New Jersey Republican State Committee v. Murphy, 081220 NJSC, A-82-19

Docket NºA-82-19
Opinion JudgeRABNER CHIEF JUSTICE
Party NameNew 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.
AttorneyMichael L. Testa, Jr., argued the cause for plaintiffs (Testa Heck Testa & White, attorneys; Michael L. Testa, Jr., Justin R. White, and Anthony M. Imbesi, of counsel and on the briefs, and Mark D. Sheridan, Jason F. King, and James K. Webber, Jr. (Squire Patton Boggs and Webber McGill), on the r...
Judge PanelRABNER, C.J., writing for the Court. JUSTICES LaVECCHIA, ALBIN, PATTERSON, FERNANDEZ-VINA, SOLOMON, and TIMPONE join in CHIEF JUSTICE RABNER's opinion. JUSTICES LaVECCHIA, ALBIN, PATTERSON, FERNANDEZ-VINA, SOLOMON, and TIMPONE join in CHIEF JUSTICE RABNER's opinion.
Case DateAugust 12, 2020
CourtSupreme Court of New Jersey

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.

No. A-82-19

Supreme Court of New Jersey

August 12, 2020

Argued August 5, 2020

On direct certification by the Supreme Court from the Superior Court, Law Division, Mercer County.

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

RABNER, C.J., writing for 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.

To make up for the tax revenue 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 here is whether the borrowing scheme violates the State 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 (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) (the "Emergency Exception").

The language of the Emergency Exception requires the Court to address (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.

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. The Court defers 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.

Further, the Bond Act uses only general language to state its purpose. It 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. 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 when, on July 16, 2020, it adopted a law that called for up to $9.9 billion in borrowing. But those projections are likely to continue to change in the 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, the Court requires that the Governor or the Treasurer certify the State's projected revenue figures and the shortfall resulting from the 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.

The Court reads the Emergency Exception in light of the purpose of the fiscal clauses of the Constitution, considered as a whole, and the Framers' intent, thus avoiding absurd outcomes that would, for example, allow the State to borrow funds to meet an emergency but not be able to spend them. The Court also gives 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. The Court concludes that the Act is valid under the Debt Limitation Clause and that the Appropriations Clause does not bar the new law.

HELD: Subject to the limits imposed here by the Court, the Bond Act does not violate the Constitution.

Section II of the Court's opinion chronicles the human toll and economic consequences of the COVID-19 pandemic, as well as measures taken by the State in response to the crisis. (pp. 8-13) The Court then details the provisions of the Bond Act. (pp. 13-16) Before the Bond Act was enacted, the Office of Legal Services opined that the State could borrow, under the Emergency Exception, "for expenses directly addressing COVID-19" and "to replace certified, anticipated revenue" -- relating to FY2020 -- "that was never realized due to COVID-19," but not "to replace general revenue to support non-COVID-19 related spending in future budgets." (pp. 16-18) Plaintiffs filed a complaint on July 16, 2020, asserting that the Bond Act violated the Debt Limitation Clause, and the Court granted direct certification the next day, __N.J.__ (2020), because the issues raised are critical to both the budget process and the public and because the matter needs to be resolved with finality before the end of the fiscal year on September 30, 2020. (pp. 18-19)

Section III summarizes the arguments raised by the parties. (pp. 19-21)

Section IV of the Court's opinion sets forth principles of constitutional interpretation, including the strong presumption of validity that attaches to legislation and the need to avoid interpretations that render language in the Constitution superfluous or meaningless, or that lead to absurd results. In the end, the polestar of constitutional construction is always the intent and purpose of the particular provision. (pp. 21-24)

Section V of the opinion traces the relevant constitutional history relating to appropriations and debt limits. That history reveals the extent to which the Framers of the 1947 Constitution were influenced by the recent experience of the Great Depression and the need for the State to be able to respond to emergencies. (pp. 24-37)

Section VI examines the current Appropriations Clause, which calls for the State's finances to be conducted on the basis of a single fiscal year covered by a single balanced budget. The Clause does not contain an emergency exception. The Court interpreted the Clause in Lance when it considered whether the State could "rely on borrowed funds to balance its annual budget." 180 N.J. at 593. The Lance Court held that proceeds from contract bonds "do not constitute 'revenue' for purposes of . . . the Appropriations Clause[], and cannot be used to balance the annual budget." Ibid. The Court in Lance declined to consider plaintiffs' challenge under the Debt Limitation Clause -- noting the question raised had been resolved in Lonegan v. State

(Lonegan II), 176 N.J. 2 (2003) -- and had no other reason to consider that Clause or the Emergency Exception.

See 180 N.J. at 593. (pp. 37-39)

Section VII studies the current Debt Limitation Clause, which, as relevant here, requires voter approval for the State to incur debts that together exceed one percent of the general...

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