New Jersey Republican State Committee v. Philip D. Murphy (084731)(Mercer County and Statewide) ( 2020 )

SYLLABUS
This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the
Clerk for the convenience of the reader. It has been neither reviewed nor approved by the
Court. In the interest of brevity, portions of an opinion may not have been summarized.
New Jersey Republican State Committee v. Philip D. Murphy
(A-82-19) (084731)
Argued August 5, 2020 -- Decided August 12, 2020
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”).
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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.
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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 appropriation for the fiscal year -- except for debts created “to meet an emergency
caused by disaster.” The Constitution does not define “emergency” or “disaster,” and no
case law has addressed the meaning of the Emergency Exception or its interplay with the
Appropriations Clause. In Lonegan II, the Court held that “only debt that is legally
enforceable against the State is subject to the Debt Limitation Clause.” 176 N.J. at 13.
Because contract bonds are not backed by the full faith and credit of the State and are subject
3
to future legislative appropriations, they are not legally enforceable against the State and, as a
result, do not violate the Debt Limitation Clause. Id. at 14-15, 21. Lonegan II did not
address possible tensions between the Appropriations and Debt Limitation Clauses.
(pp. 39-43)
Section VIII addresses several issues that the Bond Act presents: (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. (pp. 43-56)
(1) Here, the parties agree that the COVID-19 pandemic is a disaster within the
meaning of the exception. Whatever else the Emergency Exception may encompass, it
includes a rare, once-in-a-century, infectious disease of the magnitude of COVID-19, which
has caused a health emergency, a broad-based economic one that has left individuals and
families struggling, and a fiscal crisis for the State. The nature of the “emergency” extends
to all three. Any debate over whether the disaster and its effects are foreseen or unforeseen
at this point misses the mark. The distinction does not appear in the text of the Emergency
Exception and is illogical when it comes to a continuing emergency. (pp. 44-46)
(2) The second component of the Emergency Exception -- that borrowing must “meet
an emergency” -- begs the question as to what type of borrowing is permitted. The Court
considers the definition of “meet” and discerns that, at a minimum, incurring debt to meet an
emergency caused by disaster means that borrowing must relate to or provide for that
emergency. The Bond Act authorizes borrowing “[1] to respond to the fiscal exigencies
caused by the COVID-19 Pandemic and [2] to maintain and preserve the fiscal integrity of
the State.” Bond Act, § 2(ll). The Court does not read those phrases as separate, stand-alone
justifications for borrowing under the Emergency Exception. If borrowing were done solely
to maintain the State’s fiscal integrity, untethered to the effects of the pandemic, it would not
satisfy the exception. Both clauses must relate to the effects of COVID-19. In this case,
borrowing “to meet an emergency” raises two issues: the type of borrowing and spending,
and the overall amount of borrowing. (pp. 46-47)
Here, borrowing may be allowed to meet all three aspects of the current emergency.
Debt can be incurred to provide not only for masks, respirators, and field hospitals, and for
direct aid to individuals and families afflicted by the disease, but also for the impact on the
public fisc caused by COVID-19. For example, the State may borrow to provide for public
services like education, police, fire, first aid, child welfare, and prisons -- to secure the
continued functioning of government. In other words, because the collapse in revenue
brought on by the pandemic affects the State’s ability to provide for direct aid and other
government services, the Emergency Exception permits the State to borrow in order to meet
them. But not every act of borrowing would “meet” the current emergency. Borrowing for
programs unrelated to the emergency, such as the subsidization of a new sports arena, would
not satisfy the language of the exception or the Act. To incur debt for such a project would
require additional legislation that might well need voter approval. The above examples are
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illustrative only. Questions about which projects best respond to the pandemic are for the
Legislature and the people to decide, subject only to constitutional bounds. (pp. 47-50)
Because of how the Bond Act was drafted, this case presents an additional issue:
whether the overall amount of borrowing meets the current emergency. The Act caps the
total amount of borrowing at $9.9 billion. That amount matches the projected revenue
shortfall the State Treasurer reported on May 22, 2020 -- an estimate that has been reduced
and is expected to continue to fluctuate. To avoid borrowing in excess of what the law
allows, and to be faithful to the Emergency Exception, the State cannot issue bonds or
borrow funds beyond the actual fiscal exigency caused by the pandemic. In order to satisfy
those concerns, it will be necessary for the Governor or the Treasurer to certify publicly the
State’s projected revenue and consequent shortfall “as a result of the COVID-19 pandemic”
before each tranche of borrowing. What this means in practice is that, even though the Bond
Act allows for borrowing of up to $9.9 billion, if the Governor or the Treasurer were to
certify that the fiscal shortfall due to COVID-19 was $7 billion, then the State could borrow
only up to that amount at the time. (pp. 50-52)
The Bond Act’s generic language, which is linked to the State’s fiscal shortfall, calls
for this added level of protection. Had the Act instead specified particular efforts to meet the
emergency, there would be no need for the additional periodic certifications that the Court
requires. The Court encourages greater specificity for laws issued under the Emergency
Exception and for how borrowed money will be spent. (pp. 52-53)
(3) Applying the principles of constitutional interpretation noted above, the Court
concludes that the Appropriations Clause does not stand in the way of borrowing for
appropriate purposes under the Emergency Exception. A contrary reading would lead to a
situation in which the State could borrow funds to meet an emergency but not be able to
spend them. And the history of the 1947 Constitutional Convention revealed the Framers
had dual concerns: to impose discipline on the State’s fiscal practices and, at the same time,
provide flexibility to respond to emergencies caused by disaster. Read in tandem, and in
light of the Framers’ intent, the fiscal clauses allow the State to borrow and spend for that
particular purpose and do not pose a bar to the Bond Act. The Court notes that its decision
does not overrule the holding in Lance, which did not consider the Debt Limitation Clause,
the Emergency Exception, or their interplay with the Appropriations Clause. (pp. 53-56)
Section IX concludes that the Bond Act is constitutional, subject to the limiting
principles set forth in the opinion. (pp. 56-57)
JUSTICES LaVECCHIA, ALBIN, PATTERSON, FERNANDEZ-VINA, SOLOMON,
and TIMPONE join in CHIEF JUSTICE RABNER’s opinion.
5
SUPREME COURT OF NEW JERSEY
A-82 September Term 2019
084731
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.
On direct certification by the Supreme Court from
the Superior Court,
Law Division, Mercer County .
Argued Decided
August 5, 2020 August 12, 2020
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
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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.
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
2
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
3
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 (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 appropriat ed 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
4
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
5
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.
6
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.
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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
1
World Health Org., “Q&A on coronaviruses (COVID-19)” (Apr. 17, 2020),
https://www.who.int/emergencies/diseases/novel-coronavirus-2019/question-
and-answers-hub/q-a-detail/q-a-coronaviruses.
2
Except where otherwise noted, the data in this paragraph comes from the
Johns Hopkins University of Medicine, Coronavirus Resource Center , and is
current as of August 11, 2020. The data can be found at
https://coronavirus.jhu.edu/.
8
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 in the country’s history. 4
The nation’s unemployment rate rose from 3.5% in February 2020 to 14.7% in
mid-April.5 In May, the number of people seeking unemployment benefits
peaked at nearly 25 million nationwide. 6 By June, New Jersey’s
3
CDC COVID Data Tracker, “United States COVID-19 Cases and Deaths by
State,” https://www.cdc.gov/covid-data-tracker/#cases (last visited Aug. 11, 2020).
4
Ben Casselman, “A Collapse That Wiped Out 5 Years of Growth, With No
Bounce in Sight,” N.Y. Times (July 30, 2020); Fed. Reserve Bank of St. Louis,
“Real Gross Domestic Product,” https://fred.stlouisfed.org/series/GDPC1#0.
5
Fed. Reserve Bank of St. Louis, “Unemployment Rate,”
https://fred.stlouisfed.org/series/UNRATE (compiling data from the U.S. Bureau
of Labor Statistics).
6
Id., “Continued Claims,” https://fred.stlouisfed.org/series/CCSA.
