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Christie bolsters new budget with $2.6 billion short-term loan

Thursday, July 17, 2014   (0 Comments)
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Christie bolsters new budget with $2.6 billion short-term loan

Crunched for cash, New Jersey officials have taken out a short-term loan of $2.6 billion to pay the first bills coming due in the state budget. Gov. Chris Christie's new $32.5 billion budget took effect July 1. His administration took out a $2.6 billion loan from J.P. Morgan on the same day as a "cash flow facility to help meet the state’s working capital needs," according to the state Treasury Department. This year's $2.6 billion short-term loan was bigger than the $2.1 billion credit line Christie took out at the start of the previous fiscal year.

Short-term loans are nothing new as a budget Band-Aid. New Jersey collects most of its state revenue late in the game every year, during the April-to-June quarter, leading governors since 1991 to take out "bridge loans" early in the fiscal year, when tax collections are scarcer. But the practice of borrowing right at the beginning of the fiscal year has only been around since the post-recession days of Christie's Democratic predecessor, Gov. Jon Corzine. Santarelli said that the interest rate on the $2.6 billion loan resets every month. For July, the monthly interest rate is 0.522 percent, he said. Such loans usually are repaid within six months.

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