NJ Business Matters: The Blog of the CIANJ

Gov. DuPont on Limiting Access to Our Own Resources

Congress, once again, had the opportunity to have an impact on America's highest-in-the-industrialized-world natural gas prices. Unfortunately, they once again failed to pass legislation which would codify a moratorium on off-shore drilling to a distance of 50 miles, while allowing states to choose whether they wish to explore their own coastlines after that point. Before America decided to become the only nation on Earth to restrict access to its own resources, we paid the lowest natural gas rates in the industrialized world. Now we pay the highest - while sitting on 420 trillion cubic feet of it. That pesky law of supply and demand just refuses to abide by Congressional efforts of repeal.

Today, former Delaware Gov. Pete du Pont uses his space in the Wall Street Journal to make the case for increasing energy production through oil and natural gas exploration, and for the addition of non-emission producing nuclear plants. As the current chair of the National Center for Policy Analysis explains,

[T]he Senate voted in June to mandate a reduction in projected future oil usage of 10 million barrels a day, or 35%, which, since our domestic oil production is declining, means less imports. In other words, Congress wants to block drilling for more American oil while at the same time blocking the importation of oil--not a rational energy policy.

On the other side of the coin is the need for more refineries to produce the oil products we need: gasoline, diesel fuel, jet fuel and plastics. Twenty-five years ago we had 254 oil refineries; today there are just 145 (although they are a bit more productive) since we haven't built a new refinery in America for 30 years.

Then there is nuclear power, America's largest pollution-free source of energy. One hundred four nuclear plants supply about 20% of our electricity, and we could build many more. As President Bush pointed out two weeks ago, "Our country has not ordered a new nuclear power plant since the 1970s." He recommends that we build three new nuclear plants a year to meet our energy needs. But new nuclear plants have been continually opposed by the liberal establishment that now controls Congress.

All of this done without a way to address our present and future energy needs. As we have noted time and again, nuclear power, oil and natural gas may someday become obsolete. However, they all meet our present energy needs and nuclear power is the only option available which both produces significant energy and results in nearly zero emissions. Rather than hampering America's technological advancements in these areas, Congress should allow American industry to flourish. It may not make for flashy photo-ops, but it does keep the lights on.

Greenspan Calls for Corporate Tax Reductions

Former Federal Reserve Chairman Alan Greenspan is calling for an altering and reduction of America's corporate tax structure soon, to avoid putting the US at a competitive disadvantage as the global economy evolves and to deal with political realities. The Wall Street Journal's Real Time Economics blog reports,

[Greenspan] said the problems of higher U.S. tax rates in a global economy are being masked by the low global cost of capital and declining exchange rates.

This will be temporary, however. “The cost of capital is not going to stay down at this level,” Greenspan said. As the cost of capital rises, the problems of higher U.S. tax rates relative to other countries will become more apparent, he said....

“When all of a sudden the Baby Boomers retire … pressure is going to be for higher taxes, not lower taxes and to do anything that effects the corporate tax rate on the downside will run into political resistance.”

He said political opposition will occur even though economists widely agree that lower corporate tax rates can boost jobs by increasing productivity. “Regrettably, there is still a great deal of populism in this country,” he said.

Rudy and Energy Independence

Earlier this week, we blogged on the YouTube Democratic Debate and the candidates' answers to a question on the need to reinvigorate America's nuclear infrastructure. That entry, with the video, is available here. Today, Mayor Giuliani writes about part of his plan for America's energy independence. The mayor stresses some themes developed here at NJ Business Matters - including the necessity to remove regulatory burdens to ensure we do not limit access to our own resources, and the need to promote nuclear technology. Again, at the risk of sounding like a broken record (or a short-circuited iPOD - depending on your age), but nuclear technology already provided New Jersey with more than half of its electricity while producing virtually no emissions.

Just like Brazil is ahead of us in ethanol, France is ahead of us in nuclear power. Eighty percent of the electricity in France comes from nuclear power. Only twenty percent of electricity in America is generated by nuclear power and it's going to go down to fifteen percent in the future if we don't do something about it. We invented the peaceful use of nuclear power, but we've let other countries get ahead of us. There is no reason for that. No one's ever died from nuclear power in the United States. Despite that fact, we haven't licensed a new nuclear power plant in the United States in 30 years.

America has more coal than Saudi Arabia has oil. If we can compete and make cost effective the process of carbon sequestration, clean coal, we can rely on coal to a much larger extent. And we can rely on it without harming the environment.

We also must increase our use of solar power, wind power and hydro-power. We can reduce energy costs and reduce pollution through conservation. And if we can figure out how to change our electrical grid to a digital grid we'll be able to use our energy on a much more efficient and consistent basis.

Lame Duck Watch: Higher Realty Transfer Fees in NJ's Biggest Cities?

In the spring A3190/S2643 was introduced in the New Jersey legislature, which would allow some of New Jersey's large cities to place an additional tax on the sale or transfer of real estate, providing a disincentive to invest in the cities of Newark and Jersey City. In effect the legislation would allow municipalities to impose a 0.1% tax on the sale of property in two cities with some of the highest property taxes in New Jersey. Government should, in an effort to spur investment, be taking active steps to reduce taxes in these urban areas.

0.1% may seem insignificant, but increases in realty transfer fees do reduce home sales. A February 2006 study conducted by the Rutgers Economic Advisory Service and Center for Urban Policy Research found that a 10 percent increase in the realty transfer fee would yield a reduction in home sales by 0.42%.

The tax increase implemented by A3190, $.50 per $500 of the sale price, represents a price increase of greater than 10% for homes sold for up to $850,000.

In short, the tax increase would price a definable percentage of homebuyers out of the market – something that stands in opposition to the principles for building and sustaining a healthy and vibrant economy.

The CIANJ opposes this measure as it will discourage a segment of the market from purchasing land in Newark and Jersey City, harming economic development in those cities. 