9
unemployment rate had reached 16.6%.7 Nearly 1.4 million New Jersey
residents filed unemployment claims between mid-March and mid-July.8 Even
as workers returned to their jobs, the number of continuing claims remained
close to 500,000 in mid-July.9
In response to the crisis, Governor Philip D. Murphy issued a series of
Executive Orders, including stay-at-home orders and directives that closed
non-essential retail businesses. 10 On April 14, 2020, the State enacted the
COVID-19 Fiscal Mitigation Act, which extended Fiscal Year 2020 (FY2020)
through September 30, 2020,11 and required the State Treasurer to prepare a
7
Dep’t of Labor & Workforce Dev., Press Release: “Challenges Remain as New
Jersey Employment Continues Rebound in June,” (July 16, 2020),
https://nj.gov/labor/lpa/pub/emppress/pressrelease/prelease.pdf.
8
Id., Press Release: “NJ Labor Dept. Has Distributed $10.7B in Unemployment
Benefits Since Start of Pandemic” (July 16, 2020), https://www.nj.gov/labor/
lwdhome/press/2020/20200716_paymentsupdate.shtml.
9
Certification of Lesley Hirsch, ¶ 17 (July 31, 2020).
10
See, e.g., Exec. Order No. 104 (EO 104) (Mar. 16, 2020) and EO 107 (Mar.
21, 2020).
11
L. 2020, c. 19, § 3. The fiscal year traditionally runs from July 1 to June
30. In ordinary times, “FY2020,” for example, would run from July 1, 2019
through June 30, 2020. At the outset of the fiscal year, Governors certify the
amount of revenue from taxes, fees, and other sources, which they reasonably
anticipate will be available to spend, consistent with the Appropriations
Clause.
10
report on the State’s financial condition for FY2020 and FY2021. 12 The
report, submitted on May 22, 2020, states that New Jersey potentially faces “a
combined revenue shortfall of nearly $10 billion” for the remaining months of
FY2020 and through the end of FY2021. 13 The report projected that budget
revenues will be $2.7 billion lower than previously forecast for FY2020, and
$7.2 billion lower for FY2021. 14
By June, the estimates improved slightly to a $2.3 billion shortfall for
FY2020 and a $6.9 billion shortfall for FY2021.15 Revenue trends through
July suggested higher overall revenue than predicted on May 22 and June 30. 16
The State Treasurer also noted that “the revenue forecast will most certainly
change in the coming weeks and months as actual collections data are
tabulated and as state specific economic impacts of the pandemic begin to
12
L. 2020, c. 19, § 5. The shortened FY2021 will begin on October 1, 2020 and
end on June 30, 2021. Id. § 3(a).
13
Dep’t of the Treasury, Report on the Financial Condition of the State
Budget for Fiscal Years 2020 and 2021 2 (May 22, 2020).
14
Id. at 8.
15
Certification of Elizabeth Maher Muoio ¶ 65 (July 31, 2020).
16
Id. ¶ 66.
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crystalize.”17 At the same time, the Treasurer testified before the Legislature
that the demand for public services has “increased significantly” -- referencing
“[d]emand for and reliance on public health professionals, law enforcement,
first responders, financial assistance, and Medicaid, just to name a few.” 18
To balance the budget for the extended FY2020, the State enacted a
Supplemental Appropriations Act on June 30, 2020, which deferred and cut
billions in spending.19 The original State budget for FY2020 appropriated
$38.7 billion in state funds. 20 As of the end of March 2020, the State had
already spent approximately $30 billion. 21 In the Governor’s budget message
delivered on February 25, 2020, he estimated $41.1 billion in revenues for the
upcoming FY2021 budget. 22 The budget message preceded the now widely
known COVID-19 pandemic.
17
Id. ¶ 59.
18
Id. Ex. C.
19
L. 2020, c. 43.
20
L. 2019, c. 150.
21
Muoio Cert. ¶ 77.
22
Office of Mgmt. & Budget, The Governor’s FY2021 Budget at B-2, B-3
(March 2020).
12
In an effort to stabilize the economy in April and May 2020, the federal
government made available up to $500 billion for states and local governments
to borrow. New Jersey is eligible to borrow up to $9.2 billion of that
amount.23 Any borrowing must be backed by the State’s “strongest security
typically pledged to repay publicly offered obligations” and must be repaid
within three years. 24
B.
In response to the effects of the pandemic, on July 16, 2020, the
Legislature passed and the Governor signed into law the New Jersey COVID-
19 Emergency Bond Act. L. 2020, c. 60. The law authorizes the State to
borrow up to $9.9 billion.
The Act identifies the “severe impact” COVID-19 has had on the State’s
economy: (1) “expect[ed] precipitous declines in revenue” in FY2020 and
FY2021, including “significant reductions” in revenues from gross income
taxes, corporate business taxes, sales and use taxes, motor fuels taxes, casino -
related taxes, and lottery sales, id. § 2(hh), 2(ii)(1); (2) the “need to
significantly revise the estimated revenues and projected appropriations for
23
Certification of Michael B. Kanef ¶¶ 51-56 (July 31, 2020) (describing
Municipal Liquidity Facility).
24
Id. ¶¶ 57, 74.
13
Fiscal Years 2020 and 2021,” id. § 2(ii)(2); and (3) potential increases in “the
actuarially recommended contributions to the State’s pension plans to the
extent that the valuation of pension plans is affected by the deterioration in
value in the investment markets,” id. § 2(ii)(3).
“[T]o respond to the fiscal exigencies caused by the COVID-19
Pandemic and to maintain and preserve the fiscal integrity of the State” -- the
law’s stated purpose -- the Act authorizes the State to issue bonds and borrow
from the federal government. Id. § 2(ll); see also id. § 4(a). Bonds may be
sold to the federal government and at any public or private sale for a total
amount of up to $9.9 billion. Id. § 4(a). The State may issue up to $2.7 billion
in bonds for the three-month period that ends on September 30, 2020, and up
to $7.2 billion for the upcoming shortened FY2021. Ibid. The Act also
provides for the State to issue “[r]efunding bonds” in order to refund bonds
that were previously issued and pay “the principal of the outstanding bonds.”
Id. § 4(b).
The Act establishes a Select Commission on Emergency COVID-19
Borrowing. Id. § 6. The Commission is comprised of two Senators selected by
the Senate President and two members of the Assembly selected by the
Speaker. Ibid.
14
According to the Act, the process for borrowing is as follows. The
Governor, State Treasurer, and Director of the Division of Budget &
Accounting within the Department of the Treasury, or any two of them --
referred to as the “issuing officials” -- make an initial decision to issue bonds.
Ibid. They then transmit a report that describes the proposed bonds to the
Select Commission, which must vote on the proposal within six days. Ibid.
Approval by three members is required before the State can issue any bonds.
The Commission’s failure to meet, act, or approve the report constitutes
disapproval. Ibid.
Proceeds from the sale of bonds are to be deposited by the State
Treasurer in a separate fund -- the “New Jersey COVID-19 State Emergency
Fund.” Id. § 13. The Act directs the Treasurer to transfer those proceeds to
“the General Fund or the Property Tax Relief Fund as needed to support
appropriations made by the Legislature” for FY2021. Id. § 14. According to
the Act, “such amounts shall constitute State revenues.” Ibid. The balance in
the Emergency Fund is subject to appropriation by the Legislature. Ibid.
All bonds issued under the Act are a “direct obligation of the State” and
are backed by its “faith and credit.” Id. § 7. The State is thus obligated to
make interest payments and redeem the principal amount of the bonds when
they mature -- no later than thirty-five years after the date they were issued.
15
Id. §§ 5, 7. To provide funds to repay the principal and interest, the Act
appropriates, or pledges, taxes collected under the Sales and Use Tax Act,
N.J.S.A. 54:32B-1 to -55. Id. § 22(a). If necessary, the State is authorized to
levy and collect an annual tax on real and personal property in each
municipality. Id. § 22(b). If, however, there is money in the General Fund at
the end of the calendar year that is “beyond the needs of the State,” the
Treasurer is directed to transfer those funds for the payment of principal and
interest on the bonds. Ibid.
C.
Before the Bond Act was enacted, the Assembly Minority Leader asked
the Office of Legislative Services (OLS) to offer an opinion on “whether or
not the State may issue general obligation bonds without voter approval to
meet the needs of the State arising from the COVID-19 pandemic.”
OLS issued an opinion letter on May 7, 2020. In it, OLS opined “that
the COVID-19 pandemic is a disaster contemplated by the [Emergency
Exception], and the State therefore may issue bonds, without the usual
requirement for voter approval, to meet COVID-19 related emergency needs.”
