New Jersey is saddled with one of the greatest debt burdens in the country — frequently ranked in the top five states with most owed per person — and is looking to borrow even more.

The state has begun to issue $825 million worth of bonds to fund voter-approved projects, like public library improvements, technical education programs and school security upgrades,as well as needs that didn't get voter sign-off,like new trains and buses.

On top of these new bills the state will have to repay with interest to investors, state leaders have floated additional borrowing measures, such as a $500 million bond to remove lead drinking water pipes and a $600 million bond agreement to replace the Portal Bridge.

"It’s hard to escape making some of those investments, because it's more detrimental in the long term if you get further deterioration of your aging infrastructure," said Marcy Block, senior director of public finance at Fitch Ratings. "These are investments the state will have to make regardless of what the end cost will be."

Treasury spokeswoman Jennifer Sciortino agreed that the bonds will "address some of the state's most critical priorities," and added, "Time is of the essence, and market conditions are extremely favorable at the moment."

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This new borrowing previews Gov. Phil Murphy's winter budget address for the 2021 fiscal year, in which he will propose what to prioritize in a shrinking pile of money the state has for paying off what it already owes in bonded debt and ballooning pension and health care liabilities.

In the budget that ends June 30, 2020, New Jersey allotted almost 10% of its spending plan to pay off the principal and interest it owes to bondholders, or $4 billion of the $45.2 billion obligation, according to the state's 2018 debt report. Put into context, that's close to six times more than what New Jersey gives to NJ Transit.

New Jersey owes $4,154 per person in tax-supported debt, much higher than the nation's state median of $1,068, according to an analysis by credit ratings agency Moody’s Investors Service.

"New Jersey is the fourth-highest debt state in the nation, just looking at bonded debt per capita," said Baye Larsen, vice president at Moody’s. "But compared to what the state has outstanding, this new borrowing is a very small amount. We would not expect to see changes in their debt profile as a result of this borrowing."

"The state’s overall debt load will remain relatively unchanged," Sciortino said.

In early January, New Jersey began selling $325 million in general obligation bonds "backed by the faith and credit of the state" for projects that voters approved in 2017 and 2018. That amount includes $87.5 million to modernize public libraries and make branches more accessible to people with disabilities, or 70% of the $125 million voters approved in November 2017.

Murphy announced that libraries can apply for the first round of grants from March 9 to April 6.

The bonds will raise an additional $175 million of the $500 million for school projects that voters approved in 2018, which will pay for security upgrades, boosting vocational schools and water infrastructure improvements. Murphy said in October that his administration would prioritize the bond funding to reduce lead exposure in schools.

The rest of the bonds will pay for water supply facility improvements, environmental cleanup, conservation and land preservation, according to bond documents.

Borrowing not approved by voters

New Jersey's constitution says that in order to borrow amounts greater than 1% of the state's annual spending, voters must approve it in a general election. But political leaders have found ways around this rule.

A few weeks ago, the state issued $500 million in NJ Transit transportation bonds to finance 17 new locomotives and 600 buses that will go into service in the next few years. Transportation Trust Fund revenue, paid for by the gas tax, will pay off the bonds.

Voters didn't give their permission for these bonds, because they will be issued by the Economic Development Authority, an agency that courts said can issue bonds without placing the issue on the ballot. The plan, approved by the EDA and NJ Transit boards last month, is similar to borrowing agreements under former Gov. Chris Christie's administration. In his last year as governor, New Jersey borrowed close to $1 billion to renovate the Statehouse and build new Trenton offices, by structuring the bond payments as leases.

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This appropriation-backed debt is considered a bit riskier than voter-approved general obligation debt because it requires state Legislature approval every year to make sure the debt service is paid, said Larsen, of Moody's. General obligation debt, like that of the library programs, is automatically built into the budget and will still be paid automatically if there isn't a budget in place.

"But in New Jersey it's still relatively low-risk debt, one notch below GO bonds," Larsen said. "This debt pays for essential projects; the state has solid legal structures and an incentive to maintain market access to issue more debt. If they don't pay, they lose market access."

Upcoming debt

Murphy said in October that he wanted to offer voters a 2020 ballot question to bond $500 million to replace lead service lines and lead-based paint in New Jersey homes. That bond would cover about 25% of the estimated $2.3 billion it costs to remove all of New Jersey's lead lines.

Murphy said at the time he was "not married" to $500 million, but hoped the lead lines could be replaced through a combination of the bond proceeds, Department of Environmental Protection funds, federal grants and "modest" rate increases from water companies.

Senate President Stephen Sweeney, D-Gloucester, said in January that the Legislature and the Murphy administration are trying to find the right number.

"If we say we're gonna fix everything, we're going to fix the lead problem," Sweeney said. "[If] two years in, the money is expired and the lead problems still prevail, that's not a good situation to be in."

Murphy prioritized the borrowing in his 2020 State of the State address, saying, "Let’s work together, now, to come to an agreement on what this investment needs to be — so we can put it before the voters this November and can invest in our communities that much faster."

Meanwhile, the state needed funding to replace the troublesome Portal Bridge, a two-track bridge over the Hackensack River built in 1910. The bridge periodically gets stuck and doesn't close properly after opening for ships to pass underneath, causing commuting headaches.

In order to help fund the $1.5 billion plan, the NJ Transit board approved an agreement with the EDA to issue $600 million in bonds that would be repaid by state Transportation Trust Fund revenues.

That's almost double the state's original pledge of $336 million, but federal officials said New Jersey would have to add more of its resources in order to receive federal funding it needs.

"New Jersey has completed every possible administrative step short of the actual issuance of the bonds," Murphy's office said in a press release. Murphy joined U.S. Reps. Tom Malinowski, Mikie Sherrill and Bill Pascrell Jr. and other legislative leaders at the NJ Transit station in Secaucus in August to urge the Trump administration to help fund the Portal Bridge replacement.

Ashley Balcerzak is a reporter in the New Jersey Statehouse. For unlimited access to her work covering New Jersey’s legislature and political power structure, please subscribe or activate your digital account today.

Email: balcerzaka@northjersey.com Twitter: @abalcerzak