NJ Business Matters: The Blog of the CIANJ

OLS Budget Chief Confirms New Jersey Still Broke

The Budget Officer for the non-partisan Office of Legislative Services told members of the Senate Budget and Appropriations Committee that the state remains in the same fiscal hole it was when he spoke to their counterparts in the Assembly last week. The $1.3 billion deficit for the current fiscal year is constitutionally required to be filled by June 30. The current projected deficit already takes into account the $1 billion in savings identified by Governor Corzine.

The biggest deficit in terms of dollars remain in sales tax and income tax. The sliver of good news is that the sales tax figure may begin an upward trend once December figures are released. Budget Officer David Rosen also revealed that the deficit has been exacerbated by a $170-$180 increase in the demand for services through Medicaid.

This is further evidence that this year's budget requires the long-overdue conversation over the proper role and size of government in New Jersey.

AFL-CIO: Who Needs the Senate To Pass New Law?

Over on Huffington Post, Stewart Acuff, Chief of Staff for the Utility Workers Union, writes that organized labor is preparing to bypass the Senate and get its job-killing card check measure enacted through Obama appointees to the National Labor Relations Board,

[If] we aren’t able to pass the Employee Free Choice Act, we will work with President Obama and Vice President Biden and their appointees to the National Labor Relations Board to change the rules governing forming a union through administrative action to once again allow workers in America access to one of the most basic freedoms in a democracy–the freedom of speech and assembly and association so that workers can build the collective power to challenge the Financial Elite and Get America Back to Work. (emphasis ours. cutesy capitalization near the end of the paragraph, theirs)

The AFL-CIO is now transparent in its recognition and strategy. The Employee Free Choice Act is barely alive in the Senate, and the odds only decrease with the seating of Senator Scott Brown (R-MA). Big labor is now developing a strategy to ram its agenda through the administrative process.

Regardless of an individual Senator's feelings on card check and the misnamed Employee Free Choice Act, shouldn't they all be upset that the AFL-CIO is openly trying to do an end-run around the legislative branch?

$70 Billion Moved Out of NJ in Four Years

A new study from the Center on Wealth and Philanthropy at Boston College reports New Jersey lost $70 billion in wealth between 2004 and 2008, as high net worth individuals left for more hospitable tax states such as Florida and Pennsylvania.

The study found that in the four years prior (which happens to be before hikes in the income and sales tax went into effect), the state had a net in-migration of $98 billion.

“The wealth is not being replaced,” said John Havens, who directed the study. “It’s above and beyond the general trend that is affecting the rest of the northeast.”

The 32-page study is available at this link. It is part of a continually-growing body of research that empirically proves what has been self-evident to free market thinkers - taxes are a price and therefore factored into an individual's decision matrix. In modern times with ease of transportation, high tax rates will force greater numbers of people to lower-tax destinations. That is especially true when a narrow slice of the population is expected to pay for the overwhelming majority government services. Eventually, those who are the most heavily taxed will flee.

This has impacts on job creation, tax collections, philanthropy and economic opportunity. It is also why calls for the state to extend last year's income tax hike are short-sighted and ultimately self-destructive. 

Obama Admin Shows Its Support for Nuclear Energy

The Obama Administration is reportedly seekingan additional $36 billion in this year's budget to fund loan guarantees for the expansion of nuclear energy in the United States. While the president's record on nuclear power has been spotty; this represents the most significant sign that President Obama wants to see an America with a baseload that includes a strong nuclear segment.

Nuclear energy remains the only technologically available generating source that can provide a baseload, while emitting virtually zero greenhouse gases. The $54 billion in total loan guarantees would be enough to build another 10 reactors, but hurdles still remain.

The Department of Energy's loan process lacks transparency, and government requirements mean that even if a financing deal is possible, it would take ten years before a reactor could be built. Plus, there is no guarantee that Congress will approve the president's request.

The president deserves applause for his willingness to move forward in the face of misguided opposition from some of his supporters. Now it is up to Congress and the DoE to make this step meaningful.

Feb Issue of Commerce Magazine Now Online

The February 2010 issue of COMMERCE Magazine is arriving in mailboxes today and has been posted to CIANJ's website. The direct link to this month's issue of the magazine is available here.

Some highlights of this month's issue are:

• A feature on continuing education and executive MBA programs at New Jersey colleges (p.12)
• A conversation with CIANJ Board Member Liz Napoli (MC&M Limited) on the future of retail (p.26)
• An interview with My9 anchor Brenda Blackmon on her battle with discrimination on the way to the top (p. 30)

Your blogger also has a short column on the expiration of the income tax hike that passed in New Jersey last year, printed on page 10.