The opinion letter, however, drew a distinction between “borrowing to
supplement revenue for future fiscal year budgets,” which OLS believed would
violate the Constitution, and “borrowing money where the anticipated revenue
16
certified in accordance with . . . the Constitution becomes insufficient due to
an unexpected event” -- a reference to FY2020 -- which OLS found
permissible.
OLS noted that “the Constitution does not define ‘emergency’ or the
meaning of ‘to meet an emergency.’” Examining the language in the context
of the entire Emergency Exception, OLS opined that “‘to meet an emergency’
appears to be limited to borrowing to directly resolve the presently identifiable
emergency,” such as the purchase of “ventilators and personal protective
equipment.”
OLS also concluded that “the sudden, unanticipated and precipitous
shortfall of expected revenue resulting from the COVID-19 pandemic is the
type of emergency contemplated by” the Emergency Exception. According to
OLS, the State could therefore borrow “for expenses directly addressing
COVID-19” and “to replace certified, anticipated revenue” -- relating to
FY2020 -- “that was never realized due to COVID-19.” The Emergency
Exception, OLS opined, permitted “the State to address a specific, unforeseen
spending need that arises” after the enactment of a budget that certified
anticipated revenues.
In OLS’s view, the Emergency Exception “do[es] not provide an
exemption to the balanced budget requirement[].” As to the FY2021 budget,
17
OLS observed that the decline in revenue “will not be a precipitous and
unforeseen shortfall, but rather an anticipated decline.” Borrowing to
supplement that shortfall, OLS opined, would be inconsistent with the
constitutional requirement of a balanced budget. In short, OLS stated that
“borrowed money may not be used to replace general revenue to support non -
COVID-19 related spending in future budgets.”
D.
In anticipation of the Governor signing the Act, plaintiffs -- the New
Jersey Republican State Committee, Declan O’Scanlon, Hal Wirths, Lisa
Natale-Contessa, and Ileana Schirmer -- filed a complaint on July 16, 2020.
The complaint asserted the legislation violated the Debt Limitation Clause of
the State Constitution and accordingly sought to restrain the Governor from
signing or enforcing the bill, S. 2697/A. 4175. The following day, plaintiffs
filed an amended complaint that acknowledged the Governor had enacted the
legislation. Plaintiffs sought declaratory and injunctive relief on the same
grounds.
We granted direct certification on July 17, 2020. ___ N.J. ___ (2020);
see also R. 2:12-1, -4. We acted because the issues raised are critical to both
the budget process and the public at this challenging time in our State’s
history. We also recognized that the matter needed to be resolved with finality
18
before the end of the fiscal year on September 30, 2020, which is fast
approaching.
We denied a motion by Jack M. Ciattarelli and James K. Webber, Jr. to
intervene but granted their alternative request to participate as amici curiae.
We also granted leave to Liberty and Prosperity 1776, Inc. and Michael Smith
to participate as amici.
III. Parties’ Arguments
Plaintiffs argue that the Bond Act is unconstitutional because it violates
both the Appropriations Clause and the Debt Limitation Clause. They contend
the Act seeks to fund general operating expenses of the State with proceeds
from bonds, contrary to the ruling in Lance. Because debt financing cannot be
considered revenue or counted toward a balanced budget, plaintiffs argue, the
Act violates the Appropriations Clause. Plaintiffs also submit the Act is
unconstitutional under the Debt Limitation Clause because the debt it
authorizes is not limited to a single object.
In addition, plaintiffs assert that the Emergency Exception “does not
obviate the Appropriations Clause.” According to plaintiffs, the emergency
that struck New Jersey in the first quarter of 2020 during FY2020 -- the
COVID-19 pandemic -- “is no longer a surprise or unforeseen.” An
19
anticipated decline in tax collection and income, plaintiffs submit, “is not an
‘emergency’ that allows circumventing the Appropriations Clause.”
Amici Ciattarelli and Webber likewise contend the Bond Act violates the
Appropriations Clause and the Debt Limitation Clause. They claim the Act is
a “direct assault on the holding” in Lance and thus runs afoul of the
Appropriations Clause. In addition, they argue the Act fails to satisfy the
Emergency Exception because it permits borrowing to recreate lost revenue,
not to meet an emergency. Read together, amici maintain, the Appropriations
Clause and the Debt Limitation Clause prohibit debt financing of general
expenses. Amici add that the Act is bad public policy that threatens the public
fisc.
Amici Liberty and Prosperity 1776 and Michael Smith also argue the Act
is unconstitutional and stress the importance of voter approval under the
Constitution. They further contend there is no objective evidence the State
must spend $9.9 billion to meet an emergency.
The State urges that the Bond Act be upheld. It contends that the
emergency and federal funds exceptions to the Debt Limitation Clause permit
the government to create debt to meet the current fiscal emergency. The State
also maintains that proceeds from bonds can be used to replace revenue and
fund operating expenses across multiple fiscal years. It submits that
20
longstanding practice confirms such a reading of the Debt Limitation and
Appropriations Clauses. The State also draws on the Framers’ intent in 1947,
with the Great Depression in mind, to provide flexible tools to respond to
fiscal emergencies.
According to the State, Lance does not call for a different result. Any
ambiguity relating to the fiscal clauses, the State adds, should be resolved in
favor of the more specific language of the Debt Limitation Clause. In the
alternative, the State submits that if the Court finds the Bond Act is
unconstitutional, it should exercise its equitable powers to fashion a remedy
for the present fiscal emergency.
IV. Interpretative Principles
Statutes challenged on constitutional grounds are entitled to a strong
presumption of validity. State v. Buckner, 223 N.J. 1, 14 (2015); State v.
Trump Hotels & Casino Resorts, Inc., 160 N.J. 505, 526 (1999); Hamilton
Amusement Ctr. v. Verniero, 156 N.J. 254, 285 (1998). A law can be declared
void only if its “repugnancy to the constitution is clear beyond reasonable
doubt.” Buckner, 223 N.J. at 14 (quoting Gangemi v. Berry, 25 N.J. 1, 10
(1957)).
The Judiciary “has the obligation and the ultimate responsibility to
interpret the meaning of the Constitution.” State v. Lunsford, 226 N.J. 129,
21
153 (2016). When called on to do so, courts must apply the provisions of the
constitution in a way “that serves to effectuate fully and fairly [their]
overriding purpose.” Trump Hotels, 160 N.J. at 527 (emphasis added)
(citation and quotation marks omitted); see also Lance, 180 N.J. at 596.
To assess the constitutionality of a statute, courts are “guided by the
language and history of the New Jersey Constitution.” Lunsford, 226 N.J. at
153. Judges consider “the text and structure of the Constitution, the relevant
historical materials, and, most importantly, the ‘basic principles of our
democratic system.’” Comm. to Recall Robert Menendez From the Office of
U.S. Senator v. Wells, 204 N.J. 79, 123 (2010) (interpreting the Federal
Constitution and quoting U.S. Term Limits, Inc. v. Thornton, 514 U.S. 779,
806 (1995)).
We look first to the plain language of a constitutional provision to
understand its meaning and the Framers’ intent. Buckner, 223 N.J. at 15. In
doing so, courts give words their normal and ordinary meaning. Vreeland v.
Byrne, 72 N.J. 292, 302 (1977). Absent “a clear indication to the contrary,”
when a word or phrase appears more than once, “it should have the same
meaning throughout.” L.A. v. DYFS, 217 N.J. 311, 333 (2014) (interpreting a
statute and quoting Oldfield v. N.J. Realty Co., 1 N.J. 63, 69 (1948)). Beyond
that, “resort may be had to pertinent constitutional and legislative history” to
22
help determine “the true sense and meaning of the language used.” Atl. City
Racing Ass’n v. Attorney Gen., 98 N.J. 535, 542 (1985).
Courts avoid interpretations that render language in the Constitution
superfluous or meaningless. Burgos v. State, 222 N.J. 175, 203 (2015); State
in Interest of K.P., 311 N.J. Super. 123, 139 (Ch. Div. 1997). Indeed, “when
interpreting a constitution, ‘real effect should be given to all the words it
uses.’” State Conference-NAACP v. Harvey, 381 N.J. Super. 155, 159 (App.
Div. 2005) (quoting Myers v. United States, 272 U.S. 52, 151 (1926)).
Courts must also avoid interpretations that lead to absurd results. See
Sun Life Assurance Co. of Can. v. Wells Fargo Bank, N.A., 238 N.J. 157, 174
n.3 (2019) (“Statutes cannot ‘be construed to lead to absurd results. All rules
of construction are subordinate to that obvious proposition.’” (quoting State v.
