief and Debt Prevention Fund”.
An amount of $ 2.5 billion has been allocated to repay the existing bond debt. The remaining $ 1.2 billion has been set aside to fund planned capital investments on a pay-as-you-go basis to save on long-term borrowing costs.
Last month, Republicans who are currently in the minority in both houses of the Legislature criticized the Murphy administration for failing to act sooner to pay off some of the state’s high-interest bond debt. They argued that the delayed action was already costing taxpayers money.
But Treasury officials said work with consultants on identifying debt issues that are ripe for defeasance is on track. They also predicted that debt relief efforts would likely take months.