Camden School District Ranks Last While Urban Schools Scholarship Act Awaits A Hearing

Camden's school district was the worst performing among those monitored by New Jersey's Department of Education. Today's Courier-Post details some of the findings,

Camden fared the worst in all five categories among the seven districts reviewed, meeting only 6 percent of the benchmarks in instruction, 5 percent in personnel, 39 percent in operations management, 11 percent in governance and 31 percent in finance.

The report said the district does not disqualify individuals with criminal backgrounds or revoked licenses from being hired. It lacks policies for supervising and evaluating teachers and meeting their professional-development needs. The school board hasn't even evaluated the superintendent in recent years.

The district does not provide mandated programs for gifted and talented students, lacks an approved plan for improving special-education activities and relies on a high-school geometry and calculus curriculum that is 17 years old, the report found.

In addition, the report said, the district does not spend federal or state grant funds as required and has no rules for addressing the deliberate falsification of annual reports on violence or vandalism.

The district did satisfy all of the performance indicators in early-childhood education and operates "exemplary" health and nursing programs, the report said.

A separate audit of curriculum and professional-development in the district found that the instruction program for some subjects pre-dated the state's creation of content standards. The audit, also released on Tuesday, cited "fragmented and partial documentation" to explain the expenditure of $256,000 for teacher training. (emphasis ours)

In case you have forgotten, the Urban Schools Scholarship Act (USSA) was introduced in January and has still not been officially heard in either of the education committees. The USSA would give up to 4,000 children in Camden, Newark, Orange and Trenton the opportunity to utilize scholarships (funded through tax-deductible corporate contributions) to attend other public or non-public schools. Furthermore, the children taking advantage of this opportunity would be educated at about half the cost of what the Camden school district currently spends. A hat tip to Asw. Nilsa Cruz-Perez (D-Camden) for being a primary sponsor of the bill and putting the interests of her constituents first.

Pennsylvania has already instituted a similar program, benefiting more than 20,000 students. How much longer will reaching six percent of instruction benchmarks continue before NJ is willing to do the same?

That's Billion...With a "B"

Today's New York Times once again outlines how New Jersey, through administrations and legislatures for more than a decade, managed to accumulate a $58 billion shortfall in public retiree care. The complete story is available here, but the Cliff's Notes version can be quickly explained in three paragraphs,

In 1994, New Jersey decided to stop setting aside money in a fund to pay for health care for its retired public workers. The savings paved the way for a big tax cut.

Meanwhile, hundreds of thousands of public workers were being told that as long as they worked 25 years, the system would provide virtually free health care for them when they retired, often when they were as young as 55....

When New Jersey stopped funding its retiree health plan 13 years ago, it also stopped trying to keep track of the cost. That created the illusion that the long-term obligation was zero, not billions of dollars, and made it easy for the state to enhance its already rich benefits.

Regular blog readers already know that future retirees were expected to pay a small percentage of their pension toward health benefits, which would have produced some savings and marked a significant deviation from past unaffordable practices. However, the state was unable to develop a program by the contractual deadline, meaning some could opt out by participating in a wellness program.

The article also highlights the fact the NJEA negotiates with New Jersey's more than 600 individual school districts (thus giving them 600 opportunities to increase benefits).

Meanwhile, retired teachers have dodged the bullet entirely. Their union, the New Jersey Education Association, negotiates contracts with school districts and not with the state, and the state has not asked them to chip in for their premiums....

Another problem is that for years, New Jersey has allowed towns, school boards and other local governments to set pay and benefits. School districts, which contribute to health care only for active workers, can help their own budgets by negotiating small pay increases and reassuring their employees that the state will retain ample retirement packages. The state then has to come up with the money.

You get the idea, and regular blog readers know the CIANJ is pushing for all options to be available. Reworking our disjointed school funding formula, bringing public employee benefits more in line with the private sector and yes, asset monetization, must all be considered if our over-taxed businesses and residents are going to be able to remain in the state. 60% of residents have reported they cannot keep pace with cost of living increases - the most unacceptable number of all.

"Government Exists to Preserve Freedom"

An interview with Judge Andrew Napolitano is one of the featured pieces in the Summer edition of COMMERCE Magazine. Conducted by Ramapo College professor, CIANJ Member, pundit, and blogger extraordinaire Dr. Murray Sabrin, Napolitano expresses his positions on free enterprise and the need for the government to resist interference into our everyday and business lives. The Napolitano interview has been republished on USA Daily. Click here to read the article in its entirety.

The summer edition is chock full of compelling stories that reflect the philanthropy, challenges and opportunities dealt with by New Jersey's business community. Other stories from this month's COMMERCE Magazine include,

• NJ Office of Economic Growth Chief Gary Rose Addresses CIANJ Board
• In Session with Retired Chief Justice Deborah T. Poritz
• Super Sports Agent Scott Boras Helps His Clients Monetize Their Baseball Talents
• General Electric Vice Chairman Bob Wright Lends His Powerful Voice to Autism Speaks
• Healthcare Mandates are Bad Medicine

For all of our featured stories, click here.

YouTube Debate on Nuclear Energy

If you watched last night's YouTube Democratic debate, you saw a question posed by Shawn from Ann Arbor about nuclear power as part of the matrix used to address global climate change. Regular blog readers already know that nationally, 20% of America's electricity is provided via nuclear power and that number is 50% in New Jersey - a prime reason NJ has some of the lowest per capita carbon rates in America. The candidate responses are available here. The answers range from being in favor of exploration, to opposed to being agnostic on the issue. Of course the latter two answers want an investment in renewable resources (which we're not opposed to), but never get to how we can meet our increasing energy needs in the interim. As we've said, nuclear power may some day be obsolete, but it is a presently available answer to our present problem.

In NJ, license renewals are nearly due at most of our reactors, and, as NJ.com is reporting, there may be a proposal for a new one to help meet our energy needs.  As a the organization that works to deliver power to all our homes points out,

Paula DuPont-Kidd, spokeswoman for Valley Forge, Pa.-based PJM, which operates a wholesale electricity market and power grid serving customers in the region, said an array of energy sources are needed to keep up with demand.

