N.J. Republican State Comm. v. Murphy

Decision Date12 August 2020
Docket NumberA-82 September Term 2019,084731
Parties NEW JERSEY REPUBLICAN STATE COMMITTEE a/k/a the NJGOP; Declan O'Scanlon ; Hal Wirths; Lisa Natale-Contessa; and Ileana Schirmer, Plaintiffs, v. Philip D. MURPHY, in his official capacity as Governor of New Jersey, Defendant.
CourtNew Jersey Supreme Court

Michael L. Testa, Jr., Vineland, argued the cause for plaintiffs (Testa Heck Testa & White, attorneys; Michael L. Testa, Jr., Justin R. White, and Anthony M. Imbesi, Vineland, of counsel and on the briefs, and Mark D. Sheridan, Jason F. King, and James K. Webber, Jr., Whippany (Squire Patton Boggs and Webber McGill), on the reply brief).

Jean P. Reilly, Assistant Attorney General, argued the cause for defendant (Gurbir S. Grewal, Attorney General, attorney; Jean P. Reilly, of counsel and on the briefs, and Jamie M. Zug, Eric L. Apar, Eileen W. Siegeltuch, Victoria G. Nilsson, and Susan J. Wilkerson, Deputy Attorneys General, on the briefs).

Mark D. Sheridan, Newark, argued the cause for amici curiae Jack M. Ciattarelli and Assemblyman James K. Webber, Jr. (Squire Patton Boggs and Webber McGill, attorneys; Mark D. Sheridan, Jason F. King, and James K. Webber, Jr., Whippany, of counsel and on the brief).

Seth Grossman submitted a brief on behalf of amici curiae Liberty and Prosperity 1776, Inc., and Michael E. Smith.

CHIEF JUSTICE RABNER delivered the opinion of the Court.

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. Because the issue is vitally important and must be resolved quickly, we directly certified the matter for the Court's prompt review.

I. Introduction

The impact of the COVID-19 pandemic has been felt in many ways. The human toll is staggering. Millions worldwide have contracted the virus, and hundreds of thousands have passed away from it. Our nation and State have been particularly hard hit by the pandemic. New Jersey has the second highest number of COVID-19 deaths in the nation, and the eighth highest number of cases. Altogether, up until now, more than 185,000 New Jerseyans have fallen ill from the virus, and an estimated 15,800 have died.

The economic fallout has been enormous as well. In a matter of months, countless businesses have shuttered and millions of people have lost their jobs, resulting in immense personal and professional hardships. About 1.4 million New Jersey residents filed for unemployment benefits from mid-March to mid-July.

Tax revenues have also plummeted. Unlike in the federal system, our State Constitution requires the Governor and Legislature to adopt a balanced budget every year. See N.J. Const. art. VIII, § 2, ¶ 2. To make up for the 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 before the Court is whether the borrowing scheme violates the New Jersey Constitution.

Basic principles about the State's fiscal affairs are set out in Article VIII, Section 2 of the Constitution. That section includes two key clauses that relate to the State's appropriations and creation of debt in any fiscal year.

The Appropriations Clause requires that "one general appropriation law covering one and the same fiscal year" be adopted. N.J. Const. art. VIII, § 2, ¶ 2. The Clause also calls for a balanced budget each year. Ibid. Under Lance v. McGreevey, proceeds from contract bonds cannot be counted as revenue in balancing the budget. 180 N.J. 590, 593, 853 A.2d 856 (2004).

The Debt Limitation Clause, as its name suggests, imposes limits on incurring debt. N.J. Const. art. VIII, § 2, ¶ 3. The Clause bars the State from creating debt that exceeds one percent of the total amount appropriated in the general appropriations law without voter approval. Id. ¶ 3(a). The Clause, however, provides an exception for any debts or liabilities created "to meet an emergency caused by disaster." Id. ¶ 3(e). For short, we refer to that language as the "Emergency Exception." It is central to the outcome of this case.

