Bill Text: NJ A4577 | 2020-2021 | Regular Session | Introduced


Bill Title: Establishes State Debt Reduction Fund.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2020-08-25 - Introduced, Referred to Assembly Appropriations Committee [A4577 Detail]

Download: New_Jersey-2020-A4577-Introduced.html

ASSEMBLY, No. 4577

STATE OF NEW JERSEY

219th LEGISLATURE

 

INTRODUCED AUGUST 25, 2020

 


 

Sponsored by:

Assemblyman  ROY FREIMAN

District 16 (Hunterdon, Mercer, Middlesex and Somerset)

 

 

 

 

SYNOPSIS

     Establishes State Debt Reduction Fund.

 

CURRENT VERSION OF TEXT

     As introduced.

 


An Act establishing the State Debt Reduction Fund, amending P.L.1990, c.44, and supplementing Title 52 of the New Jersey Statutes.

 

     Be It Enacted by the Senate and General Assembly of the State of New Jersey:

 

     1.    (New section)    The Legislature finds and declares that:

     a.     The Legislature of the State of New Jersey has a responsibility to maintain the fiscal health of the State, and by extension, the economic well-being of the citizens of the State;

     b.    Despite the Legislature's efforts in recent years to fulfill this responsibility, the coronavirus 2019 (COVID-19) pandemic has compromised the State's fiscal health and ability to preserve the economic well-being of its citizens;

     c.     To repair the fiscal health of the State, the Legislature has authorized the issuance of nearly $10 billion in debt that would not mature for 35 years;

     d.    The above amount, authorized for debt issuance, is based on forecasted revenue shortfalls in Fiscal Years 2020 and 2021, as laid out in a report released by the State Treasurer in May 2020;

     e.     This amount does not account for any future events that may improve the State's fiscal position, such as a rebound in revenues or the receipt of federal aid; and

     f.     The issuance of this debt through the establishment of a State Debt Reduction Fund is necessary to improve the State's fiscal health and safeguard the economic well-being of the citizens of the State.

 

     2.    (New section)    There is hereby created within the General Fund a restricted reserve fund to be known as the State Debt Reduction Fund.  The State Treasurer shall credit to the State Debt Reduction Fund, on or before December 31 of each year, and in addition to any sums appropriated to the State Debt Reduction Fund, the amounts determined pursuant to section 3 of P.L.    , c.    (C.        ) (pending before the Legislature as this bill).  The State Treasurer shall provide a report of the status of the State Debt Reduction Fund to the Governor and to the Legislature pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1) periodically, but not less often than annually on or before January 15.

 

     3.    (New section)    The amount to be annually credited to the State Debt Reduction Fund shall be made in up to four credits in the following manners:

     a.     The amount of the credit to the State Debt Reduction Fund attributable to surplus revenue shall be an amount equivalent to 30 percent of the excess, if there be any, of the amount determined in subsection b. over the amount determined in subsection a. of section 3 of P.L.1990, c.44 (C.52:9H-16).  If actual revenue collections pursuant to the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., for the fiscal year immediately preceding the fiscal year in which a credit to the State Debt Reduction Fund is required are less than the amount of revenue collections pursuant to that act as certified by the Governor upon approval of the annual appropriation act for that fiscal year, the amount of the credit to the State Debt Reduction Fund attributable to surplus revenue shall exclude the difference between the amount so certified and the actual collections.

     b.    The amount of the credit to the State Debt Reduction Fund attributable to undesignated fund balance shall be an amount equal to 30 percent of the amount of undesignated fund balance at the close of the fiscal year immediately preceding the fiscal year in which a credit to the State Debt Reduction Fund is required, according to the annual financial report of the General Fund for that fiscal year.

     c.     The amount of the credit to the State Debt Reduction Fund attributable to unexpended appropriations shall be an amount equal to 30 percent of any unexpended appropriations that would otherwise lapse into the State Treasury at the close of the fiscal year.

     d.    The amount of the credit to the State Debt Reduction Fund attributable to federal COVID-19 relief funding shall be an amount equal to 30 percent of any grant of money received by the State from the federal government that is intended to provide aid to the State to respond to the public health or economic emergency caused by the COVID-19 pandemic, and that was not appropriated or anticipated by the State on the effective date of this act.  If the State is not allowed to use a federal grant in the manner required under this act, the credit required by this subsection shall be paid from the General Fund from amounts that would otherwise have been expended for purposes allowable under the federal grant.

 

     4.    (New section)    The Governor shall include in the Governor's annual budget message to the Legislature an estimate of the credit to be made to the State Debt Reduction Fund as a reduction of the estimated undesignated fund balance in the General Fund as of July 1 of the fiscal year for which the Governor is making the Governor's budget recommendations.

 

     5.    (New section)    Balances in the State Debt Reduction Fund may be appropriated by the Legislature only for the purpose of retiring and defeasing the State's bonded debt and the costs thereof.