But especially in New Jersey, she said, new generation or construction is crucial.

"In the eastern region there are a number of plants that are 40 years old and older, and plants are deciding: Is it economically viable to make upgrades, or does it make sense to retire it?"(emphasis ours)

With the time required from application to operation, and the goals set forth by NJ's Energy Master Plan, Executive Order 54 and the Global Warming Response Act, the time to explore this avenue is now.

Update at 9:58: A hat tip to the Nuclear Energy Institute's "Nuclear Notes Blog" (now part of our blogroll) for posting the video clip of the debate, viewable below.

Reap What You Owe

The bills are coming due for pension benefits owed to New Jersey's public employees, and the taxpayers in some towns may be in for some sobering news following their rebate checks.

As today's Star-Ledger reports,

In all, the Treasury Department numbers show, the tab for supporting retirement benefits for hundreds of thousands of government workers, fire fighters and police officers will be $1.056 billion, due next April. That includes $416 million to cover the cost of public employee pensions and $640 million for the retirement benefits of police officers and firefighters.

Last year the total due was $650 million, and in 2004, when the state began phasing in pension contributions after a payment "holiday" of several years, the bill was a diminutive $53 million.

"We recognize that these contribution amounts are large and represent substantial increases from last year," said State Treasurer Brad Abelow, in a statement that accompanied a town-by-town breakdown of the new bills. "They are symptomatic of the need for New Jersey to put its fiscal house in order, which Governor Corzine is committed to doing and is making significant progress toward."

The CIANJ and other business and taxpayer groups recognized that the benefits paid to our public employees were more generous than private sector practice and unsustainable. As the Corzine Administration works with localities to correct some poor practices stretching back more than a decade, there must be equal attention paid to ensuring the problem does not worsen. That includes requiring future retirees to pay a percentage of their own health insurance, and reducing the mandates that have helped drive insurance prices so high.

Click here for a town by town breakdown of who owes what in 2008.

Then What?

One of our gripes with some in the environmental movement is their swiftness in pointing out the problems with coal, and oil as they supposedly contribute to global warming, without offering much in terms of solutions. Of course, there's a technology which we presently possess that produces zero carbon emissions and can supply sufficient energy to meet our needs - nuclear power. Presently, 52% of New Jersey's electricity is produced by nuclear energy, which is why we are one of the best states in terms of carbon released per capita. That's not good enough for some, and it's facts like these that make the following story so interesting.

PSEG is committed to being environmentally friendly. They're one of the first utilities to use hybrid vehicles for their bucket trucks and are committed to meeting the goals of the Global Warming Response Act. Today The Record reports,

PSEG Power will spend more than $700 million to cut pollution from its big Jersey City power plant -- a move that should improve air quality in Bergen County and beyond.

A $700 million investment in cutting pollution impresses environmentalists, but

One environmental activist welcomed the health benefits the cleaner air will bring. Still, he noted the changes at the Hudson Generating Station will do little to reduce its carbon dioxide emissions. The plant is one of the region's largest sources of that pollutant, which scientists blame for raising temperatures worldwide.

Tackling global warming "will necessitate an end to reliance on coal and it would have been easier to meet that goal if PSEG had more vision on this particular site,"

Yet when it comes to nuclear energy, and the Oyster Creek Generating Station, the same environmental group is against that as well.

Just wondering how folks plan on meeting NJ's, America's and the world's increasing energy needs in the near-term. Maybe one day nuclear power will be obsolete, but it is one of the present solutions to our present problem, and NJ has already benefited immensely from it. We should continue investment in this technology, or it's going to get pretty cold and dark around here.

The Week of Studies

First it was Forbes, then CNBC, then the Department of Labor and now it's the Rutgers Economic Advisory Service (RECON) noting, once again, that high costs of living are keeping our job growth relatively stagnant.

The Star-Ledger has coverage of what both you regular blog readers already know - that NJ's job growth is slow compared to the national average. While the study offers a brighter outlook for next year, the forecasts also call for continued slow growth for high-wage jobs, with service sectors adding the super-majority of jobs.

More worrisome is the fact that New Jersey is currently lagging the nation when it comes to higher-wage job growth, she (RECON Director, Dr. Nancy Mantell) said. For the 12 months ended in May, New Jersey's manufacturing employment declined 2.5 percent, compared with 1.1 percent for the U.S. as a whole. New Jersey's 0.6 percent growth rate for finance jobs was less than half the 1.3 percent national rate.

Over the next 10 years, New Jersey can expect job growth in professional and business services, leisure, hospitality, food service and retail, Mantell said. Health services will gain jobs, "and that is tied to the aging of our population -- 14 percent of our population will be over 65 by the end of the forecast period" in 2017.

Rutgers economist James Hughes, who presented the forecast with Mantell and colleague Joseph Seneca, said New Jersey's high housing costs are one reason the state's job growth lags.

"New Jersey ranks number one nationally in median household income; we are 33 percent higher than the national average, and that sounds pretty good," Hughes said. "Unfortunately, we also rank number one in monthly housing costs.

"In New Jersey, the cost of an owner-occupied dwelling with a mortgage is 52 percent higher than the national average. Our higher incomes are consumed in higher housing costs, and that gives a tremendous advantage to places like North Carolina and Virginia."

The full forecast is available here. 

Your Money?

Yesterday on the House floor, Rep. Don Young (R-AK) of "Bridge to Nowhere" fame lashed out at Congressman Scott Garrett (R-NJ) for introducing amendments that would eliminate tens of millions of dollars worth of taxpayer funded earmarks, including one in Rep. Young's state.

After saying NJ's Congressional delegation did a poor job of bringing home earmarks and that the state was therefore poorly represented - and has a bad reputation to boot, Young went on to declare that Garrett wants to take, "My (Young's) money. My money for my students."

Just a reminder to the Gentleman from Alaska that the money is actually the taxpayers' money and not his. Garrett is part of the National Taxpayers Union's "Batting 1.000 Club" for voting to eliminate all earmarks deemed wasteful.

