NJ Business Matters: The Blog of the CIANJ

Stating the Obvious

The editorial boards at the Star-Ledger and Asbury Park Press both chose today to write about New Jersey's sagging business climate, and call on the Governor and legislature to change it.

The Ledger cites a Rutgers University Study, which we first mentioned here at NJ Business Matters two weeks ago. The study found that in 2007, New Jersey's private-sector employment base grew by only 0.1%. That put New Jersey 41st in the nation and we ranked behind every bordering state.

The Press editorial does the better job of directly stating the problem,

But even [streamlining econmic development agencies] will not succeed unless the state revamps its tax system, which makes it so expensive to live here, and its regulatory structure, which businesses find cumbersome and overly restrictive.

Taxes and regulation are intertwined with economic development.

The last sentence says it all. Legislators and administrations routinely introduce pro-business initatives. All of them would help create jobs within certain niches, but most suffer from the same fatal flaw: they require companies to send money to Trenton, only to have some of it sent back with strings attached. Every business climate ranking, even those that do not put New Jersey near the bottom, acknowledge that this is one of the most expensive states to do business. Changing that undeniable fact should be job number one in assisting an economy in trouble.

Among the areas in which NJ ranks near the bottom, according to the Tax Foundation, are corporate and individual income tax rates, and property taxes. Those all sound like a good place to start.

Different Era, Same Regulation

New Jersey Citizen Action is opposing deregulation of the wireline phone industry, charging an open marketplace could lead to increased rates of 335% for New Jersey consumers.

Richard Young, spokesperson for Verizon, puts it best,

"We looked at the study (cited by Citizen Action), and we believe the study is shallow, short-sighted and full of holes. ... We are asking the board to look at marketplace realities."

Bingo. The main argument by NJCA and their allies is that there is a lack of competition in the marketplace. Unfortunately, they take too narrow a focus. Aside from competition from other hard-wired phone companies, there is now competition from wireless phones, VoIP and cable. In fact, those segments now represent a larger share of the market than traditional landline companies do. By the way, those other industries do not face the same regulation as landline companies. All the wireline companies are asking for is to be allowed to compete more equitably with the other forms of communication.

Many New Jersey regulations are designed to sunset after a certain period of time to prevent regulations from a different era from hampering modern business. The explosion in carriers and forms of telephone technology exactly fits that description. It's time for years-old regulations to catch up to reality.

Keeping It Simple

A feature article in Sunday's Asbury Park Press picks up on a report we featured here at NJ Business Matters last week - New Jersey's slow job growth relative to its neighbors. The Garden State added just 3,700 private sector jobs last year - 0.1% of its overall workforce, which ranks NJ 41st in the nation. We recommend the entire article as a must-read, but the introduction about sums it up,

Adrian Stevens can't pinpoint the exact moment he decided to sell his restaurants and move to Florida, but he knows how he felt.

He felt frustrated because his taxes and fees kept increasing. He felt confused because he didn't know what would come next. And he felt sad because he had to leave New Jersey, the state where he was born and raised his family.

"It's death by 1,000 cuts," Stevens said

This state has natural advantages that are the envy of other markets around the world. The trouble with some of the "pro-business" initiatives taken up by governors and legislatures is that so many boil down to companies sending money to Trenton, only to have it sent back with strings attached. Creating a low tax and regulatory environment is the best way to attract and retain business in the state. Always has been, always will be.

Jersey's Job Growth Continues to Slide

In a year in which New Jersey has already lost more than 10,000 private sector jobs, Rutgers University has unveiled a study demonstrating our 2007 growth was slower than neighboring states. In 2007, NJ added only 3,700 private sector jobs, or about 0.1% of its workforce. To compare, here is a rundown of growth figures in nearby states:

• New York - 1.2%
• Connecticut - 0.8%
• Massachusetts - 0.7%
• Pennsylvania - 0.6%
• New Jersey - 0.1%

Overall, New Jersey ranked 35th in job creation as a percentage of its overall workforce. If we want to maintain a high quality of life, those numbers have to change - and fast. A good start would be for Governor Corzine to veto the job-killing paid leave mandate that sits on his desk.

Maryland Goes on the Spending Spree

Jersey's budget crunch has many causes, but one of the underreported ones is the state's high-reliance on high income wage earners. Despite what you might hear from groups pressing for even more tax increases on the top 10% of wage earners, NJ's tax structure is already one of the most "progressive" in the nation. Following passage of NJ's millionaire's tax, 5,000 of said millionaire's established residence elsewhere, and during down economic times the budget experiences unsustainable shortfalls.

