NJ Business Matters: The Blog of the CIANJ

Paid Family Leave Final Vote on Monday

Yesterday afternoon, the Assembly Labor Committee voted 6-2-1 in favor of passing Paid Family Leave. The bill still has another committee hearing in the Assembly, but will face its final vote in the Senate on Monday. Click here for this week's CIANJ Business Beat highlighting the proposed mandate, and here for the PolitickerNJ story on the closeness of Monday's vote.

As you know, the bill would allow employees to take up to six weeks off to care for a newborn or newly adopted child or a sick family member. Unlike FMLA, there would be no exemption for small businesses and eligibility would be based on wages earned per week, not hours worked. Regular blog readers also know that New Jersey is one of only six states with paid maternity leave. The overwhelming majority of family leave applications would be to add six weeks of paid family leave to the six weeks of paid maternity leave already in place.

During the committee hearing, which was held less than 24 hours after it was announced New Jersey lost 9,500 jobs in January - more than half of all the jobs lost in America, they struck down three amendments. The proposals which were dismissed would have:

1. Exempted companies with less than 50 employees from participating in the program. This would have brought the program in line with federal unpaid leave laws.
2. Exempted the top 10% of wage earners at a company, ensuring an organization would not miss key personnel for up to 12 weeks.
3. They even voted against allowing employees to voluntarily opt out of the program.

As CIANJ said with the Millionaire's Tax, the half-millionaire's tax, the sales tax increase and the steadfast refusal of the legislature to cut the size of government - at some point, those legislative actions are going to have negative results on our economy. Now that we have some of the highest costs of doing business in the nation, the impact is becoming apparent. We are a net loser in migration and now after a year of nearly stagnant job growth are in a net loser in jobs as well.

Call your Senator now or click here to e-mail them and urge them to vote no on Paid Family Leave.

NJ Loses 9,500 Jobs in January

Less than 24 hours before the Assembly Labor Committee considers a job-killing paid family leave bill, New Jersey's Department of Labor and Workforce Development issued initial job numbers for January, and revised its job growth numbers in 2007.

Unfortunately, the news is not good for the New Jersey economy. The sobering statistics include,

• The number of jobs created in 2007 was revised. The Department, which had estimated the creation of 29,400 jobs, downgraded that to 4,700.
• In January 2008, New Jersey's private sector lost 9,200 jobs, while government shed 300 jobs.
• New Jersey's job losses accounted for about 50% of the nation's job loss last month. NJ lost more jobs than any other state.

Clearly, this is a cycle in which government should be doing all it can to help New Jersey grow its way out of increasing unemployment compounded by one of America's highest tax burdens.

What it is not time for is an 800% toll increase and a paid leave program that applies only to New Jersey and California.

The Department of Labor and Workforce Development's press release and cross tabs are available here.

Update at 7:20 a.m. - Star-Ledger coverage is now available, including this quote from Rutgers economist Dr. James Hughs,

It was shocking -- we slipped from slow growth to no growth over the past year, and the decline in January was far worse than we had anticipated

Hitting the Links - Budget Style

The Governor's Budget address has concluded. Here are a few links of importance:

• The Budget in Brief Backgrounder (and by "brief", we mean 84 pages) is available here.
• Here is a link to the text of the Governor's speech, which for the first time in recent memory was a budget address that included zero applause lines.
• CIANJ's response is already posted to our website.
• You can watch responses from elected officials roll in on PolitickerNj
• Finally, you can watch CIANJ President John Galandak tonight on News 12. The boss will be on News 12's Capital Hotseat

The Budget Is Coming! The Budget Is Coming!