PoliticsNJ has Young's retort while the video is pasted below courtesy TalkingPointsMemo.

Slow Growth Continues; Administration Says Job Numbers Not Acceptable

Yesterday, the Department of Labor released its June job numbers, and New Jersey remain mired in a holding pattern of slow growth and with numbers below the national average and below New Jersey's historical averages.

The Record coverage is first rate and details a few key facts:

• Of the 1900 new jobs, about 1200 were generated by the public sector
• If the current pattern holds, NJ will add less than half of its historical annual average and fewer jobs than last year
• NJ's job expansion is only at about one-third of the national average
• During post-recessionary expansions, NJ added on average 70,000 new jobs annually, this year 9,600 have been added during the first six months.

Gary Rose, Chief of the Office of Economic Growth, expressed mild disappointment in the numbers and noted the Front Office does not find this trend acceptable.

We note in this post what we have numerous times in the past - New Jersey has the natural advantages and intellectual talent to be the most prosperous state in America. Instead, we are stuck with slow growth and 60% of our population says they cannot keep pace with cost of living increases.

If, as the Forbes and CNBC rankings reminded us, the impediments remain high cost of doing business and a high cost of living, the legislature must address those issues first, and should avoid making those situations worse. That may seem self-evident to you, but it has not developed that way in Trenton.

Of All the Programs in All The Budgets

Congress hasn't done much to cut spending this year, but that shouldn't surprise anyone who witnessed the Senate disagree to do what they had already unanimously agreed to do. Well, they finally found something, and as John Fund points out in yesterday's Opinion Journal, it's the office which monitors the compliance of unions with federal law. It is the ONLY enforcement office facing a cut and it represents less than .1% of the Department of Labor's budget. Why should it be singled out?

In the past six years, the Office of Labor Management Standards, or OLMS, has helped secure the convictions of 775 corrupt union officials and court-ordered restitution to union members of over $70 million in dues....

OLMS, the Labor office that watches over union disclosure forms, says that last year 93% of unions met its reporting requirements. But the other 7% deserve scrutiny. Union members deserve to know how their dues are spent. They might want to know that in 2005, the National Education Association gave more than $65 million to Jesse Jackson's Rainbow PUSH Coalition, the Gay and Lesbian Alliance Against Defamation, and dozens of other liberal advocacy groups that have nothing to do with the interests of teachers. In 2006, 49 individuals employed at the national AFL-CIO headquarters were paid more than $130,000.

Oh, now it makes sense. While Congress was quick to pass through the Sarbanes Oxley Act of 2002 and put requirements on America's corporations, unions file less often, do not need independent certification and use free software while not being required to follow standard accounting practices.

Then again, this is the same group that wants to eliminate the guarantee of a secret ballot before a union can represent workers at the bargaining table.  

Reacting to Rankings

The mainstream media is picking up on the Forbes and CNBC rankings of the best states for business, first introduced to both our regular blog readers last week.

Today's Record has reactions from the NJ State Chamber and CIANJ President John Galandak. The boss expressed his frustration that high business costs and cost of living are such that they nearly negate all of the state's natural and human advantages. It's like having a Ferrari and always being stuck in traffic,

The state came in 45th in "cost of doing business," 48th in "cost of living" and 40th in a category that assessed the workforce education, availability, unionization level and other issues. The state came in first in quality of life, second in technology and innovation and fifth in access to capital.

Galandak expressed frustration over the rankings.

"With our people, geography and intellect, New Jersey should see people and businesses flocking to our state," he said. "And they would be if our business and personal costs were in line with the rest of the country."

As legislators talk, campaign and pander, be sure to mention to them all that you have built for the state only to have Trenton policies make it increasingly unaffordable.

Lame Duck Watch: Right to Repair Bill Threatens an Owners Right to Intellectual Property

A theme regular blog readers know is the way in which innocuous-sounding legislation can inflict damage to businesses and how quickly it can remove incentives to create the modern technology that has become part of our everyday lives. The second installment of Lame Duck Watch highlights such a bill.

A931/S2533 would require auto manufacturers to deliver virtually unfettered access to their technology to auto repair shops. Consumer advocacy groups would have you believe the legislation will give you a wider variety of choices and reduce costs. Unfortunately, the bill uses auto manufacturers as a test case for violating intellectual property rights and removes the present, inherent requirements for repair shops to remain updated on all the technologies and changes to modern cars. All this to create a solution where there is not yet a problem.

According to Consumer Reports, only about 0.2% to 1.2% of the nearly 400 million automobile repairs performed last year encountered a problem gaining access to information to complete the job. One of the reasons for this is that the Automotive Service Association-Automaker Agreement is in place to provide independent repairers access to service, tool and training information. Remember that with 400 million annual repairs, auto manufacturers rely on independent repair shops, meaning it is in their best interest to ensure the repair shops remain up to speed on changes and advancements. One of the best forums to communicate and ensure cooperation between the service industry and automakers is the National Automotive Service Task Force (NASTF).

NASTF is a cooperative effort among the automotive service industry, the equipment and tool industry, and automotive manufacturers to ensure that service professionals have the information, training and tools needed to properly diagnose and repair today’s high-tech vehicles. By investing in proper equipment and subscribing to available web-based information services, legitimate repair shops can gain access to nearly all information. The only information to which repair shops cannot gain access relates to vehicle security systems, smart codes and engine immobilizer overrides.

In addition, there are legitimate concerns that this legislation is an effort by aftermarket part manufacturers to gain access to proprietary vehicle information that will enable them to more readily build cheap, knock-off parts. The legislation requires manufactures to forfeit intellectual property (without compensation) to “any vehicle owner or repairer” including all “information necessary to diagnosis, service or repair a motor vehicle.” Through NASTF, manufacturers already provide this information. This bill goes much further by also requiring manufacturers to provide information “necessary to integrate replacement equipment in the vehicle.” This exposes the intellectual property and integrity of automobile parts.