Provenzano, 34 N.J. 318, 322 (1961))); Perez v. Zagami, LLC, 218 N.J. 202,
214 (2014) (same). “[W]hen ‘a literal interpretation would create a manifestly
absurd result . . . ,’ courts may consider [a] law’s overall purpose for
direction.” Sussex Commons Assocs., LLC v. Rutgers, 210 N.J. 531, 541
(2012) (quoting Hubbard ex rel. Hubbard v. Reed, 168 N.J. 387, 392 (2001)). 25
25
“When confronted with words whose literal application would cause absurd,
anomalous or otherwise inconceivable results, courts must always be prepared
to ask whether the ‘instant case involves a situation which apparently escaped
the attention of the draftsman.’” First Nat’l Bank of Chicago v. Bridgeton
23
Those principles apply with equal force to the interpretation of both statutory
language and the text of the Constitution.
In the end, “[t]he polestar of constitutional construction is always the
intent and purpose of the particular provision.” State v. Apportionment
Comm’n, 125 N.J. 375, 382 (1991). In this case, with two relevant provisions,
“[t]he true rule of construction ‘is not to consider one provision of the
Constitution alone, but to contemplate all,’” in order to give effect to the
purpose of the Constitution as a whole. Behnke v. N.J. Highway Auth., 13
N.J. 14, 26 (1953) (quoting Downes v. Bidwell, 182 U.S. 244, 312 (1901)).
V. History
To fully understand the fiscal framework of the modern Constitution and
the interplay between the current Appropriations and Debt Limitation Clauses,
we first trace 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.
Mun. Port Auth., 338 N.J. Super. 324, 327 (App. Div. 2001) (quoting Dvorkin
v. Township of Dover, 29 N.J. 303, 313 (1959) (involving statutory
interpretation)).
24
A.
The fiscal clauses first appeared in the 1844 Constitution. The
threadbare Appropriations Clause of Article IV, Section 6, Paragraph 2 of the
1844 Constitution did not require a single, balanced budget. It merely
provided that “[n]o money shall be drawn from the treasury but for
appropriations made by law.” N.J. Const. of 1844 art. IV, § 6, ¶ 2. The clause
did not attract much attention or debate. See Proceedings of the New Jersey
State Constitutional Convention of 1844 (1844 Proceedings) 114, 519 (1942)
(presenting the proposed clause and noting it was “agreed to, without
amendment”).
The longer Debt Limitation Clause garnered significantly more attention.
“As in most states, New Jersey’s Debt Limitation Clause had its origins in the
depression years that followed the economic boom of the 1830s.” Lonegan v.
State (Lonegan I), 174 N.J. 435, 443 (2002).
Early in the 19th Century many of the states borrowed
for the development of highways, canals and other
internal improvements. Business boomed, money was
plentiful, and the states had little difficulty in selling
their bonds. By 1840 the bonded indebtedness of the
states exceeded the then tidy sum of $200,000,000.
However, with the aftermaths of the financial crisis of
1837, the borrowing states found themselves in
difficulties and many states defaulted on their bond
obligations.
[Clayton v. Kervick, 52 N.J. 138, 146-47 (1968).]
25
“New Jersey was not caught ‘so badly as were some of the other states’ in the
national ‘speculative boom in internal improvements, in new business, . . . and
in land operations’ in the ’20’s and early ’30’s.” John Bebout, “Introduction”
to 1844 Proceedings, at xciv (quoting Eugene E. Agger, “Banking in New
Jersey,” in 4 New Jersey, A History 1213-14, 1223 (Irving S. Kull, ed., 1930)).
Nevertheless, it is clear that “the delegates to the 1844 Constitutional
Convention had in mind liability such as State bond indebtedness.” Clayton,
52 N.J. at 147. Indeed, “[t]he history of the times renders evident the purpose
of the 1844 provision.” Id. at 146.
When Rhode Island adopted its first state constitution in 1842, it
included the nation’s first limitation on state debt. See Amos Tilton,
“Constitutional Limitations on the Creation of State Debt,” in 2 Proceedings of
the Constitutional Convention of 1947 (1947 Proceedings) 1708, 1709 (1951).
The Rhode Island clause provided that
[t]he general assembly shall have no power, hereafter,
without the express consent of the people, to incur state
debts to an amount exceeding fifty thousand dollars,
except in time of war, or in case of insurrection or
invasion; nor shall they in any case, without such
consent, pledge the faith of the state for the payment of
the obligations of others. This section shall not be
construed to refer to any money that may be deposited
with this state by the government of the United States.
[R.I. Const. of 1842 art. IV, § 13 (emphasis added).]
26
Two years later in New Jersey, the Committee on the Legislative
Department presented a draft debt limitation provision for the New Jersey
Constitution. See 1844 Proceedings at 111-15. Section Nineteen of the draft
permitted double the amount of debt ($100,000); supplied greater detail as to
how debt would be calculated, spent, obtained, and repaid; and included the
exception contained in the Rhode Island provision “for purposes of war, or to
repel invasion, or to suppress insurrection.” Id. at 114.
Various parts of the proposal were debated, with particular attention to
the amount of time for the repayment of borrowed money. See generally id. at
310-11, 519-22. Ultimately, the twenty-year time period in the draft was
expanded to thirty-five years, and the final clause retained the exception in the
Rhode Island Constitution of 1842 for times of war, invasion, and insurrection .
N.J. Const. of 1844 art. IV, § 6, ¶ 4.
The Legislature invoked the exception on several occasions during the
Civil War. See L. 1861 (extra session), c. 8 (authorizing the issuance of up to
$2 million in general obligation bonds to pay expenses related to suppressing
the rebellion and repelling any invasion); L. 1863, c. 250 (authorizing an
additional $1 million in bonds); L. 1864, c. 433 (same).26
26
Funds raised were used for “supplies of every kind pertaining to . . .
recruiting, subsisting, clothing, arming, equipping, and transporting ” troops,
27
B.
When the 1947 Constitution was adopted, both the Appropriations
Clause and the Debt Limitation Clause were expanded.
1.
Dedicated funds and related concerns -- a point of focus and contention
at the 1947 Convention -- drove the expansion of the Appropriations Clause.
The 1844 Constitution “deal[t] with state finances in four short
paragraphs,” leaving “the state fiscal structure . . . almost entirely” to be
resolved through legislation. George C. Skillman & Sidney Goldmann, “The
Single Budget, Single State Fund and Single Fiscal Year: The Preparation of
the Budget as an Executive Function,” in 2 1947 Proceedings 1668, 1668. As
a result, “[b]eginning with 1923 there had been two fiscal years in state affairs
-- the calendar year of the Highway Department and the July 1-June 30 fiscal
year of the State Government.” Id. at 1670. Eventually, arguments to abolish
different fiscal years and dedicated or special funds prevailed, and a single
fiscal year and budget were adopted through legislation in 1944 and 1945. See
id. at 1671-83.
Lewis Perrine, Annual Report of the Quartermaster General for the Year 1862
3 (Jan. 13, 1863); for medical services including opening two hospitals, see id.
at 19-23; as well as for payments to “families or dependent widowed mothers”
of soldiers totaling nearly $750,000 per year, R.F. Stockton, Jr., Annual Report
of the Adjutant General for the Year 1862 16 (Dec. 31, 1862).
28
At the 1947 Convention, many favored preserving those statutory
protections in the Constitution. Abram M. Vermeulen, Supervisor of the
Accounting Bureau of the Department of Taxation and Finance, for example,
was of the view that the Appropriations Clause of 1844 “does not go far
enough.” 5 1947 Proceedings 542. He explained that
[t]here should be a single, all-inclusive budget covering
expenditures for all departments. Legislation presently
provides for this. This legislation should be protected
in the Constitution so that we could never revert to a
system such as prevailed before 1944. The State
Highway Department formerly operated under a
different fiscal year and under a separate budget from
the rest of the State.
[Ibid.]
James Kerney, Jr., testified similarly on behalf of the New Jersey Committee
for Constitutional Revision. Id. at 646, 649-50.
