The money would be offered as loans, to be repaid with interest at the same rates that the Fed now offers to states. But if by June 30, 2022, the borrowing governments could show that their budgets were “truly balanced,” and they were building up adequate rainy day funds, the loans would be forgiven and the borrowers could keep the money.
In 2004, as former Gov. Jim McGreevey, a Democrat, moved to borrow to enable spending increases, he was sued by Leonard Lance, a Republican member of the State Senate, who was later elected to Congress.
The state Supreme Court permitted the borrowing that year, but made it illegal to do so in subsequent budgets without voter approval.
This year, the Supreme Court cited the extraordinary health emergency and the fiscal crisis caused by the coronavirus, which has led to more than 16,000 deaths in New Jersey, when it cleared the way for the borrowing to go forward.
New Jersey delayed approval of its fiscal year budget by three months during the early throes of the pandemic, passing a stopgap spending measure in late June. The budget that was approved on Thursday, which is widely expected to be signed into law by Mr. Murphy, covers only nine months.
Mr. Lance, who lost his seat in Congress in 2019, said the state should have been permitted to borrow in the fiscal year in which the crisis struck, but not during the year that starts Oct. 1.
“This is a terrible burden that will be borne by our children,” he said.
In August, more than 90 economists and economic policy experts in New Jersey released a joint letter urging the state not to use what they called “counterproductive” cuts to balance the budget.