Today at 11:30, Governor Corzine will deliver his budget address, and the long-awaited cuts will finally be unveiled. Here is some of what the Jersey papers have told us to look for:

• A budget with a bottom line of about $33.2 billion, which would be a $350 million reduction from last year.
• Cuts to every department in state government
• The closing of one or more departments. Reportedly on the chopping block are the Departments of Agriculture and Personnel and the Commerce Commission
• Cuts in aid to municipalities, hospitals and state colleges
• No new taxes or fees
• Layoffs and early retirement incentives for between 3,000 and 5,000 state employees

The list above would represent a good first step toward fiscal sanity in New Jersey. It would mean that for at least one year, we would stop digging ourselves deeper into debt and that state government finally got the message from some of the nation's most overburdened taxpayers and businesses.

You can watch the Governor's address live on New Jersey Network's website. Text and audio of the speech, along with the formal document, will be made available here soon after the Governor leaves the Assembly Chambers. 

Road To Ruin

Add the Wall Street Journal to the list of those opposed to Governor Corzine's toll road proposal. The Journal's Saturday editorial repeated the themes that have become prevalent here at NJ Business Matters,

Essentially, the state would be issuing new debt to pay down old debt. There would be an obligation to pay off bondholders and pay a dividend to the state. Mr. Corzine is betting that this bond authority can be made independent enough from Trenton's politicians to guarantee a regular revenue stream that couldn't be spent on the usual political payoffs. But the pols have a way of getting their clutches on such pools of surplus cash (think Social Security)...

As the Governor fine tunes his budget and state government braces for cuts that taxpayers and business owners have been demanding, the Journal levels with us and acknowledges that controlling New Jersey's spending is the only way to work ourselves out of this debt. In the last 20 years state revenues have grown at a rate of about 3% annually. Spending has grown by 7%, and NJ has made up the difference with some tax increases, but mainly with borrowing. Hence, state debt has increased by nearly $30 billion since 1990.

Excessive spending created the situation and reduced spending is the clearest way out of it. As the editorial closes,

Mr. Corzine's toll-hike plan is well meaning but unlikely to work and is already encountering bipartisan opposition. If it fails, he ought to consider the only real solution, which would be a state constitutional tax and spend limitation. He'd be a hero to taxpayers, and it might even save the state from bankruptcy.

That would be a step toward truly saving our state.

Public Interests Groups = Special Interest Groups

A hat tip to Dan Popeo, Chairman of the Washington Legal Foundation for his op-ed in yesterday's Washington Examiner.

The anti-business crowd is often quick to refer to business as a "special interest", but fail to apply the same tag to organized labor, trial lawyers and other advocates. Popeo highlights the money and organization behind these special interest groups and then notes what should be the obvious,

America cannot regulate and sue its way to economic success....

Recklessly smearing free enterprise and labeling businesses as “special interests” may fill politicians’ and activists’ coffers, but such tactics deeply fail all hard-working Americans. Empty words and an oppressive regulatory climate will not solve any of the pressing problems facing the U.S. economy.

They do, however, strip away economic rights and our confidence in free enterprise, two key factors that must continue to provide America with an edge in the brutally competitive international market.

If those who claim to represent the public interest act so harshly toward successful companies, why would anyone want to invest in America’s future or create a new business?

An excellent question for elected officials to ponder on this snowy afternoon.

800% Toll Increase Doesn't Have 21 Votes

Only a few days before his budget address, Governor Corzine and a key legislator are both acknowledging that they do not have the votes necessary to enact the Governor's toll road proposal.

"I'm not conceding that it's dead. On the other hand, I'm a realist. I don't have 21 and 41 votes for this," Corzine said, referring to the minimum votes he needs to push his proposal through the state Senate and Assembly.

Sen. Raymond Lesniak (D-Union) flatly said Corzine's complex plan to use huge toll increases to sharply reduce state debt and pay for road projects is on the scrap heap.

"It's dead as we know it," Lesniak said. "That doesn't mean it couldn't come back in a revised, trimmed-down version."

That's welcome news to the state's businesses and taxpayers. Perhaps the Administration is correct and our fiscal problems cannot be solved by cuts alone. However, before the nation's most overburdened taxpayers can be asked to pay more, the government must do all it can to reduce the size of government (not just the rate of growth). We are hopeful that the Governor's budget will reflect that objective.

