TRENTON, NJ — New Jersey may have to give back $1.8 billion it received in federal coronavirus relief funds after the U.S. Treasury issued new guidance restricting how those funds can be used.
Gov. Phil Murphy said the state received that guidance Wednesday and said it contradicts what states were told previously about the relief funds.
“I was assured that funding from the CARES Act would be able to be used flexibly by states,” Murphy said Thursday during his daily coronavirus news conference. “Those assurances, apparently, were empty.”
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The Coronavirus Aid, Relief, and Economic Security (CARES) Act that passed in late March provided more than $2 trillion in economic relief to ease the financial impact of the outbreak, which led to the stay-at-home order Murphy issued March 21.
The aid to states was part of the $150 billion Coronavirus Relief Fund that was to help state and local governments weather the crisis.
Nearly 100,000 New Jersey residents had tested positive for the coronavirus through Thursday morning, and 5,368 people had died from complications of the virus. Read more: NJ Coronavirus Updates: Here’s What You Need To Know
Matt Platkin, chief counsel for Murphy’s administration, said the guidance released by the Treasury Department leaves not only the state but counties that were seeking a combined $1.6 billion in assistance in the lurch.
“For more than a month, the governor has been calling for block grant direct cash assistance,” Platkin said, because of the dramatic declines in revenue and the costs of mitigation efforts.
“What it boils down to is you can’t use it (the CARES funding) on anything that you budgeted for last year,” he said. “We have expenses that are new, (but) a lot of those are reimbursible through other federal programs.”
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“So this money that is sitting in an account — literally billions of dollars — if we can’t use it for anything that was budgeted last year, in a very strict interpretation, we’re going to have to return most of it,” Platkin said. “As we’re falling off a fiscal cliff, this money that was put into the CARES Act as recognition for what states and governors have done to address the pandemic is now of little to no use to us.”
Platkin and Murphy said they are working with New Jersey’s congressional delegation and other members of Congress “to make it clear this guidance doesn’t reflect what’s happening on the ground.”
Murphy also responded to remarks by Senate Majority Leader Mitch McConnell, who suggested states should just let themselves go bankrupt instead.
“He’s dead wrong,” Murphy said in a brief interview on CNN Thursday evening. “It’s incredibly irresponsible” for McConnell to suggest states go bankrupt “in the midst of this health care crisis.”
In a published statement, Murphy said, “I have been clear for weeks that if we do not get significant, direct and flexible financial support from the federal government, we will be forced to make many difficult decisions,” referring to the state budgeting process that has been stretched out to Sept. 30.
On CNN, he was blunt: “We will have to gut the very programs that are critical to taking care of our residents.”
The financial impacts will have significant ripple effects that could have deep consequences for school districts across the state that are are wrestling with budgets for 2020-21 right now. They have no idea whether they will receive the funding that was promised during Murphy’s budget address in March, or if they will see drastic reductions — cuts that for some could be a final blow as they struggle with cuts resulting from the S2 mandate.
“(The) $1.8 billion was never enough to begin with, but at the very least we should be able to support our people and help keep the funding that municipalities and school districts are expecting whole,” Murphy said.
The state’s “rainy day fund” of money put aside for emergencies will only go so far, he said.
“If the federal government doesn’t do its job and support New Jersey families, we may not be able to keep our teachers, cops, firefighters and paramedics employed — the very people who are on the front lines every day,” Murphy said. “Sadly, the message from Washington to our first responders and to our educators is clear: As you work tirelessly to stop this pandemic, to keep people safe, our national leadership thinks you are not essential, that you should fear for your jobs.”
“Unlike the federal government, which can run trillion-dollar deficits every year, New Jersey can’t,” he said.
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