Like so much else brought on by COVID-19, the legal issue before the Court is unprecedented. The above passage first appeared in the Constitution of 1947 and has not previously been considered by the courts. As discussed in more detail below, the record of the 1947 Constitutional Convention reveals how the nation's recent experience with the Great Depression influenced the Convention -- and, in particular, the Framers’ decision to amend the Constitution to allow for greater flexibility to respond to emergencies.

The language of the Emergency Exception requires us to address several issues: (1) whether COVID-19 qualifies as a "disaster," and, if so, the nature of the emergency it has caused; (2) what type of borrowing "meet[s] an emergency caused by disaster"; and (3) the interplay between the Emergency Exception and the fiscal clauses of the Constitution.

The first issue is straightforward. Laypeople, scientists, and legal scholars alike would agree that COVID-19 is a true disaster with widespread consequences. The pandemic has caused a health emergency, a broad-based economic one that has devastated many individuals and families, and a fiscal crisis for the State. The present "emergency caused by disaster" extends to all three areas.

Second, the State is permitted to incur debt and borrow money "to meet" the emergency. At a minimum, any borrowing under the Act must relate to or provide for the pending emergency. We defer to the Legislature as to which programs will best respond to the pandemic, provided the choices do not run afoul of the Constitution. That said, not every act of borrowing would "meet" the emergency caused by the pandemic, as noted below.

Further, the Bond Act uses only general language to state its purpose. The law authorizes borrowing "to respond to the fiscal exigencies caused by the COVID-19 Pandemic and to maintain and preserve the fiscal integrity of the State." Bond Act, § 2(ll). The Act thus links permissible borrowing to the State's fiscal exigency -- the shortfall in revenue caused by the pandemic -- but does not specify particular types of relief efforts or programs. Whether borrowing meets the emergency therefore depends on what the fiscal exigency or revenue shortfall actually is.

The Legislature acted on the best information available to it when, on July 16, 2020, it adopted a law that called for up to $9.9 billion in borrowing. The amount reflected current projections around that time. But those projections are likely to continue to change in the weeks and months ahead, as the State Treasurer acknowledges.

To avoid borrowing in excess of what the law allows, and to be faithful to the Emergency Exception, we require that the Governor or the Treasurer certify the State's projected revenue figures and the shortfall resulting from the COVID-19 pandemic before each tranche of borrowing.

The State may not borrow more than the amount certified, and not more than $9.9 billion in total. In other words, if, at the time the State seeks to borrow money or issue bonds, the Governor or the Treasurer certifies that the shortfall resulting from the pandemic is estimated to be $7 billion, the State cannot borrow more than that amount.

Finally, we read the Emergency Exception in light of the purpose of the fiscal clauses of the Constitution, considered as a whole, and the Framers’ intent. By doing so, we avoid absurd outcomes that would, for example, allow the State to borrow funds to meet an emergency but not be able to spend them. We also give meaning to the underlying purpose of the relevant clauses: to impose discipline on the State's fiscal practices and provide flexibility to respond to emergencies caused by disaster.

We therefore conclude that the Act is valid under the Debt Limitation Clause and that the Appropriations Clause does not bar the new law. Subject to certain limits we impose, the Bond Act does not violate the Constitution.

II. Facts and Procedural History
A.

COVID-19 is a contagious disease caused by a new type of coronavirus.1 The virus, first identified in an outbreak in Wuhan, China in December 2019, has since spread around the globe. The Governor declared a public health emergency and state of emergency on March 9, 2020. The World Health Organization declared the outbreak a pandemic on March 11, 2020. The President proclaimed the pandemic a national emergency on March 13, 2020. At this time, there is no vaccine or cure for the virus.

COVID-19 has taken an enormous toll. There are more than 20.1 million confirmed cases worldwide and more than 5.1 million in the United States.2 737,520 people have lost their lives -- 163,681 of them in the United States. New Jersey has been hit particularly hard, with 185,031 confirmed cases and 15,878 deaths. Our State ranks second in the nation in COVID-19 deaths and eighth in the number of cases.3

The virus has also triggered staggering economic consequences for the nation and the State. As states and cities imposed restrictions to slow the spread of the virus, business closures led to mass layoffs and furloughs. Gross Domestic Product fell 32.9% on an annualized basis during the second quarter of this year, marking one of the steepest declines...

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