Warns that Using CARES Act Funds to Pay for Existing State Employees Could Be Problematic & Require Return of Money to Federal Government
Senate Republican Budget Officer Steven Oroho (R-24) sent a letter today to Governor Phil Murphy warning that the administration’s plans to use $450 million of CARES Act funds to pay for existing State employees could be problematic.
Sen. Steven Oroho warned Gov. Phil Murphy that plans to use $450 million of CARES Act funds to pay for existing State employees could be problematic, and urged those funds to be reallocated to boost underfunded grant programs that support small businesses and nonprofits. (©iStock)
He urged those funds to be reallocated to support struggling small businesses and nonprofits that are engines of the Garden State economy and provide critical social services to local communities.
This comes as the New Jersey Economic Development Authority is rolling out another limited round of business grants supported by CARES Act funds. Oroho said the sum of New Jersey’s grant programs has been inadequate, noting that Pennsylvania has provided much more support to its business community.
The full text of the letter from Sen. Oroho to Gov. Murphy is included below:
October 19, 2020
Dear Governor Murphy,
I am writing to encourage you to reallocate $450 million of federal CARES Act funding that you have budgeted for paying the salaries of State employees. Your intended use of $450 million of CARES Act funding in this manner crowds out the immediate needs of small businesses and nonprofits that have struggled mightily to survive and address COVID-19 – some unsuccessfully – and it risks a potential adverse finding of auditors and a forced return of the funding to the federal government.
We understand and appreciate that early on in the COVID-19 emergency you were concerned that impacts on the State Budget could be catastrophic. To address that concern, your administration has sought flexibility in the use of CARES Act funding to address State Budget revenue shortfalls – something expressly prohibited by the CARES Act. You have seized upon a perceived loophole in guidance provided by the U.S. Treasury Department which indicates that it would be a lawful use of CARES Act funds to pay the salaries of existing employees engaged in COVID-19 activities. To this end, you have earmarked $450 million of CARES Act funds to pay State employee salaries – effectively substituting federal relief funds for other State revenues, thereby providing budget relief.
However, since the dark days of March and April, our State’s financial outlook has improved remarkably. Income and sales tax collections are well ahead of budget projections, which will build upon the planned $2.3 billion surplus that was planned in the current budget. Our State is no longer in the position of needing to seriously consider the creative manipulation of CARES Act funds for budget relief.
Aside from the allocation of CARES Act funds to State Budget relief being poor public policy, there is a risk that this creative washing of funds into the State Budget will trigger audits and a requirement to return some of these federal funds. An inspection of an as-yet-unavailable accounting of which State employee salaries are being paid for with the $450 million may demonstrate that listed employees were not truly dedicated to addressing COVID-19 response or relief efforts. Additionally, many employees whose services have been related to COVID-19 are already paid for with other federal funds, including employees at the Department of Labor, Department of Human Services, and Department of Health. If the State uses CARES Act money to pay their salaries, we will lose other federal financial support.
In contrast to the improving State financial outlook, the outlook for small businesses and nonprofits has clearly worsened. They, more so than the State, need access to additional assistance that can be offered using our limited CARES Act funds.
Small businesses and nonprofits are engines of our economy and provide critical social services to our communities. Failing to prioritizing CARES Act money in their support is short-sighted public policy. For these reasons, I strongly urge you to reconsider the allocation of $450 million of CARES Act funds that is currently earmarked for one-time budget relief and paying the salaries of existing employees. Instead, you should reassign this money to help businesses and nonprofits that are suffering across New Jersey. This suggested use of CARES Act funds is better from a long-term policy perspective, and it will inoculate us from potential findings that New Jersey abused CARES Act funds for its own short-term budget relief.
If you do not agree that a reallocation is appropriate and intend to move forward with prioritizing short-term budget relief over the needs of suffering businesses and nonprofits, we respectfully request that you immediately personally review, and share publicly, a list of the State employees’ salaries that will be paid for with federal funds.
Senator Steven Oroho
Republican Budget Officer
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