Newark Faces $143.5M Deficit Without Federal Aid, Officials Say

Newark is facing imminent crisis if federal dollars don't replenish what COVID-19 has drained from the city's coffers, officials said Thursday at NJPAC.

NEWARK, NJ — Amid conflict between the states and federal government over additional aid for areas of the United States most crippled by the coronavirus, New Jersey’s largest city is saying it could suffer a $143 million budget impact without support. 

The announcement comes as Congress is set to vote on a bill co-written by Senator Bob Menendez to provide states, counties and local governments with an additional $500 billion in additional stabilization, the likes of which cannot come soon enough for a hard-hit Newark. The city continues to lead Essex County and the state in positive cases at a whopping 4,415 infections and more than 300 deaths. 

Since reporting its first case of the coronavirus on March 14, the city has spent about $11 million in related costs like free PPE for residents and emergency grocery relief. Officials said they project an additional $32.6 million in spending through the summer, not including the expansion of testing, which could cost an estimated $11 million.

The COVID-19-related costs are compounded by a projected short-term $110 million in revenue losses by the end of the summer, a significant hit to the city’s $725 million annual budget. Suspension of parking enforcement, delayed tax payments and fewer municipal court fines are putting the city in a bind. 

While the last federal stimulus bill, the CARES Act, did provide $150 billion for states and local governments with at least 500,000 residents, Newark was not eligible to receive direct funding with a population of only 282,000. Mayor Ras Baraka called upon Congress to not only pass legislation to replenish state funds but allocate them based on which states have been most gutted by the public health crisis. 

Menedez’s bill proposes distribution of the $500 billion based on population, infections and revenue losses. On Saturday, Gov. Phil Murphy warned of “historic” layoffs at the state, county and local levels, a reality that Newark officials echoed as they face the possibility of severely scaling back services and furloughing employees. 

The bill has faced pushback from some GOP lawmakers, including senior leader Mitch McConnell, who on Wednesday proposed states should “go bankrupt” as a means of getting through the crisis financially. Baraka said the resistance from Republicans is retaliation against states who have called the White House to task in doing more to combat the crisis. 

On Tuesday, Senate President Stephen Sweeney proposed a plan to avoid layoffs by cutting the hours and salaries of 100,000 public employees. The plan would allow municipalities and the state to save millions by making workers take unemployment several days a week, allowing them to keep their health benefits while capitalizing on federal aid for unemployed workers. 

“We are facing a deadly situation, not just from COVID-19, but the wrecking of our budget and our ability to provide services to the people in a safe and healthy way,” Baraka said. 

Newark’s Business Administrator, Eric Pennington, said the city will be implementing both a hiring freeze and a spending freeze other than for essential expenses as the administration seeks every alternative to furloughs, layoffs and buyouts. Though the city is not at the stage of pinpointing priorities or estimating the number of employees who stand to lose work, Baraka’s administration has put together a plan that incorporates the city’s unions. 

Most of the $6 million in monies that Newark is distributing in aid for residents and businesses is supplied by entitlement dollars, but in terms of what has been spent on costs like hotels for quarantining the homeless population and emergency food relief, Baraka said the city will be in trouble if it does not recoup those funds. 

“That will make our plans more imminent to lay people off and to affect the services that we deliver to the residents of this city. It will happen very soon. The fact that we allowed our residents to have a delay in paying taxes, that we took away all fines and fees and gave amnesty, we have to anticipate that,” Baraka said. “Ultimately, the taxpayers will bear the burden of most of this.”

Baraka said the city would know by mid-May just how serious the situation is in terms of reductions in staffing and services. 

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