Murphy Vetoes Nonprofit Loan Program Proposal

By Christian Wade | The Center Square contributor, The Center Square New Jersey

February 10, 2023

(The Center Square) — Gov. Phil Murphy vetoed a bill backed by top Democratic leaders that would have required the state to create a loan program for nonprofit groups, calling the plan "unworkable" as proposed.

The proposal, which was approved by the state Assembly in December, would authorize the New Jersey Economic Development Authority to provide financial assistance, in the form of loan guarantees, to support the construction of new physical spaces by nonprofit organizations.

The bill was backed by top democratic officials, including Assembly Speaker Craig Coughlin, D-Middlesex, who argued nonprofit organizations would be able to repay the loans by generating additional income through expanded box office sales, private donations, sponsorships, or other sources of revenue.

In a veto message, Murphy said he supports the idea of providing additional funds to nonprofits to build new facilities -- calling it a "noble purpose" for the authority, but said the proposal is "unworkable in its current form."

"A more appropriate approach to providing nonprofit organizations with financial assistance to support the construction of new physical spaces is through the annual budget process or administration of federal relief funds," Murphy said.

Murphy said his concerns with the legislation include projects financed by the authority would be subject to state labor laws requiring workers employed in a publicly backed construction project be paid the prevailing wage rate, which would drive up overall costs.

Additionally, applicants for the loans would need to demonstrate the economic feasibility of the project and a reasonable expectation of loan repayment.

"These criteria are of course totally appropriate when the EDA is operating in its traditional role of providing economic assistance to for-profit businesses; but are not adaptable to a program intended to support nonprofits, which may not be able to overcome the cost and administrative burdens," Murphy wrote in his veto message.

A fiscal note attached to the bill by the Office of Legislative Services said a review determined the bill would result in a "marginal cost increase" for the development authority, as well as a "potential increase in expenditures" if a nonprofit defaults on a loan guaranteed by the agency.

"In the event that an approved borrower defaults on a guaranteed loan, the EDA would also be expected to incur increased expenditures associated with the repayment of the outstanding balance of the guaranteed portion of the loan," the agency wrote.

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