236 A.3d 898
N.J.2020Background
- COVID-19 produced a health crisis, massive job losses, and a multi‑billion dollar projected State revenue shortfall for FY2020–FY2021.
- The Legislature enacted the New Jersey COVID‑19 Emergency Bond Act authorizing up to $9.9 billion in borrowing (up to $2.7B through Sept. 30, 2020; up to $7.2B for the shortened FY2021), including general‑obligation bonds backed by the State.
- The Act creates a Select Commission to approve bond issuances, directs bond proceeds into a separate Emergency Fund, and pledges sales‑tax receipts (and, if necessary, other sources) for repayment.
- Plaintiffs challenged the Act as violating Article VIII, §2: the Appropriations Clause (balanced‑budget rule) and the Debt Limitation Clause (one‑percent cap and single‑object/voter‑approval requirements).
- The Supreme Court granted direct certification, considered whether COVID‑19 is a “disaster,” what borrowing may “meet” such an emergency, and how the Debt Limitation and Appropriations Clauses interact.
- Because revenue projections changed after the Act passed, the Court required the Governor or Treasurer to certify projected COVID‑19‑related revenue shortfalls before each tranche of borrowing and limited borrowing to the certified shortfall (not exceeding $9.9B total).
Issues
| Issue | Plaintiffs' Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does COVID‑19 qualify as a “disaster” under Art. VIII, §2 ¶3(e)? | COVID‑19 may be known now but does not justify circumventing constitutional limits. | COVID‑19 is a disaster that triggered an emergency justifying the exception. | COVID‑19 is a disaster; emergency extends to health, economic, and fiscal harms. |
| May the State borrow to replace lost revenue and fund operating expenses without violating the Appropriations Clause (balanced‑budget rule / Lance)? | Borrowed funds cannot be treated as revenue to balance the budget; Lance prohibits using bond proceeds to cover general operating expenses. | Emergency Exception permits borrowing to address pandemic‑related fiscal exigencies, including replacing lost revenue. | The Appropriations Clause does not bar borrowing under the Emergency Exception; Lance remains good law re: contract bonds but did not address the Emergency Exception. |
| Does the Bond Act violate the Debt Limitation Clause (one‑percent cap, single‑object, voter approval)? | The Act improperly authorizes broad, multi‑purpose borrowing that evades single‑object and voter‑approval limits. | The Emergency Exception allows borrowing to meet emergencies caused by disaster; the Act fits that exception. | The Act is valid under the Debt Limitation Clause because the COVID‑19 emergency falls within the exception; single‑object and voter‑approval requirements do not apply to emergency borrowing. |
| Are there constitutional limits on amount and use of borrowing under the Act? | The $9.9B cap lacks present justification; borrowing should be tightly constrained and not used for non‑pandemic projects. | The Legislature relied on Treasurer projections; broad discretion is appropriate to meet fiscal exigencies. | Borrowing must relate to the COVID‑19 fiscal exigency; before each tranche the Governor or Treasurer must publicly certify the projected pandemic‑related revenue shortfall, and borrowing is limited to the certified amount (and to $9.9B overall). Non‑emergency uses (e.g., a sports arena) would not qualify. |
Key Cases Cited
- Lance v. McGreevey, 180 N.J. 590 (N.J. 2004) (proceeds from contract bonds are not "revenue" for the Appropriations Clause and cannot be used to balance the annual budget)
- Lonegan v. State (Lonegan II), 176 N.J. 2 (N.J. 2003) (only debt legally enforceable against the State is subject to the Debt Limitation Clause)
- State v. Buckner, 223 N.J. 1 (N.J. 2015) (statutes are entitled to a strong presumption of validity)
- State v. Lunsford, 226 N.J. 129 (N.J. 2016) (courts must interpret the Constitution to effectuate its overriding purpose)
- Jamouneau v. Harner, 16 N.J. 500 (N.J. 1954) (contextual definition of "emergency" under emergency‑control statutes)