A. R. Everson, Executive Vice-President of the New Jersey Taxpayers’
Association, tied the need to abolish dedicated funds to the fiscal exigencies
that accompanied the Great Depression and argued that a single treasury would
better enable the State to meet similar fiscal catastrophes in the future:
One of the most powerful arguments against
dedication of funds was provided during the depression
when we were faced with the question of utilizing
available highway funds to keep the people from
starving, or retaining these funds to build roads. . . . In
the dreary year of 1932, for example, over $8,000,000
was diverted from the State Highway Fund, the motor
29
vehicle fuel tax and the motor vehicle license tax, to
state unemployment funds to sustain human life.
From 1931 through 1939, an eight-year period, the
State expended for emergency relief over
$143,000,000. Of this amount, $31,000,000 came from
the State Highway Fund . . . . If we now dedicate
highway and kindred funds by constitutional provision,
we shall forever seal off this vital source of revenue and
foreclose its use for human need should the chaos and
disaster of a depression or any other catastrophe come
upon us again in New Jersey. . . . You cannot be sure
today, when you are writing a Constitution for years to
come, that nothing like this will ever happen again.
[Id. at 741, 743 (emphasis added).]
Irene Baldwin, testifying on behalf of the New Jersey League of Women
Voters, likewise anticipated that emergency appropriations might be needed
when she spoke in “favor of all state monies in a single treasury.” Id. at 748.
The Revision Commission of 1941 also supported a single fiscal year
and budget, and one general appropriations bill. See Report of the
Commission on Revision of the New Jersey Constitution, in 5 1947
Proceedings 827, 827-29. Among other suggestions, the Commission
recommended the following expansion to the Appropriations Clause:
No other bill appropriating public money for any
purpose shall be enacted unless it shall (1) provide for
some single object or purpose, (2) receive the
affirmative votes of two-thirds of the membership of
each house of the Legislature, and (3) together with all
prior appropriations for the same fiscal period, shall not
exceed the total amount of revenue available therefor.
30
[Id. at 829.]
The Report explained the draft clause would both promote fiscal soundness
and allow the State to respond to emergencies that might arise. Id. at 827-28;
accord 5 1947 Proceedings 599-601 (testimony of Robert C. Hendrickson,
State Treasurer, summarizing the Report).
The Committee on Taxation and Finance proposed an appropriations
clause to the Convention on July 30, 1947. It featured a single budget and
fiscal period but took a more flexible approach to emergencies than Treasurer
Hendrickson and the Revision Commission had recommended. The
Committee did not adopt the two-thirds-vote and single-object requirements
for supplemental appropriations. Its proposed language instead spoke of
reasonable foreseeability and limited the general annual appropriation law and
additional appropriations to available and anticipated revenue, rather than
available revenue alone. Proposal of the Committee on Taxation and Finance,
in 2 1947 Proceedings 1234, 1235.
The Appropriations Clause adopted by the Convention contained the
Committee’s recommended language with only minor changes. See 2 1947
Proceedings 1241, 1306. The full text of the current clause appears in section
VI below.
31
2.
Although the Debt Limitation Clause was the subject of considerable
debate in 1844, “[n]o attempt was made to amend [that] provision” until the
Commission on Revision’s 1942 Report. Tilton, 2 1947 Proceedings at 1715.
The Report of the Revision Commission proposed various changes to the
clause but recommended retaining “the requirement of a referendum upon all
indebtedness exceeding $100,000.” 5 1947 Proceedings at 828.
As it did with the Appropriations Clause, the Committee on Taxation
and Finance generally took a more flexible approach than the Revision
Commission. The Committee proposed the following debt limitation clause to
the Convention on July 30, 1947:
The Legislature shall not, in any manner, create any
debt or debts, liability or liabilities, of the State, which
shall singly or in the aggregate with any previous debts
or liabilities at any time exceed $100,000.00, except for
purposes of war, or to repel invasion, or to suppress
insurrection, or to meet an emergency caused by act of
God or disaster, unless the same shall be authorized by
a law for some single object or work, to be distinctly
specified therein; which law shall provide the ways and
means, exclusive of loans, to pay the interest of such
debt or liability as it falls due, and also to pay and
discharge the principal of such debt or liability within
thirty-five years from the time of the contracting
thereof, and shall be irrepealable until such debt or
liability, and the interest thereon, are fully paid and
discharged. And no such law shall take effect until it
shall, at a general election, have been submitted to the
people, and have received the sanction of a majority of
32
all the votes cast for and against it at such election; and
all money to be raised by the authority of such law shall
be applied only to the specific object stated therein; and
to the payment of the debt thereby created. This section
shall not be construed to refer to any money that has
been, or may be, deposited with this State by the
Government of the United States.
[2 1947 Proceedings 1235 (emphases added).]27
Reporting for the Committee on August 5, 1947, Chairman Read
stressed the Committee’s determination to remain flexible as to the manner of
debt acquired. See 1 1947 Proceedings 149. He also underscored that the
Committee expanded the 1844 Clause by adding to its exceptions for war,
invasion, and insurrection the phrase,
“or to meet an emergency caused by act of God or
disaster,” which was practically done in 1932 by the
Legislature and looked upon with a great deal of
propriety by the people of the State because those
things had to be done. Therefore, we placed those
words in there.
[Ibid. (emphases added).]
There can be little doubt that the practical enactment Chairman Read
referred to was the creation of the State Emergency Relief Administration,
27
The underscored language was also included in the proposed 1944
Constitution, which was defeated at the polls. See Revised Constitution of
1944 art. VII, § 5; accord Tilton, 2 1947 Proceedings 1718-19; see also Robert
F. Williams, The New Jersey Constitution 25 (2d ed. 2012).
33
accompanied by an initial appropriation of $8 million, see L. 1931, c. 394,
along with the 1932 authorization of $20 million in bonds “for the relief of the
unemployed and dependents in this State,” see L. 1932, c. 251.28 Indeed,
“New Jersey’s borrowing from 1932 to 1939 was mainly for the purpose of
financing unemployment relief, with one issue in 1933 dedicated to
educational aid.” Tilton, 2 1947 Proceedings 1713. Because of those efforts,
New Jersey’s bonded indebtedness rose and reached a peak in 1935, “when the
State’s outstanding obligations totaled $197,000,000.” Ibid.
In response to the hardships of the Great Depression, the Emergency
Relief Administration provided aid through food, shelter, fuel, clothing, health
services, work projects, and support for governing bodies and state agencies.
See State Emergency Relief Administration, Emergency Relief in New Jersey,
October 13, 1931-April 15, 1936: Final Report to the Governor and to the
Senate and General Assembly (Emergency Relief Final Report) 31-52 (July 31,
1936). The Administration also provided a diverse array of special programs
including recreation activities, rural rehabilitation, relief gardens, adult
education, student aid, junior college, and vocational rehabilitation, among
28
There were other relief provisions around the same time as well. See, e.g.,
L. 1933, c. 398 (additional $5 million “for the relief of the unemployed and
dependents”); L. 1934, c. 255 (additional $10 million); L. 1939, c. 329
(additional $21 million).
34
others. Id. at 53-61. That history informs the meaning of the phrase “meet an
emergency caused by disaster,” which the Framers added to the 1947
Constitution.
As required under the 1844 Constitution, which did not have an
emergency exception, the Depression-relief bond measures identified above
were submitted for voter approval at general elections. At the 1947
Convention, James J. Smith, on behalf of the New Jersey State League of
Municipalities, opposed any constitutional provision that would dedicate
certain tax revenues to highway funds. See 5 1947 Proceedings 720. Beyond
that, Smith asserted in his testimony that citizens benefit when the Legislature
has the authority to respond to emergencies without the need to amend the
Constitution:
[T]he original dedication of highway funds by the act
of 1927 was a legislative enactment. A Legislature
enacts laws to meet current needs. It developed during
the depression years that the social welfare of the
citizens of the State required that certain highway funds
be diverted for unemployment relief which was more
necessary at that time than the extension of our highway
system. It was generally conceded that it was a very
wise thing to do, and approximately $65,000,000 was
appropriated for relief.
We do not know what lies ahead. It is quite
possible that in the future the people of the State of New
Jersey through their legislators would again decide to
use highway funds and other funds for urgent needs. If
such an emergency should arise it would be most
35
unfortunate for us to find that to meet a pressing need
would require an amendment to the State Constitution.
Emergencies cannot be met or anticipated by a
constitutional provision.
[Id. at 722 (emphases added).]
The revised Debt Limitation Clause the Framers adopted eliminated the
need to divert dedicated funds at a time of emergency and also provided the
State flexibility to borrow funds for emergencies without waiting for voter
approval.
