How New Jersey Averted a Pandemic Financial Calamity

“Even as we continue to confront the pandemic’s challenges, we cannot — and we will not — sit still,” the governor said Monday in a statement. “Now is the time to put in motion a plan to spark New Jersey’s recovery and get our economy moving forward.”

A key pillar of the budget is a proposal to fully fund the state’s public sector pension obligations for the first time since 1996. If adopted, Ms. Muoio said, the allocation would eventually result in cost savings to the state.

The state has not set aside the full amount of its pension obligation for 25 years, resulting in $4 billion in extra debt, Ms. Muoio said. Under a deal brokered with the Legislature, Mr. Murphy had been on track to fully fund the state’s share by next year. But the spending plan released on Tuesday accelerates that commitment.

Under the plan, the state’s surplus, which proved to be a vital resource during the first wave of the pandemic, would not grow, state officials said, but would remain at about the same level it was at the end of 2020.

“I think we all know right now what a rainy day looks like,” Ms. Muoio said.

In November, the state borrowed $4.29 billion to cover its operating costs, a move that Republicans unsuccessfully tried to block, citing the burden it would place on future generations of taxpayers. The state is not expected to begin paying interest on that debt during the fiscal year covered by the proposed budget, administration officials said.

James W. Hughes, the former dean of the Edward J. Bloustein School of Planning and Public Policy of Rutgers University, said the state’s decision to turn to borrowing made sense at the time.

“It’s so overused, but whatever the term is — unprecedented, uncharted waters — five, six months ago that was truly the case,” Mr. Hughes said.