     6.    Section 3 of P.L.1990, c.44 (C.52:9H-16) is amended to read as follows:

     3.    The amount to be annually credited to the Surplus Revenue Fund shall be determined by the State Treasurer in the following manner:

     a.     [He] The State Treasurer shall identify the amount of General Fund anticipated revenue certified by the Governor upon approval of the annual appropriation act for the fiscal year immediately preceding the fiscal year in which a credit to the "Surplus Revenue Fund" is required.

     b.    [He] The State Treasurer shall determine, from the annual financial report of the General Fund for the fiscal year immediately preceding the fiscal year in which a credit to the "Surplus Revenue Fund" is required, the amount of revenue actually deposited in the General Fund in that fiscal year.  If in any preceding fiscal year for which a determination under this subsection is to be made, there is a law enacted which will increase the revenue to the General Fund, the yield from that increase for that preceding fiscal year in which the increase is in effect shall be disregarded in determining the amount to be credited to the "Surplus Revenue Fund."

     c.     The amount of the credit to the "Surplus Revenue Fund" shall be an amount equivalent to [50%] 30% of the excess, if there be any, of the amount determined in subsection b. of this section over the amount determined in subsection a. of this section.  If actual revenue collections pursuant to the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., for the fiscal year immediately preceding the fiscal year in which a credit to the "Surplus Revenue Fund" is required are less than the amount of revenue collections pursuant to that act as certified by the Governor upon approval of the annual appropriation act for that fiscal year, the amount of the credit to the "Surplus Revenue Fund" otherwise calculated pursuant to this section shall be reduced by the difference between the amount so certified and the actual collections.

(cf: P.L.1990, c.44, s.3)

 

     7.    Section 4 of P.L.1990, c.44 (C.52:9H-17) is amended to read as follows:

     4.    The Governor shall include in [his] the Governor's annual budget message to the Legislature an estimate of the credit to be made to the "Surplus Revenue Fund" as a reduction of the estimated undesignated fund balance in the General Fund as of July 1 of the fiscal year for which [he] the Governor is making [his] the Governor's budget recommendations.  The amount estimated by the Governor for this purpose shall not be less than [50%] 30% of the difference between the amount certified by [him] the Governor upon approval of the annual appropriation act for the fiscal year immediately preceding the fiscal year for which [his] the Governor's budget recommendations are being made and the amount of revenue anticipated for that preceding fiscal year as reflected in the annual budget message for that preceding fiscal year.

(cf: P.L.1990, c.44, s.4)

 

     8.    This act shall take effect immediately.

 

 

STATEMENT

 

     This bill establishes within the General Fund a restricted reserve fund to be known as the State Debt Reduction Fund.  Balances in the State Debt Reduction Fund may be appropriated by the Legislature for the purpose of reducing the State's bonded debt.  The State Treasurer is to credit to the State Debt Reduction Fund, on or before December 31 of each year, and in addition to any sums appropriated to the State Debt Reduction Fund, the amounts determined pursuant to this bill.  The State Treasurer is to provide a report of the status of the State Debt Reduction Fund to the Governor and to the Legislature periodically, but not less often than annually on or before January 15.

     The amount to be annually credited to the State Debt Reduction Fund is to be made in up to four credits as follows: (1) a credit in an amount equal to 30 percent of any surplus revenue, calculated in the same way as deposits to the Surplus Revenue Fund; (2) a credit in an amount equal to 30 percent of the amount of undesignated fund balance at the close of the preceding fiscal year; and (3) a credit in an amount equal to 30 percent of any unexpended appropriations that would otherwise lapse into the State Treasury at the close of the preceding fiscal year; and (4) a credit in an amount equal to 30 percent of any grant of money received by the State from the federal government that is intended to provide aid to the State to respond to the public health or economic emergency caused by the COVID-19 pandemic, and that was not appropriated or anticipated by the State on the effective date of this act.

     This bill also reduces, from 50 percent to 30 percent, the amount of surplus revenue that must be deposited in the Surplus Revenue Fund.  Accounting for the required deposit into the State Debt Reduction Fund, the amount of surplus revenue available for appropriation is reduced from 50 percent to 40 percent.

     The coronavirus 2019 (COVID-19) pandemic has compromised the State of New Jersey's fiscal health and ability to preserve the economic well-being of its citizens.  To repair the fiscal health of the State, the Legislature has authorized the issuance of nearly $10 billion in debt that would not mature for 35 years.  This amount is based on forecasted revenue shortfalls in Fiscal Years 2020 and

2021, as laid out in a report released by the State Treasurer in May 2020.  This amount does not account for any future events that may improve the State's fiscal position, such as a rebound in revenues or the receipt of federal aid.  The issuance of this debt through the establishment of a State Debt Reduction Fund is necessary to improve the State's fiscal health and safeguard the economic well-being of the State's citizens.

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