New Jersey, one of the states hardest hit by the coronavirus outbreak, would borrow up to $9.9 billion from sources that could include the U.S. Federal Reserve to deal with massive revenue losses from the economic shutdown, under an agreement announced on Friday between the governor and legislative leaders.
At a media briefing, Democratic Governor Phil Murphy said the state “is out of money” and that it needs the borrowing as well as an influx of federal dollars due to a budget shortfall through 2021 that he cautioned could reach $20 billion.
“Everybody recognizes the need for the borrowing, as painful as it is,” he said. “We know we don’t have a choice even with federal cash.”
The Fed’s municipal liquidity facility is an option for a significant portion of the borrowing, according to Murphy’s office. Illinois became the first state to tap the program with a $1.2 billion, one-year loan last month.
New Jersey Senate President Steve Sweeney, a Democrat, said the borrowing would address the financial crisis caused by the virus and would be overseen by a new legislative commission. A borrowing bill is expected to be taken up by the Senate next week and then move to the Assembly for a vote.
States, including New Jersey, have been pushing the U.S. Congress for unrestricted funding they could use to plug big budget holes caused by plummeting tax revenue.
U.S. House Speaker Nancy Pelosi on Thursday called for $1 trillion for state and local governments
To deal with its crisis, New Jersey extended the end date for its fiscal 2020 budget by three months to Sept. 30, 2020. Fitch Ratings in April downgraded New Jersey’s credit rating one notch to A-minus with a negative outlook, citing “significantly weakened finances.”
New Jersey has had 176,575 cases of the coronavirus, according to a Reuters tally, the fifth-highest of any U.S. state.