Breaking News: Supreme Court Unanimously Upholds the Constitutionality of the COVID-19 Emergency Bond Act

New Jersey Republican State Committee v. Murphy, 243 N.J. 574 (2020). As discussed here, the Supreme Court directly certified a challenge to the recently adopted COVID-19 Emergency Bond Act. After hearing oral argument last week, the Court moments ago issued a unanimous opinion by Chief Justice Rabner that upheld the constitutionality of the Act.

The Court’s 57-page opinion described in detail the history, going back to the 1844 Constitution, of key provisions of the current 1947 New Jersey Constitution at issue: the Appropriations Clause of Article VIII, section 2, paragraph 2, the Debt Limitation Clause of Article VIII, section 2, paragraph 3, and the “Emergency Exception” to that latter clause (“to meet an emergency caused by disaster”), which was adopted “against the backdrop of the Great Depression and the crises that befell our State during that time.”. Chief Justice Rabner then provided an exhaustive discussion of the current provisions and the case law addressing them. Finally, he noted that “[s]tatutes challenged on constitutional grounds are entitled to a strong presumption of validity” and will be voided only if its “repugnancy to the constitution is clear beyond reasonable doubt.”

The Court perceived and addressed three 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 parties “agree[d] that the COVID-19 pandemic is a disaster within the meaning of the exception.”

Chief Justice Rabner concluded that, “[i]n practical terms, 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.” Thus, the State “may borrow to provide for public services like education, police, fire, first aid, child welfare, and prisons, among other services– to secure the continued functioning of government.” But not all borrowing would “meet” the emergency. Using borrowed funds to subsidize a new sports arena would not “respond to the fiscal exigencies caused by the COVID-19 Pandemic” or “preserve” the State’s “fiscal integrity,” in the words of the Bond Act.

A contrary approach, limiting borrowing to “health aspects of the pandemic, such as respirators and field hospitals,” would not “meet” the emergency, the Court said. “Nor does that approach find support in the words of the Constitution, which does not limit borrowing in such a stringent way at a time of continuing emergency caused by disaster.”

The Court imposed a caveat on its approval of the Bond Act, however. “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.”

Overall, the Bond Act survived the attacks on it. Subject to the caveat, bonding under the Act may proceed.