Pandemic Emergency Spending: $9.9B Bond Issue Upheld by New Jersey Supreme Court

Justices Solomon, Paterson, Fernandez-Vina, 

Timpone, Lavecchia, Rabner (C.J.), Albin

Many questions are presented about the role of courts in the pandemic emergency.  One of the great challenges is the catastrophic fall in state and local government revenue.  New Jersey's state Constitution of 1947, Article VIII, Section II,  requires a balanced budget but permits voter-approval of bond issues typically issued for major infrastructure projects. 

Faced with an apparent conflict between the balanced budget requirement and the `debt limitation' clause the Court concluded 

"The Framers did not intend for the Appropriations Clause to bar what the Debt Limitation Clause allows; their purpose was to enable the government to act to “meet an emergency caused by disaster.”"

 There is an exception in the `Debt Limitation Clause' for emergency and Acts of God.  State Supreme Court precedent suggested that without voter approval such funds could not be treated as revenue for the purpose of meeting the balanced budget requirement.  This is a familiar concept - borrowed money is not income for tax purposes.

The state faced a dilemma: it needed money soon and November was far away.  Further the State Supreme Court might reject the use of emergency bond funds for current revenues precipitating draconian cuts.  And such a threat might impair the marketability of the bonds.  So the Legislature's Democratic majority approved the bond issue knowing that it would be challenged.  The usual course of litigation did not promise a prompt answer.

Many questions are presented - a few are:

Is it proper for a high court to bypass the usual course of litigation, and arrogate to itself the power to decide on an expedited basis complex issues of great import?

How should lawmakers choose between voter approval by referendum and government mandated large scale borrowing?  Has the Court disenfranchised the voters?

How does a court resolve apparently inconsistent language in statutes and constitutions?

Elected leaders differ regarding the desirability of government spending, especially for education, health, and social welfare.  What role should a judge's own values play in passing on an emergency measure like this to sustain funding rather than cut expenses?

When legislators are divided by party should courts seek a middle ground? Was unanimity wise?

-  GWC

New Jersey Supreme Court upholds emergency bond issue in Republican State Committee vs. Governor Philip Murphy 

On July 16 a $9.9 billion pandemic emergency bond issue was approved by the Democratic majority of the Legislature and promptly signed by New Jersey's Democratic Governor Philip Murphy.  It was challenged immediately upon passage by the New Jersey Republican State Committee as lead plaintiff.  The GOP asserted that borrowed money is not income and therefore violates the balanced budget clause of the State's Constitution.  It was bolstered by a May 8 GOP-solicited opinion of the state's Office of Legislative Services that although an emergency bond issue need not be submitted for voter approval, its proceeds would not count as "revenue" to satisfy the state's constituional balanced budget clause.

In an unprecedented move the next day the state Supreme Court issued an Order removing the case from the Superior Court, ordered a teleconference that afternoon at 3:00, set a briefing schedule (including for amici) and set oral argument in Trenton for 10:00 AM August 5.  Seven days later Chief Justice Stuart Rabner issued a 62 page opinion for a unanimous court upholding the measure:

This appeal addresses whether the State’s plan to issue bonds and borrow funds from the federal government in response to the emergency caused by COVID-19, in an amount up to $9.9 billion, is constitutional. To make up for the tax revenue shortfall COVID-19 has created and to maintain the State’s fiscal integrity, the Legislature passed and the Governor signed into law a bill that authorizes the State to borrow up to $9.9 billion. Under the new law, the “New Jersey COVID-19 Emergency Bond Act” (Bond Act or Act), the State can issue bonds for private sale or borrow funds from the federal government. Up to $2.7 billion in borrowing can be used for the period from July 1, 2019 through September 30, 2020, and up to $7.2 billion for the period from October 1, 2020 through June 30, 2021. The law represents a policy choice made by the Legislative and Executive branches to address the current crisis. It is not for the Judiciary to assess the wisdom of that decision. The only question here is whether the borrowing scheme violates the State Constitution.