A debt refinancing plan projected to save nearly $100 million for the New Jersey Transportation Trust Fund won final approval from a key legislative watchdog on Monday.
Members of the Legislature’s Joint Budget Oversight Committee voted 6-0 to give Gov. Phil Murphy’s administration the authority to refinance more than $1 billion in existing trust fund debt over the next few months.
The planned return of two separate trust fund bond issues is the latest savings initiative by the administration amid ongoing efforts to eliminate New Jersey’s bond debt, which has ballooned to a record high for fiscal year 2021.
The Transportation Trust Fund, or TTF, is supported by constitutionally allocated state gas tax revenue, among other revenue sources, and is used to pay for repairs to roads, bridges and railroads throughout the state.
Another billion dollars in debt for retirement
Meanwhile, administration officials said during the meeting that they also expect to pay down $1 billion in national debt over the next few weeks with funds deposited last year into a multibillion-dollar account held outside the state budget. Murphy and lawmakers created it several years ago specifically to address New Jersey’s significant debt.
Last year, the same account was used to pay down just over $2 billion in bond debt, saving taxpayers about $600 million over the next decade, according to the Treasury Department.
There is no firm estimate yet of how much the administration’s latest effort to cancel the debt could save taxpayers, Treasury officials said. New Jersey’s most recent comprehensive financial audit, which was released last year, showed that bond debt had risen to a record $48.2 billion for the 2021 fiscal year. That amount matches the state’s annual budget of more than $50 billion.
New Jersey’s most recent comprehensive financial audit, which was released last year, showed that bond debt had risen to a record $48.2 billion for the 2021 fiscal year. That amount matches the state’s annual budget of more than $50 billion.
However, the state’s total debt rose to nearly $250 billion through fiscal year 2021 when non-bond obligations, such as pensions for retired state employees, are also included, according to the audit.
Off-budget deficit fund
To address concerns about the state’s significant debt, Murphy and his fellow Democrats, who control both houses of the Legislature, created the Off-Budget Debt Relief and Prevention Fund in 2021. A surge in revenue during the COVID-19 pandemic also allowed for an initial deposit of nearly $4 billion.
Last year, as revenues continued to rise, Murphy and lawmakers added another $5 billion to the fund. At the same time, they also approved using nearly $2 billion of those resources to fund School Development Authority projects on a pay-as-you-go basis instead of issuing new bonds. Another $1 billion was also authorized at that time to fund projects managed by the New Jersey Department of Transportation and Transit.
The transportation trust fund, which also acts as an “off-budget” account, is used to pay for transportation infrastructure projects across the state on both a pay-as-you-go basis and through revenue generated from periodic bond sales.
The latest reauthorization of the trust fund, which Murphy and lawmakers amended last year, allows a total of $16.6 billion to be spent through mid-2024.
In 2021, the Murphy administration refinanced nearly $1.5 billion in existing trust fund debt to save the fund an estimated $385 million.
The trust fund’s latest proposed debt refinancing effort is projected to save about $95 million, Treasury officials said during a meeting of the Joint Budget Oversight Committee on Monday. They also said that the refinancing is likely to take place sometime in March-April.
“It would be difficult for this committee in the role that we have to vote on this refi and not accept the $95 million to $100 million in savings,” said Sen. Paul Sarlo (D-Bergen), who serves as the committee’s co-chair, before he voted to approve the refinancing plan.
Still, even as he voted for the plan, Sen. Declan O’Scanlon (R-Monmouth) suggested the administration and most Democrats should act more aggressively to reduce the state’s bond debt.
After the meeting, Treasury spokeswoman Melinda Calienda told NJ Spotlight News that “reducing the high-cost debt is another example of the administration’s commitment to making fiscally responsible investments in New Jersey’s future.”