Threatening a Securities and Exchange Commission complaint for concealing a budget hole of up to $4 billion, State Sen. Declan O’Scanlon (R-Little Silver) wants State Treasurer Elizabeth Muoio to correct data shared with rating agencies that he calls “grossly misleading and incomplete financial disclosures.”
“After reviewing Treasury’s financial disclosures, I felt like someone at a disreputable used car lot had tried to sell me a car without telling me it was recovered from a flood,” said O’Scanlon, the ranking Republican on the Senate Budget and Appropriations Committee.
O’Scanlon said he was surprised when S&P Global increased New Jersey’s credit rating last summer, saying it “seemed obvious that either the agency didn’t fully appreciate the $4 billion structural budget hole, or its financial models or analysts inappropriately shrugged it off.”
“Despite moral, and arguably legal, requirements, Treasury has thus far failed to fully and reasonably portray the State’s financial condition to financial markets and the public,” said O’Scanlon. “Most critically, the documents failed to explain approximately $4 billion of purposeful and destabilizing financial ‘cliffs’ built into next year’s State budget.
Among O’Scanlon’s allegations: a failure to disclose a $1.2 billion STAY NJ appropriation in the next budget, a depletion of the state’s debt defeasance and prevention fund, and “rapidly dwindling cash balances.”
“I found the material grossly misleading—both because of what it states, and because of what it omits: information that any reasonable rating agency, financial analyst, or member of the public who cares about State finances would expect to be told,” he told Muoio in a letter. “The $4 billion budget hole facing the next Governor and Legislature has been identified by credible New Jersey budget experts who focus their time on understanding New Jersey’s finances. Only Treasury seems to be living in denial.”
A spokesman for the State Treasurer’s office said they “stand by our robust and fully transparent communication with the rating agencies.”
“We presented them with a complete picture of the State’s finances, and rating agencies have access to all details of the State’s budget as well as unlimited ability to ask questions and seek additional information, which they do throughout the year,” the spokesman stated. “We believe any implication that we have lied to or mislead the agencies is nothing more than political posturing.”
