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Howes & Howes Wins a Big One for New Jersey Taxpayers in the Supreme Court

The politicians in Trenton will never again be able to use long-term borrowing to pay for current operating expenses, thanks in part to Howes & Howes.

The scene was the New Jersey Supreme Court in Trenton.  In a crowded courtroom, a handful of taxpayers were squaring off against the well-armed State of New Jersey.  Why?  Because the state had gone too far when it authorized bonds payable in up to 30 years to pay for operating expenses for the current fiscal year.

Howes & Howes partner Tim Howes was one of five attorneys from four New Jersey firms who represented plaintiffs in the matter of Lance et al. vs. McGreevey et al.  The purpose of the lawsuit was to stop the state government from borrowing over two billion dollars to pay for current expenses in the fiscal year 2005 budget (FY 2005 began on July 1, 2004).

Wall Street gave the risky financial scheme its disapproval by lowering the State’s bond rating.  In court, the plaintiffs argued that the scheme violated the Balanced Budget Clause of the New Jersey Constitution because the constitution requires that the state use “revenue” to balance the operating budget.  Private citizens, large and small business and local government can not and do not count loan proceeds as income or revenue, the attorneys argued, so why should the state government?

The plaintiffs initially met defeat in the trial court.  Because of the magnitude and importance of the issues, the case was appealed directly to the New Jersey Supreme Court.  The Supreme Court heard the case with only five of the seven justices sitting.  The five judge panel agreed with the plaintiffs’ reasoning and ruled that the proposed bonding scheme violated the balanced budget clause of the New Jersey Constitution.

This landmark ruling created new constitutional law in New Jersey.  Never again will the state government be able to burden future generations by this sort of reckless borrowing.


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