New Jersey may use $1 billion of unspent general-obligation bond funds to pay down existing debt, under a plan by Treasurer Andrew Sidamon-Eristoff to reduce state costs.
The Treasury Department issued a request for proposals for a financial adviser to help the third-most indebted U.S. state “pay existing general-obligation debt service with excess bond proceeds or to redeem outstanding general-obligation bonds that mature in future fiscal years.”
New Jersey had $33.9 billion in debt as of June 30, 2009, including $2.5 billion in general-obligation bonds, according to its most recent debt report. Some of the unspent funds date to bond acts as far back as 1969, said Andrew Pratt, a spokesman for the department.
“For whatever reason there is money sitting there in various accounts,” Pratt said in a telephone interview today. “What we want to do is find out why and how this money can be used.”
Pratt said the process may have one of three outcomes: the money can’t be legally touched; it can be used to pay off existing debt; or it can be redirected to pay other capital costs without new borrowing.
Advisory firms have until Aug. 20 to submit bids for the contract, which is for one year with an optional extension for an additional year, according to the request posted Aug. 6 on the Division of Public Finance website. The request was reported earlier by the Bond Buyer newspaper.
Governor Chris Christie’s $29.4 billion budget for the fiscal year that began July 1 includes $2.5 billion spent on debt service. The plan closed a record deficit of $10.7 billion by trimming $1.3 billion from aid to schools and municipalities, cutting property-tax rebates and skipping a $3 billion pension payment.
Christie may face a $10.5 billion deficit for next fiscal year, the nonpartisan Office of Legislative Services projected last month. The governor won’t seek tax increases to close the gap, his spokesman, Michael Drewniak, said last month.