State Budget May Shed 3,000 Jobs - Sort Of

Today's New York Times hints at some of the cuts Governor Corzine will propose during his budget address next week. Among those, the shedding of 3,000 state jobs and eliminating the Department of Personnel. That department is primarily responsible for administering all aspects of the civil service system at multiple levels of government.

Eliminating 3,000 jobs in a state that can no longer afford to have government as bloated as it is can happen through a multitude of ways. It appears the Administration is leaning toward early retirement packages rather than layoffs, which brought a lukewarm response from CWA Local 1034 President Carla Katz,

"As an alternative to layoffs, which are unacceptable, an early retirement incentive is good policy and would be welcomed by the union and the members. However, it is critical that there be appropriate backfilling of jobs,” since incentives for early retirement on top of an existing two-year hiring freeze “will mean that essential services to the public will continue to be undermined"

The problem with that strategy is that the state has tried it before - multiple times in the past 20 years. The net result has been increased retirement pay to those opting to depart early followed by an immediate filling of their briefly vacated position. The grand total was something that cost New Jersey's taxpayers more than it saved them.

As Senator Lance aptly put it, the burden of proof that a fifth time would be different will be heavy.

Two's Company; 73 Percent Is A Crowd

In case you hadn't heard - CIANJ recently announced its opposition to Governor Corzine's proposed fiscal restructuring plan. As you already know, the plan would involve turning operational control of NJ's toll roads over to a Public Benefit Corporation, which would send up to $38 billion to the state through bonds. The PBC's bonds would be repaid through 800% toll increases phased in through 2022 and then automatic toll increases to account for inflation through 2085.

A Quinnipiac poll released this morning shows we are not the only ones opposed. In fact, 73% of New Jersey residents polled expressed opposition.

Among the demographics in opposition are:

Democrats, Republicans, Independents, Men, Women, Those that live in urban areas, suburbs, near Philadelphia and at the Jersey Shore

The full poll is available by clicking here.

On To The Budget Cuts

The Governor's budget address is one week from today, and the word splashed across Jersey's leading papers is "cuts". The Administration and members of the legislature are quickly turning their (and attempting to shift our) attention away from the 800% toll increase plan and toward the alternative budget cuts.

The Governor is promising the cuts will be painful, and could include reduced hours at MVC, closing or reducing services at state parks, cuts to higher education, charity care and aid to towns. Remember that the size of NJ's government has doubled in 10 years and that since 2002 government has added 55,000 taxpayer-supported employees. Not all of those work in our state parks.

Meanwhile, we applaud Senate Budget Committee Chairwoman Buono, who believes the legislature should revisit some of the ideas proposed and later rejected during the special session on property tax reform. 

One of the ideas floated about was to rescind a pension boost passed in the hours before the 2001 legislature broke to campaign for re-election. The old pension formula divided the number of years worked (n) by 60 times the average of the three highest years of pay. In 2001 the legislature changed the number 60 to the number 55, which yielded a 9% pension boost to all state workers and retirees.

Rescinding that change, and eliminating pension benefits to part-time workers are two viable alternatives that should be considered by the legislature. Public employee unions maintain that such changes belong at the bargaining table. Remember that the increase came via legislation, why shouldn't the re-adjustment?

The good news for New Jersey's overburdened taxpayers is that reducing the size of government - not the rate of growth, but the size - is something Trenton is seriously discussing for the first time in recent memory. It is long overdue, but the public dialogue is now on the correct topic. Achieving a policy solution that both protects taxpayers and stabilizes the budget is the next, still harder challenge.

Two Strikes And You're Out (of Business)

Senate Majority Leader Stephen Sweeney is pushing for another mandate on NJ companies that both conflicts with federal requirements and exists virtually nowhere else in the country. This time, he would require employers to verify the legal status of their entire workforce. If a company is found to "knowingly" hire undocumented immigrants, they face revocation of their business license - 10 days for the first offense, and permanent revocation for the second.

