WNYC's Bob Hennelly is an award-winning investigative journalist. While at WNYC he has reported on a wide gamut of major public policy questions ranging from immigration and homeland security to power outages and utility mergers.
Global Public Debt Fear Hits New Jersey But Revenues Trend Up
Saturday, January 15, 2011
Market watchers say not since the 2008 meltdown have municipal and state governments had such a hard time finding buyers for the bonds as they did this week. That global anxiety over public debt was felt by the state of New Jersey.
This week the New Jersey Economic Development Authority hoped to sell $1.8 billion in bonds to help retire borrowing that had been tied to interest speculation during the McGreevey Administration.
But after weeks of a sliding market for government bonds, New Jersey found it had to pull $700 million of the offering off the market. For now, investors' skepticism on government bonds will make borrowing even more expensive, putting more pressure on local and state budgets.
New Jersey Treasury spokesman Andy Pratt said the state is holding more than $4 billion in speculative variable interest swap agreements. Most of them are concentrated in borrowing by the state's School Construction Authority.
The SCA came under intense criticism from the State Inspector General, who reported in 2005 that the Authority was vulnerable to "mismanagement, fiscal malfeasance, conflicts of interests and waste fraud and abuse." Most of the urban school districts projects were never completed.
In 2011, Jersey is already spending $2.8 billion dollars just to service its past debt. That's up by $200 million from the prior year.
This week, the state did get more upbeat news from its latest revenue numbers. Revenues from the income tax were running 11 percent ahead of projection. Corporate taxes came in 22 percent ahead of Treasury's estimates. Sales tax numbers continued to disappoint.
Governor Christie will present his budget next month. Most estimates suggest the state faces roughly the same $10 billion plus budget gap it did last year.