Sponsored by:
Assemblyman ROY FREIMAN
District 16 (Hunterdon, Mercer, Middlesex and Somerset)
Assemblyman JOHN ARMATO
District 2 (Atlantic)
Assemblywoman ELIANA PINTOR MARIN
District 29 (Essex)
Assemblyman VINCENT MAZZEO
District 2 (Atlantic)
Assemblyman ERIC HOUGHTALING
District 11 (Monmouth)
Assemblyman CRAIG J. COUGHLIN
District 19 (Middlesex)
Senator PAUL A. SARLO
District 36 (Bergen and Passaic)
Senator STEPHEN M. SWEENEY
District 3 (Cumberland, Gloucester and Salem)
Senator DAWN MARIE ADDIEGO
District 8 (Atlantic, Burlington and Camden)
Co-Sponsored by:
Assemblyman Karabinchak, Assemblywomen Lopez, Downey, Swain, Assemblyman Tully, Senators Singleton, Lagana and Turner
SYNOPSIS
Establishes "New Jersey Debt Defeasance and Prevention Fund," appropriates $3.7 billion.
CURRENT VERSION OF TEXT
As introduced.
An Act establishing the "New Jersey Debt Defeasance and Prevention Fund," and making an appropriation.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. a. There is created within the General Fund a restricted reserve fund to be known as the "New Jersey Debt Defeasance and Prevention Fund." The "New Jersey Debt Defeasance and Prevention Fund" shall be credited with the amount appropriated to the fund pursuant to section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill) and such funds as the Legislature may, from time to time, appropriate for the purposes of the fund as enumerated in subsection b. of this section.
b. Balances in the "New Jersey Debt Defeasance and Prevention Fund" may be appropriated by the Legislature only for the purposes of: retiring and defeasing State debt, including general obligation bonds and appropriations-backed bonds, and the costs thereof; and funding capital projects on a pay-as-you-go basis rather than issuing additional State debt, including general obligation bonds or appropriations-backed bonds.
2. There shall be credited $3,700,000,000 from the General Fund to the "New Jersey Debt Defeasance and Prevention Fund," established pursuant to section 1 of P.L. , c. (C. ) (pending before the Legislature as this bill).
3. There is appropriated from the "New Jersey Debt Defeasance and Prevention Fund" $2,500,000,000 for the purpose of retiring and defeasing debts of the State of New Jersey, and the costs thereof, in such manner and at such times as the State Treasurer shall direct. If moneys are used for debt retirement or defeasance, the State Treasurer shall submit to the Joint Budget Oversight Committee a report describing the manner in which debt retirement and defeasance has been accomplished, including a description of amounts to be saved and an attestation that such savings have been maximized within a ten-year period.
4. There is appropriated from the "New Jersey Debt Defeasance and Prevention Fund" $1,200,000,000 for the purpose of funding capital construction projects for which State debt is already authorized by law, or for which funding would have been derived from future State bond issuances, thereby constituting debt avoidance, subject to the approval of the Director of the Division of Budget and Accounting. The State Treasurer shall submit a list of proposed capital projects to the Joint Budget Oversight Committee for approval. Within one business day of receipt of a list, the Joint Budget Oversight Committee shall schedule a meeting to consider the submitted items, which hearing shall be held within seven days of receipt of the list.
5. This act shall take effect immediately.
STATEMENT
This bill establishes the "New Jersey Debt Defeasance and Prevention Fund" for the purposes of: retiring and defeasing State debt, including general obligation bonds and appropriations-backed bonds, and the costs thereof; and funding capital projects on a pay-as-you-go basis rather than issuing additional State debt, including general obligation bonds or appropriations-backed bonds.
The bill requires a $3.7 billion credit from the General Fund to the "New Jersey Debt Defeasance and Prevention Fund," which is to be appropriated as follows: $2.5 billion for the purpose of retiring and defeasing State debt; and $1.2 billion for the purpose of funding certain capital construction projects.
The "New Jersey COVID-19 Emergency Bond Act," which was enacted in July 2020, authorized the State to borrow up to $9.9 billion to offset anticipated declines in State revenue resulting from the COVID-19 public health emergency. The State ultimately borrowed approximately $3.7 billion for this purpose.
The sponsor of this bill notes that, in light of better-than-anticipated revenue collections leading to an estimated $6 billion budget surplus at the close of Fiscal Year 2021, it is critical for the State to take advantage of its improved fiscal outlook to defease the debt it has incurred. The fund created by this bill may be used as part of a long-term strategy to lower the State's debt and may be a tool the State uses for the foreseeable future.