The bill, which is yet to be formally introduced, would be modeled after an Arizona law which went into effect this year and was recently upheld as being Constitutional.

For many businesses, the concerns do not center around an inability to hire illegal workers, but rather the unfair burden this puts on companies who would be forced to navigate a patchwork of state and federal law. For example, companies are forbidden from asking certain questions when interviewing candidates for a position, and HR professionals are not expected to be document verification experts. Therefore, they must accept a social security card that appears valid. Plus,this would be another requirement of New Jersey companies that does not exist in competing states.

Regular blog readers know what I'm about to write next - given NJ's economic slowdown and already high cost of living and doing business, shouldn't government be doing all it can to reduce that burden, rather than increase it?

Taking Its Toll On NJ's Largest Employer

The warehouse and distribution industry is New Jersey's largest single employer, and today's New York Times demonstrates how the proposed 800% toll increases will undermine it and drive prices higher for consumers across the state.

New Jersey already ranks among the costliest places to live and do business. It should be self-evident that if you are a company that exists to ship products, the toll increases hit you disproportionately hard.

Simply put, the turnpike would go from being one of New Jersey’s great bargains to one of its biggest burdens, and in turn could spell trouble for companies that in the last few decades opened the vast warehouses lining the highway near exits 7A and 8A. Companies, including Johnson & Johnson and Mercedes-Benz, have leased millions of square feet of space there because of its easy access to the ports and to their customers.

Joseph S. Taylor, chief executive of the Matrix Development Group — which builds and leases warehouses and is partly responsible for the quadrupling of commercial space near Exit 8A — has had a front-row seat to the migration.

As it is now, Mr. Taylor said that about a quarter of the companies that consider leasing space from Matrix end up in Pennsylvania, up from 5 percent a decade ago.

Advocates of the Governor's plan point out that New Jersey has lower toll rates than the national average. That's not true for trucks, for whom the Turnpike toll of 22 cents per mile is already the national average. For the moment, we'll do what the plan advocates do and put that fact aside.

Currently, a car pays 5.5 cents for each mile they drive on the Turnpike, compared to a national toll road average of 9 cents. However, by 2022 the NJ number would jump all the way to 44 cents per mile (and $1.76 for trucks), far exceeding the national average. The national average will likely increase with inflation, but does anyone think the national average will go up 500% by 2022?

The Times points out that it is not the toll increases alone that are driving business away from the state, but an overall cost of doing business that is becoming prohibitive. Shouldn't government be doing all it can to reduce that burden, rather than increase it?

Here Some Debt, There Some Debt, Everywhere...

On Sunday, CIANJ President John Galandak appeared on My 9's (WWOR) New Jersey Now public affairs program to discuss the Governor's toll road proposal. He rightfully stressed that the Governor's plan does not reduce state debt. Rather, it moves $16 billion in debt away from the General Fund and puts the burden on the toll roads/PBC. If you live in the state, you still pay the debt. Many of the benefits derived from out-of-staters using the roads are lost to interest payments, reserves, fees etc.

So now that $16 billion in "state debt" would be lifted from the General Fund, where might that money go? Naturally, $13 billion would come in the form of new debt.

The transportation program Corzine has touted as a key benefit of his proposal would require $11 billion of new state borrowing by 2021, according to Treasury Department spokesman Tom Vincz. That amount includes $4 billion of debt already approved for transportation projects and scheduled to come on the books regardless of Corzine's plan.

On top of that, Corzine is planning to borrow $2.5 billion to pay for court-mandated school construction in city schools. That means more than $13 billion in debt tacked back onto the ledger within 14 years of the sharp debt reduction Corzine has proposed.

Peter Humphreys, a securization expert who is opposed to the program, states the obvious,

"It doesn't really work if you pay down $15 billion (of overall debt) and then borrow $12 billion of it back. You're not paying half the debt."