Congress already considered this legislation and said no way. Now, advocates are attempting to – once again – put an additional requirement on businesses operating within New Jersey. The General Assembly and Senate would be wise to follow the lead of Congress and dismiss this bill in high gear.

Another Day, Another Ranking, Further Proof of Opportunities Lost

CNBC has completed the release of its "America's Top States for Business" and there are striking (though not surprising) similarities to last week's Forbes ranking. CNBC pegs NJ as the 15th best state for business. Blog commentary on the Forbes rank here and CIANJ press release full of pithy quotes from CIANJ President John Galandak here.

Some New Jersey specific rankings include,

#1 in Quality of Life
#5 Ranking in Access to Capital
#2 Rated in Technology and Innovation
#45 in cost of doing business
#48 in cost of living

Once again we see the tremendous advantages New Jersey has both in its natural resources and geographical location and those brought about by the hard working men and women who have established a high quality of life. Yet, once again, we see that those who built all that are increasingly unable to afford to remain in the state. Just doesn't seem right.

Here are some common traits among the top five states, 5. North Carolina, 4. Georgia, 3. Utah, 2. Texas, and 1. Virginia:

• All five are right to work states
• All scored high in the workforce category (NJ placed 40th)
• In education, all recognize that spending more money does not necessarily equate to better results
• All featured a cost of doing business or a cost of living within the top 15

The national graph is available here with New Jersey specific ranks here. When legislators and candidates make their way to parades and talk to you about their outlook for the future of New Jersey, be sure to ask them about rankings such as this and the most recent Monmouth University survey.

More Shocking Economic News: Global Economy Expands as World Cuts Taxes

An outstanding column in US News and World Report by James Pethokoukis compares global tax rates to the expansion of global economies. In a not-so-surprising turn of events, as the majority of the Organization for Economic Cooperation and Development (OECD) nations have reduced their tax rates, the global economy has expanded by greater margins than in the history of the record-keeping world.

This is the story of globalization, of free trade, of the Internet, of China, of India. Then there's this: The 21st century has also seen a global effort to reduce tax rates. Since 2000, according to the Tax Foundation, more than half the countries in the Organization for Economic Cooperation and Development—the group of 30 nations that includes most of America's major economic competitors—have lowered their top marginal rates, reducing the OECD average rate from 45.93 to 42.95 percent.

And if the United States allows the tax cuts of 2001 and 2003 to expire, while maintaining its status of having the second highest corporate-tax rate in the world?

The U.S. reduced its top rate by over 13 percent between 2000 and 2006, dropping it from 15th to 21st in the rankings. If no other country had reduced its tax rates, the U.S. would stand at 26th highest, but the strong tax-cutting trend in other OECD countries blunted the impact of the 2001 rate cuts. . . . Full repeal of the 2001 rate cuts after a surcharge to fix AMT would move the U.S. from 21st to 9th highest in the rankings—and that assumes the tax cutting abroad comes to a halt. A repeal of the 2001 tax cuts with no AMT surcharge would move the U.S. to 11th highest, while an AMT surcharge alone would move the U.S. to 14th highest. In all three cases, the U.S. would rank higher than it did in 2000 (15th), before the passage of the 2001 tax cuts.

It sounds as though some on Capitol Hill are willing to bet your prosperity and competitiveness on the notion that America would be better off bucking the worldwide trend.

Lame Duck Watch: Jeopardizing NJ's Most Successful Job Creation Program

Legislators and wannabee legislators are out touting their accomplishments and telling you why they deserve a(nother) term in office. Campaign rhetoric about creating more jobs is great and demonstrates that candidates understand the importance of a healthy economy - or, at the very least, they understand that YOU want a strong economy and to see your taxes reduced. When they arrive in Trenton, they'll have to grapple with sometimes boring bill language that has not-so-boring reverberations across the business community.

In a new series, Lame Duck Watch, NJ Business Matters will introduce or re-introduce you to bills that you should be prepared to monitor and contact legislators about once the General Assembly and Senate re-convene after the November Elections. In today's Lame Duck Watch, we introduce you to A4001/S2247, which would expand prevailing wage requirements to the PRIVATE sector and for PRIVATE jobs, thus increasing construction costs on non-government job sites.

A4001/S2247 would also alter New Jersey’s most successful job creation program – the Business Employment Incentive Program (BEIP). The legislation would require BEIP grant recipients to pay the prevailing union wage on construction projects related to their move to or expansion within New Jersey.

Since its inception BEIP has generated more than 67,000 jobs and $11 billion in investment. The program’s success is directly related to its structure, which would be significantly altered should this legislation pass. BEIP grants utilize incentives and accountability tied to actual job creation and wages. The program exists to reduce the cost of doing business in the state and make New Jersey more attractive to companies considering expanding operations in or locating to the state. Unfortunately, this legislation would make BEIP grants less attractive to these companies.

Prevailing wages increase the cost of construction projects by up to 25%. CIANJ believes it is self-defeating for the State to have a program in place for the purpose of reducing costs while simultaneously mandating cost increases.

CIANJ is also concerned about the effect the legislation would have on third parties. As currently written, A4001/S2247 would mandate prevailing wage rates to be paid by a landlord or developer for construction projects if a BEIP company occupies at least 55% of a property. A BEIP recipient could be responsible for ensuring a landlord paid the prevailing wage on a project or jeopardize their grant. Companies considering taking advantage of the program would now have to take into account that an unrelated or quasi-related third party would have the ability to jeopardize their grant. It's hard to imagine participating in a program with that string attached.

The increased construction costs and administrative difficulties created by A-4001/S-2247 would nullify the benefits of BEIP grants for many companies, and the CIANJ urges legislators to vote "NO" in the Fall.

Lucky 19

Forbes has released its 2nd annual rank of the best states for doing business, and this year New Jersey slipped three spots to number 19. While not a bad rating, a look inside the numbers shows all the potential in the Garden State that is lost because of our oppresive tax burden and high cost of living.