Chairman Read noted that, aside from the Emergency Exception, the
Committee’s proposed Debt Limitation Clause was “practically the same as the
[1844] one.” 1 1947 Proceedings 149. A later amendment replaced the
$100,000 cap with a one-percent limit. See 2 1947 Proceedings 1240. The full
text of the current Debt Limitation Clause appears in section VII below.
C.
In sum, the history of the fiscal provisions reveals the extent to which
they were shaped by the times. The short Appropriations Clause adopted in
1844 generated little discussion or disagreement at that constitutional
convention. In 1947, by contrast, considerable debate about the existence of
two fiscal years and numerous dedicated funds led to an expanded
Appropriations Clause that calls for a single general appropriations act and a
balanced budget. And the Debt Limitation Clause, initially adopted in
36
response to financial crises encountered by other states, was made more
flexible in 1947 with the shift from a $100,000 to a one-percent cap and the
added exception for borrowing “to meet an emergency caused by disaster.”
The latter change, in particular, reflected the events of the Great Depression
experienced in New Jersey and the lessons learned from them.
We turn next to the current version of the two clauses and recent case
law that interprets them.
VI. Appropriations Clause
The Appropriations Clause calls for “the State’s finances [to] be
conducted on the basis of a single fiscal year covered by a single balanced
budget.” City of Camden v. Byrne, 82 N.J. 133, 151 (1980); see also Burgos,
222 N.J. at 206. The Clause provides as follows:
No money shall be drawn from the State treasury but
for appropriations made by law. All moneys for the
support of the State government and for all other State
purposes as far as can be ascertained or reasonably
foreseen, shall be provided for in one general
appropriation law covering one and the same fiscal
year; except that when a change in the fiscal year is
made, necessary provision may be made to effect the
transition. No general appropriation law or other law
appropriating money for any State purpose shall be
enacted if the appropriation contained therein, together
with all prior appropriations made for the same fiscal
period, shall exceed the total amount of revenue on
hand and anticipated which will be available to meet
such appropriations during such fiscal period, as
certified by the Governor.
37
[N.J. Const. art. VIII, § 2, ¶ 2.]
The Clause does not contain an emergency exception.
The Court interpreted the Appropriations Clause in Lance when it
considered whether the State could “rely on borrowed funds to balance its
annual budget.” 180 N.J. at 593. That seminal case involved the FY2005
budget, which relied in part on $1.9 billion in bond proceeds from the
Cigarette Tax Securitization Act of 2004, L. 2004, c. 68, and the Motor
Vehicle Surcharges Securitization Act of 2004, L. 2004, c. 70. Id. at 594.
Proceeds from the bonds went to the General Fund, and the State was obligated
by contract to repay those obligations, subject to appropriations from the
Legislature. Ibid.The 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.” Id. at 593. As the Court explained, “borrowed
monies, which themselves are a form of expenditure when repaid, are not
income (i.e., revenues).” Id. at 598. To rely on them to fund general expenses
in the ordinary course would “defeat[] the very purpose behind the
Appropriations Clause” -- “to bar the State from adopting an annual budget in
which expenditures exceed revenues.” Id. at 596. The Court referenced
38
several dictionary definitions for “revenue” in reaching that conclusion. Id. at
597-98.
The Court acknowledged its ruling might require a “significant . . . if not
. . . complete overhaul of[] the current fiscal year’s budget.” Id. at 599.
Because the “disruption to the State government could be great” and the
“legislative and executive branches acted in good faith,” the Court applied its
holding prospectively. 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.
VII. Debt Limitation Clause
Article VIII, Section 2, Paragraph 3 of the New Jersey Constitution
contains the Debt Limitation Clause. Most relevant for this case, the Clause
requires voter approval for the State to incur debts that together exceed one
percent of the general appropriation for the fiscal year -- except for debts
created “to meet an emergency caused by disaster.”
The Clause has five subparagraphs, two of which are central to this case.
The core of the Debt Limitation Clause, subparagraph (a), provides as follows:
The Legislature shall not, in any manner, create in any
fiscal year a debt or debts, liability or liabilities of the
39
State, which together with any previous debts or
liabilities shall exceed at any time one per centum of
the total amount appropriated by the general
appropriation law for that fiscal year, unless the same
shall be authorized by a law for some single object or
work distinctly specified therein. Regardless of any
limitation relating to taxation in this Constitution, such
law shall provide the ways and means, exclusive of
loans, to pay the interest of such debt or liability as it
falls due, and also to pay and discharge the principal
thereof within thirty-five years from the time it is
contracted; and the law shall not be repealed until such
debt or liability and the interest thereon are fully paid
and discharged. Except as hereinafter provided, no
such law shall take effect until it shall have been
submitted to the people at a general election and
approved by a majority of the legally qualified voters
of the State voting thereon.
[Id. ¶ 3(a).]
Exceptions to the requirement that debt be approved by the public appear
in subparagraph (e):
This paragraph shall not be construed to refer to any
money that has been or may be deposited with this State
by the government of the United States. Nor shall
anything in this paragraph contained apply to the
creation of any debts or liabilities for purposes of war,
or to repel invasion, or to suppress insurrection or to
meet an emergency caused by disaster or act of God.
[Id. ¶ 3(e).]29
29
The Debt Limitation Clause has been amended twice since 1947. In 1983,
an exception to the requirement of voter approval was added for refinancing
bonds. See N.J. Const. art. VIII, § 2, ¶ 3 (1984) (now codified at id. ¶ 3(c). In
2009, an amendment requiring voter approval when the State borrows money
40
The opening reference to “[t]his paragraph” applies to all of paragraph 3 -- the
Debt Limitation Clause in its entirety. Thus, the requirements of the Debt
Limitation Clause do not apply to the creation of debt “to meet an emergency
caused by disaster.”
The State Constitution does not define “emergency” or “disaster.” The
1931 law that created the State Emergency Relief Administration, however,
discussed the meaning of “emergency” as follows: “The hardships occasioned
by and attendant upon the lack of gainful employment and the economic
depression generally prevailing are so acute and so affect the public health and
welfare of the people that there is now an emergency which requires State
recognition and aid.” L. 1931, c. 394. In his testimony at the 1947
Convention, the Chair of the Committee on Taxation and Finance alluded to
the 1931 law. 1 1947 Proceedings 149.
No case law has addressed the meaning of the Emergency Exception or
its interplay with the Appropriations Clause. Litigation has instead largely
through a state agency or independent authority was ratified. See “Interpretive
Statement,” Public Question No. 1 (2008), https://www.nj.gov/state/elections/
assets/pdf/election-results/2008/2008-official-gen-elect-tallies-public-ques-
120208.pdf; see also N.J. Const. art. VIII, § 2, ¶ 3(b). The Clause was broken
down into five subparagraphs when the new language was adopted. See N.J.
Const. art. VIII, § 2, ¶ 3(a) to (e).
41
focused on whether “a variety of bonding mechanisms” without voter approval
ran afoul of the Debt Limitation Clause. Lonegan I, 174 N.J. at 439 (citing, as
examples, Enourato v. N.J. Bldg. Auth., 90 N.J. 396 (1982); N.J. Sports &
Exposition Auth. v. McCrane, 61 N.J. 1 (1972); Holster v. Bd. of Trs. of
Passaic Cty. Coll., 59 N.J. 60 (1971); Clayton, 52 N.J. 138; N.J. Tpk. Auth. v.
Parsons, 3 N.J. 235 (1949)).
In Lonegan I, the plaintiffs challenged the use of contract debt30 to fund
a large-scale school construction program. By statute, the Economic
Development Authority was authorized to issue up to $8.6 billion in bonds for
that purpose. Id. at 459. Although the Court restated the principle that
contract debt does not implicate the Debt Limitation Clause because “debts of
30
As the Court explained,
“contract bond” (or “contract debt”) describes bonds
issued by an independent state authority on a contract
between the State Treasurer and the authority stating
that payment on the bonds by the State is subject to
legislative appropriations. In contrast, general
obligation bonds are enforceable state debts backed by
the full faith and credit of the State.
[Lonegan I, 174 N.J. at 439 n.1 (citing John Downs &
Jordon Elliott Goodman, Barron’s Dictionary of
Finance and Investment Terms 171 (1991)).]
Contract bonds often have an independent revenue stream to repay the debt,
like tolls or payments on a lease. Id. at 445-46.