Thank you, Peter. Paying old debt with new debt and then going to the taxpayers asking for an 800% toll increase is the wrong direction for a state government that has expanded vastly in the past ten years. In that time, the size of government has doubled. It is time to reduce the size of government - not just the rate of expansion, but the size. Call your legislators and urge them to express their opposition to the plan.

The Difference Between 3% and 3.75%

In case you noticed a lack of updates, your friendly blogger was away on vacation for part of last week and Monday, and NJ Business Matters is a one-man band. Well rested, sun burnt and 10 pounds heavier, we returned to this little doozy in today's Courier-Post.

The 800% toll increase you have heard about in Governor Corzine's fiscal restructuring plan makes one critical assumption - that inflation will rise at a CPI rate of 3% per year. This introduces one of the fundamental problems of a 75-year monetization plan: how do you forecast capital markets, inflation and transportation usage for the next 75 years?

While the introduced bill caps inflation adjustments at 5% per year, the difference could significantly impact the average toll road user. As the Post points out,

(O)ver the last 75 years, the inflation rate as measured by the Consumer Price Index has averaged 3.74 percent, and the maximum inflation allowed under the bill is 5 percent.

While that may seem like a small matter, the difference could add up.

A commuter who pays $1.21 to travel on the Turnpike twice a day for 250 days this year would pay $600 more in 2022 under the historical inflation average than under Corzine's estimate.

And with constant 5 percent inflation, the same commuter's annual tolls would be almost $1,800 more than Corzine's estimate in 2022.

By the end of the 75-year contract, a single one-way $1.21 toll on the Turnpike would cost almost $104 using the historical inflation rate, $44 more than under Corzine's 3 percent assumption.

Over a year of commuting, that would be a difference of $22,125.

All this for what proponents acknowledge could be accomplished through other means, including a 15% budget cut. 

Toll Road Plan Costs You Before It Really Costs You

A hat tip to the good people at In The Lobby for all the work they've done in exposing some of the consequences should the toll road boondoggle become public policy. Today they note that the program will cost New Jerseyans an extra $4 billion because toll increases will not begin until 2010.

Aside from being phased in over time, the toll increases do not go into effect immediately. The Governor contends that is to allow residents and businesses time to adjust to the massive increases. Coincidentally, it is also the year after the next election. Just sayin.

That actually makes the deal more costly. NJ will get its money and spend it almost immediately after the concession agreement is signed, but will not begin making payments until later the interest begins to build. The net cost to you right off the bat: $4 billion. If we can find $4 billion to avoid making payments on the largest financing deal in American history, why can't we find it to take a bite out of the debt?

Click here to see the entire entry.

Video Killed the Radio Star

This Sunday, CIANJ President John Galandak will appear on My 9's New Jersey Now public affairs show. The boss will discuss the Governor's asset monetization scheme and the impact it will have on New Jersey's businesses and taxpayers.

The show airs at 12:00 p.m. on Sunday. If possible, we'll embed the video here next week.

Spending Freeze Hits Resistance

Attached to Governor Corzine's proposal to bond 75 years worth of toll revenues to pay down debt and fund infrastructure is a promise to freeze spending during the current budget cycle. In our press statement opposing the monetization of the toll roads, we also noted that CIANJ supports the spending freeze.

Which is why we were disappointed to read Senate President Codey's statements that a spending freeze may not be possible - or even wise - while asking taxpayers to send more of their money to Trenton. Today's Asbury Park Press notes,

"You cannot plead poverty, raise $40 billion, and then say you've got to cut the budget," Codey said.

"Are you going to cut aid to colleges and raise tuitions?" Codey said. "Are you going to cut aid to hospitals and see more hospitals close and more people laid off from work? Are you going to cut aid to towns and see more in property taxes because the towns didn't get as much as they though they'd get? I think that's a very hard to sell as well. . . . There are no good choices here."