New Jersey's category-specific ranks include,

1. The #9 labor market
2. The 7th best growth prospects
3. The 3rd highest quality of life
4. A #46 ranking in the cost of doing business

Take those numbers and put them next to the Monmouth University poll released last week which reported nearly 60% of NJ residents said they could not keep up with cost of living increases (compared to 40% nationally). So we've got educational, geographical and natural advantages PLUS the 3rd best quality of life, but many of the men and women who built all that are finding that they cannot afford to live here much longer. It just doesn't seem right, and it sounds like a question worth asking legislators while they work on campaigning.

The Need to Fix FMLA

No matter how great the prose we draft, it'll be overshadowed by what appears to be the big news story of the day. Such is life as a VP of Communications in Jersey, but we forge ahead nevertheless.

While New Jersey debates whether to institute a paid family leave program in the Garden State, the National Association of Manufacturers is pointing out the glaring - and costly - flaws in the federal government's unpaid FMLA program.

The New Jersey program differs from FMLA in many respects. Most obviously,

1. Beneficiaries would be paid through the state's Temporary Disability Insurance Fund.
2. There is no exemption for small employers
3. Part-time employees would be eligible

The NAM notes,

The Hudson Institute's Diana Furchtgott-Roth cites the study to report that the medical part of the law is being abused. All you need is a doctor's certificate of a chronic illness for you or a family member -- just once, just one certificate -- and you enjoy great freedom to come and go from work whenever you want. And you don't have to tell the boss for up to two days AFTER your absence you were taking leave under the FMLA.

And from the above-mentioned Furchtgott-Roth,

In Staten Island, 17% of bus operators were approved for FMLA leave in 2006. Brooklyn and the Bronx did better, with 8% and 9% of bus operators respectively. It is highly unlikely that bus operators and their families within the same city have such disparate, poor medical histories. This experience is typical of other large cities, such as Philadelphia.

Waiting for buses is inconvenient, but unanswered 911 calls are downright dangerous. A counselor to Mayor Bloomberg, Anthony Crowell, wrote that the police communication technicians who handle New York's 911 Emergency Call Center have unusually high rates of FMLA leave. In February 2007, 32% of call-takers were approved for FMLA leave. FMLA accounted for 27% of all medical leave taken in 2006.

Given there are serious flaws in the federal system, and the protections already built-in for New Jersey's workers (remember - NJ is one of about six states with PAID maternity leave), shouldn't the legislature be willing to hold off on making NJ only the second state to push through a paid leave mandate on all employers? 

Windmills Turn, Tempers Burn

It's easy to take the stage at Live Earth and rail against businesses, calling them "traitors" in one of the most extreme examples. However, as we have been pointing out time and again (and again...and again) addressing climate change is going to involve real trade-offs - and our political leaders are not being honest with us.

Yesterday, the Wall Street Journal editorialized about "cap and trade" schemes that put direct costs on businesses, who then pass them on to consumers. Rep. Dingell (D-MI) is willing to propose a carbon tax to drive home the point about the true costs of having a significant impact on the world's temperature (what is the proper temperature of the Earth anyway?).

Today, the sleepy town of Long Beach Island is coming to grips with the same reality. Enter Michael Mercurio, who was able to reduce his electric bills to near zero through the windmill in his yard and solar panels on his roof. On the other side of the picket fence are Mr. Mercurio's neighbors, fed up with the noise the windmills generate and who have taken their case to the town and the courts. As today's New York Times reports

“People have a right to use any resource on their property, just like oil, coal,” [Mercurio] added. “I don’t understand why they are against this. I really don’t.”

Maybe because, as Mr. Mercurio’s neighbors Patricia Caplicki and John Miller say in the lawsuit, in a 14-mile-per-hour wind, the three fiberglass blades produce noise greater than 50 decibels, the rough equivalent of light traffic or a noisy refrigerator.

The suit also says that the spinning blades throw “strobe-like shadows” on their property from noon to sunset.

“It’s not that we’re doing anything to stop the world from turning green,” said George M. Cafarelli, a lawyer for Ms. Caplicki and Mr. Miller who said he had asked them not to discuss the suit with a reporter. “We’re jousting at windmills which have been put up in inappropriate places.”

Richard J. Shackleton, the lawyer for the township, said that officials here were cognizant of environmental concerns and encouraged the use of alternative energy sources like solar panels. (Mr. Mercurio already has 56 solar panels on his home.)

But on a 21-mile-long barrier island that is home to about 9,000 people, Mr. Shackleton said, windmills present a safety hazard and disturb the aesthetics.

Maybe you think Mr. Mercurio's neighbors have a legitimate gripe and maybe you think they are utilizing the grand logic of NIMBYism. What should be absolutely clear is that there is going to be a cost paid somewhere and by someone if we are going to address climate change. Once we've accepted that reality - and it would help if we got some honesty from Trenton and Washington - we can begin to make sound decisions.

Red Jersey

The Star-Ledger is reporting that the Economic Development Authority has agreed to have New Jersey take on an additional $150 million in debt to fund special needs housing.

The new loan will be repaid by motor vehicle fines paid by scofflaw drivers over the next 31 years.

It is the final installment of a $200 million plan lawmakers approved in 2005 to borrow against future motor vehicle fine revenues to develop apartments, condominiums and houses for individuals with special needs....

Besides raising $150 million in new funds, the state plans to issue another $425 million in bonds to refinance portions of an earlier set of motor vehicle revenue bonds that were issued to balance the state budget three years ago.

An Inconvenient Tax

An editorial in today's Wall Street Journal pats Rep. John Dingell (D-MI) on the back for pointing out what should be obvious: you cannot greatly reduce carbon emissions at no cost to consumers. To drive his point home, Rep. Dingell will introduce a tax on carbon emissions, effectively increasing gas prices at a time Members of Congress are busy blasting oil companies.