42
an independent authority are not debts of the State,” see id. at 438, 449-50,
462-63, the Court upheld the statute in light of the State’s reliance on Abbott
v. Burke, 153 N.J. 480 (1998), and because the act furthered the education
provision of the State Constitution, see id. at 441, 462 (citing N.J. Const. art.
VIII, § 4, ¶ 1). The Court ordered additional briefing on the broader question
whether contract bonds violate the Debt Limitation Clause. Id. at 464-65.
Lonegan II resolved the issue. The Court affirmatively held that “only
debt that is legally enforceable against the State is subject to the Debt
Limitation Clause.” 176 N.J. at 13. Because contract bonds are not backed by
the full faith and credit of the State and are subject to future legislative
appropriations, they are not legally enforceable against the State and, as a
result, do not violate the Debt Limitation Clause. Id. at 14-15, 21.
Neither Lonegan I nor II addressed possible tensions between the
Appropriations and Debt Limitation Clauses.
VIII. Analysis
Against that backdrop, we consider several issues that the Bond Act
presents: (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.
43
A.
To answer those questions, we examine the key components of the
language in the Emergency Exception -- “to meet an emergency caused by
disaster.” N.J. Const. art. VIII, § 2, ¶ 3(e). The phrase has two parts: (1) the
emergency must be caused by disaster; and (2) any proposed borrowing must
meet the emergency.
As to the first requirement, not every emergency qualifies under the
Emergency Exception because not every emergency is “caused by disaster.” A
heavy snowstorm or ice storm that requires additional snow removal and extra
caution on the roadways may lead a governor to declare a temporary state of
emergency. The declaration alone, however, would not establish that the
emergency was caused by disaster. Nor would the nature of the storm itself in
many instances. Likewise, a routine budgetary shortfall might present an
emergency, but that does not mean it was necessarily the result of a disaster.
And without a “disaster,” the Emergency Exception does not apply.
Here, the parties agree that the COVID-19 pandemic is a disaster within
the meaning of the exception. Whatever else the Emergency Exception may
encompass, it includes a rare, once-in-a-century, infectious disease of the
magnitude of COVID-19.
44
The effects of the pandemic are widespread. As outlined in section II,
the disease has taken a toll on human life, on the global and national
economies, and on the public fisc in our State. Millions have contracted the
virus; hundreds of thousands have died; millions have lost their jobs; and tax
revenues here and elsewhere have plummeted. In short, COVID-19 -- an
indisputable “disaster” -- has caused a health emergency, a broad-based
economic one that has left individuals and families struggling, and a fiscal
crisis for the State. The nature of the “emergency” extends to all three. 31
As to the third area -- the impact on the public fisc -- not only did mass
unemployment lead to lower tax revenues, but direct efforts to combat the
pandemic have also exacerbated its effect on the State’s finances. Shuttering
private businesses and ordering individuals to stay at home to fight the
disease’s spread have contributed to a dramatic drop in revenue from various
sources. As a result, the State’s ability to provide important public services is
at risk.
Any debate over whether the disaster and its effects are foreseen or
unforeseen at this point misses the mark. The distinction does not appear in
31
See Jamouneau v. Harner, 16 N.J. 500, 514 (1954) (defining “emergency”
in the context of a shortage of rental housing as “an unusual public exigency
calling for the exercise of the police power to alleviate the common peril or
need”).
45
the text of the Emergency Exception and is illogical when it comes to a
continuing emergency. Today, unlike in February, we know that each week
ahead will bring more cases and more deaths. Just because one can foresee the
continuation of an emergency does not make it any less of one. See
Worthington v. Fauver, 88 N.J. 183, 195 (1982) (noting that, in the context of
the Disaster Control Act, “it is not a necessary component of an ‘emergency’
that it be sudden or unforeseen”).
B.
The second component of the Emergency Exception -- that borrowing
must “meet an emergency” -- begs the question as to what type of borrowing is
permitted.
“Meet” is not a precise term. It is also not a limiting term in everyday
use. Among other definitions, Webster’s Dictionary defines “meet” as “to
contend successfully with” -- for example, to meet a problem -- and “to
provide for” -- for example, “public and private agencies labored to meet a
critical housing shortage.” Webster’s Third New International Dictionary
(Unabridged) 1404 (1981).
The State aptly points out that the term “meet” also appears in the
Appropriations Clause where it means, in essence, “to match fully.” The
Clause requires that the State have enough revenue on hand to “meet”
46
expenditures. N.J. Const. art. VIII, § 2, ¶ 2. There is no “clear indication”
why the term should not “have the same meaning throughout” the fiscal
clauses. See L.A., 217 N.J. at 333.
At a minimum, then, incurring debt to meet an emergency caused by
disaster means that borrowing must relate to or provide for that emergency.
We interpret the stated purpose of the Bond Act with that in mind. To
reiterate, it authorizes borrowing “[1] to respond to the fiscal exigencies
caused by the COVID-19 Pandemic and [2] to maintain and preserve the fiscal
integrity of the State.” Bond Act, § 2(ll). We do not read those phrases as
separate, stand-alone justifications for borrowing under the Emergency
Exception. If borrowing were done solely to maintain the State’s fiscal
integrity, untethered to the effects of the pandemic, it would not satisfy the
exception. Both clauses must relate to the effects of COVID-19.
In this case, borrowing “to meet an emergency” raises two issues: the
type of borrowing and spending, and the overall amount of borrowing.
1.
As described in section V, the Framers were influenced by the
experience of the Great Depression when they drafted the Emergency
Exception. To repeat, during the 1947 Constitutional Convention, the chair of
the Committee on Taxation and Finance referred to what “was practically done
47
in 1932 by the Legislature,” in response to the Great Depression, to justify an
expanded exception to the Debt Limitation Clause “to meet an emergency.” 1
1947 Proceedings 149. The State’s prior efforts in that regard included a wide
array of borrowing and spending to meet the crisis at hand, including direct aid
in the form of food, shelter, and health care, and also recreation activities,
adult education, vocational rehabilitation, and then some. Emergency Relief
Final Report 31-61.
Here, borrowing may be allowed to meet all three aspects of the current
emergency. In practical terms, debt can be incurred to provide not only for
masks, respirators, and field hospitals, and for direct aid to individuals and
families afflicted by the disease, but also for the impact on the public fisc
caused by COVID-19. As to the latter category, the State, for example, may
borrow to provide for public services like education, police, fire, first aid,
child welfare, and prisons, among other services -- to secure the continued
functioning of government. In other words, because the collapse in revenue
brought on by the pandemic affects the State’s ability to provide for direct aid
and other government services, the Emergency Exception permits the State to
borrow in order to meet them.
That said, not every act of borrowing would “meet” the current
emergency. Borrowing for programs unrelated to the emergency would not
48
satisfy the language of the exception or the Act. For example, using $1 bi llion
in borrowed funds to subsidize a new sports arena could hardly be said “to
respond to the fiscal exigencies caused by the COVID-19 Pandemic” or
“preserve” the State’s “fiscal integrity.” Bond Act, § 2(ll). To incur debt for
such a project would require additional legislation that might well need voter
approval.
The above examples are illustrative only. It is not for the courts to
decide which projects best respond to the pandemic, or to get drawn into a
debate about them. Reasonable people may differ about how to meet the
challenges society now faces. Those questions “are for the Legislature and the
people to decide, subject only to constitutional bounds.” N.J. Ass’n on Corr.
v. Lan, 80 N.J. 199, 211 (1979). Courts traditionally defer to the will of the
Legislature and the choices it makes, provided they do not run afoul of the
Constitution. See McCrane, 61 N.J. at 8; Roe v. Kervick, 42 N.J. 191, 229
(1964).32
A more restrictive view would reason that because a multi-billion dollar
shortfall in revenue on account of the pandemic is predictable today -- in a way
32
Lan, 80 N.J. at 212-20, and Behnke, 13 N.J. at 32, provide examples of
legislative deference related to the “single object or work” requirement of the
Debt Limitation Clause.
49
that was not foreseeable one year ago -- the State cannot borrow to cover any
of that shortfall other than costs tied directly to health aspects of the pandemic,
such as respirators and field hospitals. Such an approach would not “meet” the
devastation caused by a broad-based emergency like the COVID-19 pandemic
or the Great Depression. Nor does that approach find support in the words of
the Constitution, which does not limit borrowing in such a stringent way at a
time of a continuing emergency caused by disaster.
2.