It's always the children and the hospitals.

The reality is New Jersey's budget has doubled in ten years. Its population has not doubled, nor has its people's income. Meanwhile, we are in an economic cycle of slow growth, an expected population decline, and some are forecasting higher unemployment in the immediate future.

Given that, isn't it time we lessened the burden on taxpayers to allow them to keep more of the money they worked for, rather than increasing tolls 800% or making Trenton's expansion permanent?

CIANJ Opposes Governor Corzine’s Fiscal Restructuring Plan

After analyzing and discussing Governor Corzine's fiscal restructuring plan, CIANJ today announced it opposed ceding control of the toll roads to a PBC, issuing further debt and increasing tolls eight-fold over the next fifteen years. New Jersey's budget has increased substantially in the past ten years, and we are in an economic cycle of slow growth. To ensure that spending continues by bonding 75 years worth of toll revenues, and to place irreversible toll increases over that same time, would be devastating to the state's taxpayers. CIANJ's statement is available below.

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CIANJ Opposes Governor Corzine’s Fiscal Restructuring Plan

Business group raises concerns about additional borrowing, increased tolls and the inability of Trenton to control spending

The Commerce and Industry Association of New Jersey (CIANJ) today announced its opposition to Governor Corzine’s fiscal restructuring plan. The group pledged it will work to protect business and taxpayer interests from the proposal to accelerate borrowing and increase tolls 800% in the next fifteen years.

CIANJ based its opposition on the impact the toll increases will have on the cost of doing business in New Jersey, the continued borrowing of state government, the loss of state control of a critical function of government, and the availability of other options – such as spending cuts – that would allow the legislature to correct the problems it created.

“The Governor’s plan to repay old debt by issuing new debt and then increase tolls to fund the expansion would be devastating to the state’s taxpayers,” said CIANJ President John Galandak. “New Jersey’s budget has doubled in the past ten years, and it is time for Trenton to make serious budget cuts rather than develop a fiscal scheme to ensure spending continues.”

The Association also announced its support for other aspects of the Governor’s proposal, such as a spending freeze and a Constitutional Amendment to end the budget maneuvers that have allowed for unchecked borrowing in the past. However, ceding control of New Jersey’s toll roads should not be a prerequisite for these reforms. In fact, reducing the burden on NJ’s taxpayers would help the state grow itself out of the most recent budget crisis.

“Living and doing business in New Jersey is already one of the most expensive propositions in the country. We recognize the budget faces serious strains, but those strains have been caused by spending and not inadequate revenue. Before New Jersey’s corporate and individual taxpayers can be asked to further fund the system, Trenton must reduce the amount of taxpayer money it spends.” Galandak concluded.

Super Monday Morning Quarterback

We're sure our regular blog readers, some of the smartest folks in Jersey, predicted the Giants would hold New England to just 14 points and pull off one of the biggest upsets in Super Bowl history. But your friendly blogger, a season ticket holder, thought we would lose 31-13. Congrats to the Giants and all their fans on this snowy Monday morning - and here's to a catch that should be looked upon as one of the top 5 in SB history.

Abuse As AG?

Investors Business Daily captures the panic attack businesses would succumb to if the words "Attorney General Edwards" were ever uttered. Former Senator Edwards, who became wealthy as a trial lawyer, is rumored to be on the short list of potential AGs.

The editorial board's most salient point involves how much lawsuits already cost the US economy, and how much the "tort tax" has increased since trial lawyers got in the lobbying game,

The tort tax caused by trial lawyers — jury awards, defense expenses and administrative charges — already costs the U.S. economy roughly 2% of GDP each year, more than any other developed nation and large jump from the 0.6% of 1950....

Not every lawsuit is abusive nor is every trial lawyer a villain. Some do good and necessary work. But too many have turned the profession into a shakedown operation. They should be brought under control through reasonable tort reform, not given free rein by one of their own.