Mr. Dingell knows all this. His point is to force his colleagues--and the voters--to be more honest about the cost of their global-warming posturing. It's one thing to pay 100 bucks to hear Madonna at the "Live Earth" concert, or impress your girlfriend by wearing an "I reduced my carbon footprint" T-shirt. It's quite another to accept that energy prices would have to rise by many multiples to make even a degree's worth of difference to the world's climate. "I sincerely doubt that the American people will be willing to pay what this is really going to cost them," Mr. Dingell said on C-SPAN last week.

That's why most politicians prefer policy artifice that disguises the cost of raising energy prices. These policy tricks include higher automobile mileage standards and a "cap and trade" regime for swapping "credits" for carbon emissions. These schemes shift the direct costs onto businesses, which then pass them along indirectly to unwitting consumers. These policies still amount to taxes on energy use, but they allow politicians and green lobbyists to pretend that you can "save the world" for the price of a concert ticket.

As part of New Jersey's Global Warming Response Act, the Department of Environmental Protection (DEP) must develop a plan by 2008 for reducing greenhouse gas emissions to 1990 levels (a 20% reduction) by 2020. Some policies attempted by the federal government have proven ineffective,

As it happens, neither cap and trade nor higher fuel mileage standards would reduce emissions all that much, if at all. Most of Europe has been busting through its carbon limits under the Kyoto Protocol, while the mileage mandates imposed in the U.S. in the 1970s didn't stop Americans from purchasing SUVs and trucks. The only thing that has slowed those sales is $3 gasoline--thus the policy logic of Mr. Dingell's tax proposal....

Speaking for ourselves, we don't favor a carbon tax. In theory, such a tax might make sense if it were offset by lower taxes on income tax rates and capital investment--which would be a net plus for economic growth. However, there's not a chance in melting Greenland that the current Congress would offset any new carbon taxes; it would merely pocket the extra revenue to permanently increase the government's share of GDP.

No word yet on the Vegas line on whether the DEP will choose to attempt the same policies here in New Jersey or move toward an energy source such as nuclear power - which already generates 52% of our electricity and produces zero emissions.

Regionalization and Monetization

Dr. David Rebovich has a very thoughtful piece on the daunting task of creating a new school aid formula posted to PoliticsNJ.com. Asset monetization may be all the rage in political circles these days, but the single biggest opportunity for property tax relief within the state's current range of capabilities remains altering our disjointed school funding formula.

What the legislature and the governor did do in the new budget was increase state aid to non-Abbott school districts by three percent. This is the first time in five years that those districts have received more state aid.  The new budget also includes a hike in direct aid for increases in enrollments and targeted assistance for at risk students, both of which have created financial pressures on many non-Abbott districts. In addition, the state is providing more funds for full-day kindergarten and for pre-school programs. 

According to the Joint Legislative Committee on Public School Funding Reform, a new school funding formula should address these issues and more. The committee's final report recommended that a new formula be based on the characteristics of the student population of a district as well as the district's ability to pay. This would mean that state aid would "follow the children" and not be based on geography alone. In addition, the committee wants public-funded pre-school programs for all children who qualify, whether they live in Abbott districts or not, and all-day kindergarten in all districts.

What also needs to be resolved is the cost of a thorough and efficient system of education. The committee suggests relying on "professional judgment panels," a standard practice nationally, to determine the resources needed to achieve educational standards. Any such calculation, however, should also take into account the added costs of educating students deemed at risk, with special needs, and with limited proficiency in English.

What taxpayers will want to know, of course, is who will foot the bill for a new school funding formula..  Well, the joint committee recommended that school districts look seriously at sharing and regionalizing services, adopt best practices in administration and program delivery, find ways to reduce school transportation costs, and cut unnecessary state mandates. Yes,  616 school districts are too many for state the size of New Jersey, but the committee did not decide how many school districts the state should have.  However, it did state that the Abbott districts should be reviewed and consideration given to making residents in those districts pay more toward their schools.

Along with stricter caps on local property tax increases, some of these recommendations are already being considered by school officials. But without requiring districts - Abbott, suburban or rural - to pursue savings measures, education costs will continue to rise. And, if the state plans to help districts implement the goals and programs above, the cost will likely be a billion dollars or more a year.  From where will that kind of money come?

There is now consensus that a new, more equitable school funding formula must be in place. Consolidation of services, accountability and the Urban Schools Scholarship Act should be part of that matrix. As noted in the CIANJ 2007 Legislative Agenda,

Where appropriate, the private sector routinely streamlines operations to make itself more efficient and reduce costs to the consumer. CIANJ favors mandatory consolidation of government services, especially administrative functions. A base-closing style commission could issue recommendations that would be voted on in their entirety by the legislature, without the possibility of amendments. This would remove the political impediments that have frustrated past efforts to consolidate. The majority of property tax dollars are used to fund public schools.

Creation of countywide oversight with the power to line-item veto budgets; funding Abbott districts at the statewide average and not at the level of the wealthiest counties; and reduction in the number of school districts would all make significant improvements to New Jersey's property tax situation.

Remember that businesses in New Jersey often pay our nation's highest property taxes twice: Once by virtue of the nearly one-third of taxes collected being generated by commercial property and then again through the higher wages necessary to support a quality of life in NJ that attracts and retains a talented workforce. Each budget passed without a new formula costs the state's taxpayers. New Jersey's special session on property tax reform produced a litany of suggestions. Before the legislature begins to move on ideas such as universal healthcare and paid family leave, turning the biggest of those suggestions into an action should be atop the agenda. 

Same Old Protectionism

The lead editorial in today's Washington Post blasts House leadership for their refusal to enhance American prosperity through free trade agreements with Peru and South Korea. The South Korea deal would have meant American automakers could see their cars sold without the current 8% tariff and with 50% less in sales taxes. As the Post adequately closes,

It would be nice if South Korea and other trading partners accepted every item on every U.S. industry's wish list. But that is not the nature of trade negotiations. In the real world, officials must weigh the costs and benefits to the country as a whole -- not to mention the legitimate interests of the other side. One union and the two smaller U.S. automakers should not be allowed to sink a deal that would improve relations with a strategic ally in Northeast Asia and deliver real gains to U.S. agriculture and industry -- not to mention American consumers. The Democrats' partisan embrace of rationalizations served up by labor and (part of) the auto lobby is not "a new day in trade policy." It's protectionism as usual.

