Cities Warn of Crisis After Murphy Freezes $105M in Aid

Citing ongoing budget concerns, Gov. Phil Murphy has frozen $105 million in “transitional aid” for some of the most distressed towns and cities in New Jersey.

The suspension of the funds means struggling municipalities that had been promised financial assistance to help balance their budgets are suddenly coming up short.

According to Mike Cerra, the assistant executive director of the New Jersey State Leagues of Municipalities, freezing the funds is not a wise move. These are municipalities that have been determined by the state to be in serious fiscal distress and need this funding to meet immediate budgetary needs.

He said Moody’s Investor’s Service has labeled the action as “credit negative” for the affected communities.

“They’re indicating that they see it as potentially a cause for downgrading at some point down the line in the future if it’s not addressed immediately," he said.

Cerra noted anywhere from nine to 15 towns and cities could be affected by the funding freeze.

“We’re not exactly sure how many towns are impacted by it at this point because the application process is ongoing," he said.

Communities that recently received transitional aid include Atlantic City, Camden, Penns Grove, Seaside Heights and Trenton.

He said despite assurances that the state Treasury Department is carefully monitoring the situation and would act quickly if there’s a crisis, “analysts who take a look at this don’t consider good intentions, they don’t consider what may happen, they look at the bottom line.”

He said the problem is “we’re talking about several towns that operate budgets on a calendar year who have adopted budgets under the assumption, at the direction of the state, to assume these revenues in their budget who are now being told the funding is suspended.”

Cerra said this creates a potential budgetary shortfall, it does create a negative viewpoint from rating agencies, and it really puts taxpayers in these communities at risk.

“It’s to preserve their fiscal integrity and to provide a means to remove themselves from transitional aid. Unfortunately, this creates the same cycle that got them in the situation in the first place. Our call to the Murphy administration is for them to prioritize transitional aid for these communities.”