N.J. League of Municipalities raises concerns over possible national default

TRENTON – Imagine towns being unable to get permission from Housing and Urban Development officials to draw down on block grants because HUD staff had been furloughed.

That could have occurred if the U.S. government had shut down in April, and is an example of the kind of problem towns in New Jersey could be facing if the federal government defaults next week, according to the N.J. League of Municipalities.

The League reported today it has reached out to the Christie administration for details on how it plans to assist municipalities if the worst occurs next week and plans to resolve the debt ceiling crisis fail.

The deadline to raise the debt ceiling is Tuesday, or the nation will default on financial obligations for the first time ever.

According to the League, there are numerous “what-if’’ scenarios afloat right now amid all of the uncertainty.

In a release, the League said that if the U.S. defaults and Treasury chooses to pay U.S. creditors, Social Security benefits, and military families first, there probably won’t be enough cash remaining to reimburse municipalities for spending under programs such as the Community Development Block Grant and others.

Even if the funds are there, the personnel necessary to process them may not be, the League warned.

The League reported that the National League of Cities similarly has asked Washington, D.C., for guidance to state and local governments.

The League stated there is a report from the Pew Center on the States that outlines the impact a default could have on cities: The Debt Ceiling Debate: How a Federal Default Could Impact States and Cities.

There also is a link to NLC’s official statement on the debt negotiations. N.J. League of Municipalities raises concerns over possible national default