New British PM OK's New Nuclear Plants

While some in New Jersey are looking to deny the relicensing of the Oyster Creek nuclear facility (remember that more than 50% of NJ's electricity is provided by non-carbon emitting nuclear power), Britain's new Prime Minister is moving forward with a new generation of nuclear plants.

Mr Brown said it was vital to safeguard the UK's power supply, and warned the country would be reliant on foreign energy sources if it did not look to replace 16 power stations due to be decommissioned over the next 20 years.

The permitting process in New Jersey takes as many as ten years and the state's energy demands continue to rise. Cell phones, laptops and the other tools each of us have become accustom to drain energy. The time to begin advancing our nuclear capability is now.

Happy Fourth of July

$180,400,000.00 - And That's Before Noon

The Indiana Department of Transportation has launched a web page demonstrating how much the state has earned in interest following the privatization of the Indiana Toll Road last year.

The monetization plan (still under wraps) conceived by Governor Corzine is headed down a different track. For example, his core principles would preclude any foreign held or for-profit entity from controlling the road. It is also unlikely the state could invest as much quickly given its fiscal constraints. Still, Indiana took its money and placed it immediately in interest bearing accounts, and in the time it took to write this piece, the state earned $1,500. With figures such as that, monetization might be a plan  worth exploration.

Down, But Not Out...Unfortunately

One of the toughest parts of working in public policy is that even the most misguided ideas never seem to completely disappear. That's what makes Richard Berman,  Executive Director of the Center for Union Facts, so accurate in his letter to The Examiner,

Secret ballot elections are still endangered, despite bill’s defeat

The death of the Employee Free Choice Act has been greatly exaggerated. The action in the Senate was simply a dress rehearsal for the real battle in 2009, when union leaders hope to have elected a new (and more compliant) president.

The truly frightening part is that a bill that would virtually eliminate secret ballot elections in the workplace made it to a floor vote in the U.S. Senate. Community and business leaders should spend time now educating the public on this anti-democratic bill, rather than waiting for union leaders to pick the time and place of the next fight.

Richard Berman

Executive director, Center for Union Facts

McLean

While Congress is now out of Washington for recess its July 4th district work period, be sure to tell your representative how important the secret ballot is to you in keeping the process of unionization as free from coercion as possible. The Employee Free Choice Act may be defeated, but big labor is sure to continue to push for its big kickback.

Serious Ways to Address Global Warming Now

Assemblyman Michael Carroll and PSE&G President Ralph Izzo are splashed across the print media and blogosphere with practical ways to address climate change through current technologies.

While environmental "advocates" are often quick to point out flaws in the current system, there is a sometimes pathological denial that trade-offs will exist and an inability to offer viable solutions. For his part, Assemblyman Carroll offers up some practical solutions available right now to help NJ reach the goal of having more of its energy be produced by sources that do not generate carbon emissions,

[W]e could eliminate the sales tax on all high mileage vehicles. Instantly, everyone gets a $2000 price break on a Prius...Eliminate the tax on ethanol, rendering it more competitive. Aggressively promote the solar energy fund, and provide income tax credits for those who convert their homes. Amend building codes (if necessary) to provide for better solar alignment of homes and installation of energy saving devices, such as "geothermal", radiant heating/cooling systems. IMMEDIATELY CEASE all efforts to deny relicensing of Oyster Creek and, indeed, encourage more nuclear plant construction, both in NJ and regionally. Encourage use of personal wind turbines, where practicable, by exempting them from zoning regulations. Link heavy rail with light surface rail and ultra-light surface rail (exempt construction thereof from cost-generating rules like prevailing wage), eliminate parking fees at stations, and cut transit fares. Explore opportunities for additional hydroelectric generation along smaller rivers, and, if we think big, perhaps even exploring reinvigorating projects like Tocks Island.(emphasis ours)

Ralph Izzo, the President, Chairman and CEO of Public Service Enterprise Group (which owns Public Service Electric and Gas) authored an op-ed in today's Star-Ledger offering his company's take on the issue. Remember that PSE&G SUPPORTS the goals set forth by the Corzine administration to reduce carbon emissions 20% by the year 2020. From the perspective of a large utility, Mr. Izzo offers,

Utilities should be allowed to invest in innovative ways that help customers save energy inside as well. These efforts may include assistance to customers when purchasing energy efficient refrigerators, lighting, air conditioning systems and other appliances.

Expanding renewable energy resources is the next critical step in addressing climate change. We at PSEG have made a start with a proposal to commit $100 million for a solar energy loan program. This, too, requires state regulatory approval, and is designed to help the state meet half of its near-term renewable targets. The program has the potential to be expanded much further.

The third avenue is through clean central station electric generation. This is essential because conservation and investment in new renewable sources of energy will not be sufficient to satisfy society's energy needs over the long term -- at least not at prices everyone can afford.

Nuclear power remains the only large power source in New Jersey that emits no global warming gases. We are exploring the feasibility of additional nuclear capacity at our generation complex in southern New Jersey, the best site for a nuclear plant in the state. However, a new nuclear facility will take more than 10 years to build and place in operation. The thinking around new nuclear needs to begin now. It will also require state and federal support to help overcome regulatory risks.

As noted on this piece of cyber real estate multiple times - if we wish to seriously address climate change and do more than feel good about ourselves, we must consider all practical options, including a re-dedication to nuclear energy. The state already gets more than 50% of its electricity from nuclear plants such as Oyster Creek, and those plants do not produce carbon emissions. No other alternative source of energy has proven to provide sufficient energy without producing emissions.

All of the solutions offered in both pieces are available to New Jersey right now, if policy leaders wish to consider them. Windmills and solar panels may be the energy source of the future, but the technology does not yet exist to produce energy sufficient for our state and economy's growing needs.

A hat tip to Assemblyman Carroll and PSEG for moving the discussion forward.