Murphy looking to borrow billions as N.J. tax revenues plummet during coronavirus crisis

Gov. Phil Murphy said Thursday that New Jersey could borrow as much as $9 billion from the U.S. Federal Reserve to plug craters in state revenues caused by statewide business closures, stay-at-home orders and record unemployment during the coronavirus pandemic.

Murphy said there’s no doubt the state budget will need to find new sources of cash, and he lacks confidence the federal government will come through with enough to put the state back on its feet.

Given that uncertainty, he said Thursday during his daily coronavirus press briefing, the opportunity to participate in the central bank’s plan to buy $500 billion in bonds from states and local governments is an “essential tool to have in the tool kit.”

Murphy did not say how much he was looking to borrow but that the state would be capped at $9 billion, based on the parameters of the Federal Reserve’s unprecedented buyout program.

“We don’t take any of this lightly,” he said. “But the fact of the matter is we are going to have serious cash flow challenges.”

If not, he said, “folks should assume we’re going to have to gut programs. And that will affect everybody in this entire state. There’s just no other way around it, and I hope it doesn’t come to that.”

“If we want to both address our cash flow challenges as well as keep our best public schools in the country, keep out full ranks of public responders, all of the services, all of that would be in jeopardy if we don’t find the capital," he said.

Murphy has said tax collections are crashing in response to the coronavirus, though his administration has not provided any updated analysis or projections. Bracing for shortfalls, last month he froze $920 million in discretionary spending, and he’ll likely have to tear up the $40.9 billion proposed budget he introduced in February.

Cash from the federal government would go a long way to keeping the state solvent, Murphy said.

“I’m hoping for the best but I gotta prepare for the worst,” he added.

Bloomberg reported Wednesday that Murphy was looking to sell bonds backed by property and sales tax revenue for the current and coming fiscal years.

In a ratings report this week, Moody’s Investors service lowered the state’s outlook to “negative” and warned “significantly reduced liquidity levels" and increased cash-flow borrowing could spur a credit downgrade.

Samantha Marcus may be reached at smarcus@njadvancemedia.com. Follow her on Twitter @samanthamarcus.

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