Case Title: New Jersey Republican State Committee v. Murphy

Citation: 

Docket Number: 

State: new-jersey

Court: New Jersey Supreme Court

Date: 2020-08-12T00:00:00Z

Document:
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”).

                                                1
       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.
                                               2
        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

                                                4
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

                           1
            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.

                                         7
                        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.

                                         11
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,