COMMERCE Magazine is the flagship publication of CIANJ. It is published 11 times annually and includes news and views from New Jersey's most influential business and government leaders. For more information about the magazine, which is read monthly by 30,000+ business leaders, e-mail info[no spam]cianj.org

Senate Panels Hears Testimony on Abolishing COAH

The Senate Economic Growth Committee will hear testimony today on S-1 (Lesniak), which would revolutionize the way New Jersey generates affordable housing and eliminate the complex rules established under COAH by disbanding the Council entirely.

The bill would require municipalities to include zoning ordinances that provide a reasonable opportunity for low- and moderate-income residents to attain housing. However, it would substitute COAH's command-and-control style with one that recognizes the diversity of tools and available land in New Jersey's 566 municipalities.

The bill would also authorize 70+ previously agreed to Regional Contribution Agreements.

The Committee will not vote on the bill today, as it is posted for discussion only.

The State Supreme Court has ruled that the New Jersey Constitution requires each municipality to provide a reasonable opportunity for housing options for low- and moderate-income residents. COAH has been in effect for 25 years, but managed to produce only 50,000 units of affordable housing. We applaud Senator Lesniak for his willingness to simplify the system and wholly remake an agency that has become a burden to individuals, business and advocates alike.

Update: At the conclusion of today's discussion-only hearing, Senator Lesniak announced that Senate action could occur as early as this month.

Gov Warns of Payroll Tax Hike

Governor Christie is warning employers that an automatic payroll tax increase of about $1,000 per employee is likely hit companies, barring assistance from the federal government.

The fund is expected to be $1.6 billion in debt in March,

The newly sworn-in Republican governor said his administration will ask the federal government to forgive the debt, but he said the state can't afford to pump money into the fund to stop the tax increase. New Jersey faces a deficit of more than $9 billion for the 2011 budget year, which begins in July.

Regular blog readers know the reason for this by heart. Between 1993 and 2005 the New Jersey Legislature raided the state's Unemployment Insurance (UI) Fund by $4.7 billion. Employers contribute about 88% of the fund's total value while workers contribute the remainder through their paycheck deductions.

However, if the fund does not meet certain funding thresholds, then an automatic payroll tax hike is triggered on employers only. The legislative raids, combined with the recession, triggered a $350 million increase last year. This year's increase could be ten times higher. 

Making it more expensive to keep workers is a tough way to lower unemployment, and the state's employers may now find themselves in the position of once again, bailing out Trenton.

Media Shakes Its For-Profit, Electioneering Fist at Supreme Court

In the wake of last week's Supreme Court ruling that asserts corporations and associations have a right to political speech in the form of independent campaign expenditures, the mainstream media here in New Jersey has gone into orbit.

Wrote the Star-Ledger,

The majority based its decision on an extreme notion of free speech rights. And that makes you wonder what’s next.

While the Asbury Park Press adds,

What's left in the wake of this activist judicial earthquake is wreck and ruin. It may take New Jersey and the nation years to recover — and then only if a different set of justices on the Supreme Court change course. In the meantime, the best that can be hoped for are strategies to limit the damage.

Of course, both these publications are owned by for-profit companies. Therefore, under the previous set of rules, if you owned a media company, you could publish your political opinions (including endorsement for election) up until voters went to the polls. However, if you were an association or corporation without a news division, restrictions on electioneering applied to you.

Where in the First Amdendment is the right to express political speech prohibited for corporations or associations, unless you own a newspaper?

Administration Releases Transition Reports

Governor Chris Christie released 19 reports prepared by his Transition New Jersey subcommittees, which conducted thorough reviews of all departments, agencies and authorities of the state and made assessments and recommendations to improve, shrink and, in some cases, eliminate wasteful or inefficient government operations.

The reports can be viewed at this link.

CIANJ took an active role in the transition process. Association President John Galandak was a member of the Economic Growth subcommittees, and several other subcommittees were represented by CIANJ Board Members.

The Transition Reports are guiding policy documents for the Administration as they govern the various state agencies.

Supreme Court Sides with Free Speech

The Supreme Court has just overturned large portions of the McCain-Feingold campaign finance reform law that passed in 2002, ruling in a 5-4 decision that limits and prohibitions on corporate independent expenditures and issue ads violate a company's right to political speech.

From The Washington Post, "Supreme Court rejects limits on corporate spending in electoral campaigns",

"When government seeks to use its full power, including the criminal law, to command where a person may get his or her information or what distrusted source he or she may not hear, it uses censorship to control thought," the court said in a decision written by Justice Anthony M. Kennedy. "This is unlawful. The First Amendment confirms the freedom to think for ourselves."

President Obama sharply criticized the decision, saying it gives "a green light to a new stampede of special interest money in our politics" and represents "a major victory for big oil, Wall Street banks, health insurance companies and other powerful interests...."

The ruling is also expected to lift similar restrictions on organized labor. The President must have forgotten to include them in the aforementioned "stampede".

CIANJ applauds the decision as one that upholds associations' right to free speech regarding candidates for elected office. The full opinion is available here.