Because of how the Bond Act was drafted, this case presents an
additional issue: whether the overall amount of borrowing meets the current
emergency. Certain laws enacted during the Great Depression authorized
borrowing of amounts ranging from $5 million to $20 million “for the relief of
the unemployed and dependents in this State.” See, e.g., L. 1932, c. 251; L.
1933, c. 398; L. 1934, c. 255. Unlike those statutes, the Bond Act uses general
language. Once again, the stated purpose of the borrowing is “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).
That language calls into question the total amount of borrowing allowed
under the Emergency Exception. Simply put, because the proposed borrowing
is keyed to the fiscal exigency caused by COVID-19 -- that is, the revenue
50
shortfall the pandemic has caused through the end of FY2021 -- whether the
borrowing meets the emergency depends on what the exigency or shortfall
actually is.
The Act caps the total amount of borrowing at $9.9 billion. That amount
matches the projected revenue shortfall the State Treasurer reported on May
22, 2020. The Legislature relied on the best available evidence at the time it
held hearings in early June. By the end of June, improved estimates reduced
the projected shortfall by $700 million -- to $9.2 billion. 33 The trend through
July also suggested higher overall revenue than predicted, which would mean
the State’s shortfall was even less. And as the Treasurer noted on July 31,
2020 in her certification to the Court, the “forecast will most certainly change
in the coming weeks and months.”
To avoid borrowing in excess of what the law allows, and to be faithful
to the Emergency Exception, the State cannot issue bonds or borrow funds
beyond the actual fiscal exigency caused by the pandemic. In order to satisfy
those concerns, it will be necessary for the Governor or the Treasurer to certify
33
Citations for this paragraph appear in section II.A.
51
publicly the State’s projected revenue and consequent shortfall “as a result of
the COVID-19 pandemic” before each tranche of borrowing. 34
What this means in practice is that, even though the Bond Act allows for
borrowing of up to $9.9 billion, if the Governor or the Treasurer were to
certify that the fiscal shortfall due to COVID-19 was $7 billion, then the State
could borrow only up to that amount at the time.35 Based on the Treasurer’s
July 31, 2020 certification to the Court, which projected a shortfall of $9.2
billion as a result of the pandemic, the State could have borrowed only up to
that amount had it been able to borrow funds or issue bonds that day.
Changes in revenue projections may head in the opposite direction as
well, and may support a higher level of borrowing to meet the fiscal exigency
caused by the pandemic than current projections do. In no event, however, can
borrowing exceed $9.9 billion under the Act.
Once again, the Bond Act’s generic language, which is linked to the
State’s fiscal shortfall, calls for this added level of protection. Had the Act
instead specified particular efforts to meet the emergency -- for example, the
34
The quoted language matches the Treasurer’s certification to the Court.
See, e.g., Muoio Cert. ¶¶ 74-75.
35
We use an aggregate figure for simplicity. Projections and certifications
would necessarily address FY2020 and FY2021, respectively, as the Treasurer
has done to date.
52
borrowing of a specific sum for direct relief to the unemployed -- there would
be no need for the additional periodic certifications by the Governor or the
Treasurer that we require.
We encourage greater specificity for laws issued under the Emergency
Exception and for how borrowed money will be spent.
C.
We next consider how the Emergency Exception relates to the fiscal
clauses of the Constitution.
The Emergency Exception appears only in the Debt Limitation Clause,
not the Appropriations Clause. That distinction is the basis for plaintiffs’
argument that the exception applies only to the act of borrowing but not to the
appropriations process.
At oral argument, counsel for amici Ciattarelli and Webber thoughtfully
acknowledged that the Appropriations Clause does not stand in the way of
borrowing for appropriate purposes under the Emergency Exception. 36 We
agree. A contrary reading would lead to a situation in which the State could
borrow funds to meet an emergency but not be able to spend them. Also, an
overly literal reading could result in the State being able to borrow more
36
We recognize that amici have a different view of the type of borrowing
considered appropriate.
53
modest amounts of money to meet the needs of a relatively limited crisis --
which ultimately might not throw revenues and expenses out of balance, given
the size of the overall State budget -- yet not be able to borrow far larger
amounts in times of great crisis, when it would simply not be possible to
balance revenues and expenses.
Such a reading would be flawed for a number of reasons. First, it leads
to absurd results like the ones noted above, and courts must avoid interpreting
the Constitution and statutes in a way that creates absurd outcomes. See Sun
Life, 238 N.J. at 174 n.3; Perez, 218 N.J. at 214. Second, such a reading of the
fiscal clauses would also render the Emergency Exception meaningless when it
is needed the most. Courts avoid interpretations that render language in the
Constitution superfluous. Burgos, 222 N.J. at 203. Third, such a reading is
not what the Framers intended.
We consider the Emergency Exception in light of the language and
purpose of the fiscal clauses of the Constitution, considered as a whole, and
the Framers’ intent in drafting them. By doing so, we give effect fully and
fairly to the overriding purpose of the fiscal clauses. See Lance, 180 N.J. at
596; Trump Hotels, 160 N.J. at 527; see also Behnke, 13 N.J. at 26 (“The true
rule of construction ‘is not to consider one provision of the Constitution alone,
but to contemplate all.’” (quoting Downes, 182 U.S. at 312)).
54
As discussed previously, the history of the 1947 Constitutional
Convention revealed the Framers had dual concerns: to impose discipline on
the State’s fiscal practices and, at the same time, provide flexibility to respond
to emergencies caused by disaster. To achieve those ends, the Constitution
calls for a single fiscal year and an annual balanced budget, and it imposes
certain limitations on incurring debt. Yet the Framers also added an exception
to empower the State to respond quickly and effectively in times of true
disaster and emergency. They did so against the backdrop of the Great
Depression and the crises that befell our State during that time. In fact, debate
at the Convention reveals the Framers were thinking of large-scale relief
efforts in the face of great calamity when they added the Emergency Exception
to the Constitution. “The history of the times renders evident the purpose”
underlying the fiscal clauses. See Clayton, 52 N.J. at 146.
We are reminded that “[t]he polestar of constitutional construction is
always the intent and purpose” of the language of the Constitution.
Apportionment Comm’n, 125 N.J. at 382. The Framers did not intend for the
Appropriations Clause to bar what the Debt Limitation Clause allows; their
purpose was to enable the government to act to “meet an emergency caused by
disaster.” Read in tandem, and in light of the Framers’ intent, the fiscal
55
clauses allow the State to borrow and spend for that particular purpose and do
not pose a bar to the Bond Act.
To be clear, we do not overrule the holding in Lance. Lance concluded
that proceeds from contract bonds “do not constitute ‘revenue’ for the
purposes of . . . the Appropriations Clause[], and cannot be used to balance the
budget.” 180 N.J. at 593. That remains the law. Lance, however, did not
consider the Debt Limitation Clause, the Emergency Exception, or their
interplay with the Appropriations Clause. 37
IX. Conclusion
Statutes challenged on constitutional grounds can be declared void only
if their “repugnancy to the constitution is clear beyond reasonable doubt.”
Buckner, 223 N.J. at 14. Plaintiffs have not met that heavy burden. We
37
In light of our analysis, we need not consider a number of arguments the
parties have raised. Because the Emergency Exception to the Debt Limitation
Clause applies here, the Clause’s single-object requirement, like its
requirement of voter approval, does not apply. See N.J. Const. art. VIII, § 2, ¶
3(a). We do not rely on the federal funds exception in the first sentence of
N.J. Const. art. VIII, § 2, ¶ 3(e), and therefore do not need to interpret its
scope. Nor do we address the refinancing or refunding of bonds, an issue
raised by amici. See ibid. ¶ 3(c); State in Interest of A.A., 240 N.J. 341, 359
n.1 (2020); Bethlehem Twp. Bd. of Educ. v. Bethlehem Twp. Educ. Ass’n, 91
N.J. 38, 48-49 (1982). Finally, we decline to consider plaintiffs’ separation of
powers argument, raised for the first time in their reply brief. See State v.
Smith, 55 N.J. 476, 488 (1970); L.J. Zucca v. Allen Bros. Wholesale Distribs.,
Inc., 434 N.J. Super. 60, 87 (App. Div. 2014).
56
therefore conclude that the Bond Act is constitutional, subject to the limiting
principles set forth above.
JUSTICES LaVECCHIA, ALBIN, PATTERSON, FERNANDEZ-VINA,
SOLOMON, and TIMPONE join in CHIEF JUSTICE RABNER’s opinion.
57