TRENTON – Senate Majority Leader Barbara Buono and Budget and Appropriations Committee Chairman Paul Sarlo said they hope the Governor would be more circumspect of the very real consequences of his speech after his insinuation that New Jersey is on the verge of bankruptcy cut short a state bond sale, costing taxpayers an unknown amount in budgeted savings.
According to Bloomberg News, a $1.2 billion state bond sale yesterday had to be cut by more than 40 percent when market demand plummeted minutes after the Governor made the “bankrupt” comment to a town hall audience in Paramus. Wall Street sources said the market’s reaction was directly tied to the Governor’s words; one called the Governor’s gaffe “a rookie mistake.”
“The Governor’s remarks yesterday were not just reckless, but factually incorrect,” said Buono (D-Middlesex). “No one denies that we face structural budget problems, but the state is in no danger whatsoever of defaulting on its obligations. States cannot declare bankruptcy and as a lawyer the Governor knows it. Let us be very clear: New Jersey makes good on its promises. I hope the Governor’s ‘rookie mistake’ makes him stop before he speaks to think about the potential impact of his words.”
“Strong words on YouTube video may increase the Governor’s national political capital, but they are having a very chilling impact on the state’s finances,” said Sarlo (D-Bergen/Essex/Passaic). “It’s not like Paramus is separated and blocked off from the rest of civilization. The Governor was barely 20 miles from Wall Street – word travels fast in the financial world.”
The leaders said that the impact on the sale’s failure would have direct implications on the state’s finances, as the Governor’s current state budget relies upon gleaning savings through refinancing of debt. Cutting short the sale now means those savings numbers may not be attainable, as a future sale will most likely require the refinancing to come at a higher interest rate.
They said the fiscal impact of the failed bond sale compounds other losses of revenue due to the Governor’s bombastic style, including $400 million in lost Race to the Top funds and $3 billion in federal monies for the deep-sixed ARC tunnel.
Buono and Sarlo noted that the head of bond trading at Deutsche Bank Private Wealth Management and the CEO of New York-based Miller Tabak Asset Management were among those critical of the Governor’s impact on the bond sale. Yet, one administration spokesman said the experts’ analysis was “completely bogus” while another said neither was “a serious student of the bond market.”
A Treasury spokesman said the state would go back out in the bond market, “if and when market conditions turn favorable.” Buono and Sarlo suggested a day when the Governor has no scheduled public events.