Maryland appears ready to follow suit, and today's Wall Street Journal editorial, "New Jersey on the Chesapeake" explains the foolhardiness,

As California and New Jersey have shown, a steeply progressive income tax makes state revenue highly dependent on relatively few earners. In good times, those earners do well and the pols spend the excess revenues. But in slowdowns, the state quickly finds itself in deficit, and, true to this form, Maryland's pols now find themselves on the New Jersey ratchet to ever higher rates.

For 190 years, New Jersey somehow managed with no state income tax.

Don't Tax You, Don't Tax Me; Tax That Suit Behind the Tree

We're actually surprised it took this long.

A new coalition has formed with a solution for New Jersey's budget troubles - $2.3 billion in higher taxes for our citizens and businesses. CIANJ just issued a press statement in which association President John Galandak calls the ideas "some of the most counterproductive to be proposed in 2008." Bingo.

Among the proposals are:

• Higher income taxes on the top 10% of Nj's population - $500 million (NJ has the second highest income tax rate in America)
• Higher gas tax, license fees and vehicle registration charges - $1.4 billion
• "Re-evaluating" job creation programs - $300 million

Business Employment Incentive Program (BEIP) grants have helped create 70,000 jobs since the program's inception. NJ should continue to fund such a program that has resulted in billions of dollars in new investment in the state - especially during a year in which NJ has already lost more than 10,000 private sector jobs.

Give the legislature and Governor credit; in public hearings they have remained dedicated to an overall budget which is less expensive than the previous year. They must avoid taking a giant step backward and down the road of higher taxes which helped create the current business climate. 

At Least We're Not Connecticut

The Tax Foundation has released their annual "Tax Freedom Day" study - letting you know just how many days of the year you work for the government, and when you can pay for things like food, clothing and shelter.

Good news, Jersey: Tax Freedom Day for us is four days earlier this year. You can begin working for yourself on May 7th.

The bad news is that the only state with a later Tax Freedom Day is Connecticut. The Constitution State has to keep their champagne on ice until the 8th.

Full study available here, and here's a link to the Tax Foundation blog.

Good News on Exports

The Governor has just announced that exports from New Jersey increased $3.5 billion in the last year.

From NJBiz:

The 12.8 percent increase exceeds the national growth of 12.1 percent, the governor said. Exports alone support more than 366,000 jobs in the state, he added....

The state's greatest trade gains came from increased commerce with countries like Israel, where the amount of New Jersey products received increased 195 percent last year; the Republic of South Africa, where it grew 60 percent; and India, where it rose 51 percent, the Corzine administration said. Italy, Japan and Singapore also saw Garden State exports increase more than 25 percent in 2007.

In The Face Of Job Losses, Add Mandates

Two e-mails just scurried across the inbox. See if you can make sense of them.

First, the NJ Department of Labor and Workforce Development released its February job figures, which show New Jersey lost another 1,700 jobs in February to add to the 8,600 jobs lost in January. Job losses were led by trade, transportation and utilities (-2,800), manufacturing (-1,100), and construction
(-500).

The unemployment rate climbed by .3% to 4.8%, which now matches the national average.

Simultaneously, NJBiz is reporting that Senate President Codey has announced there will be a special voting session, either later this month or in April, to vote on final passage of the Paid Family Leave mandate.

The meeting would include voting on the paid family leave bill and perhaps voting to confirm Gov. Jon Corzine's nominee for treasurer, David Rousseau, Codey's office said. Usually, legislators spend April focusing on budget hearings and no full Senate meetings are presently scheduled.

If the Senate passes the leave bill, it would go to Corzine, who has said he would sign it into law.

The bill (S-786) was scheduled for a vote this past Monday, but was delayed due to procedural questions.

At some point, legislators have to recognize the cause and effect of their votes, no?

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

Mixed News In December Job Numbers

New Jersey's Department of Labor and Workforce Development has released its preliminary job numbers, offering a mixed bag to those of you with an interest in NJ's economy - which is everyone.

The good news:

• 3,700 new jobs were added during December (a modest gain), and 3,500 of those were in the private sector. For too long our government has been adding jobs at too fast a rate, helping lead to the unsustainable growth in our budget. A ratio north of 17:1 between the private and public sector is a great improvement.
• More New Jerseyans than ever are employed. The new record stands at 4,114,900.
• The state's unemployment rate remains one-half percent below the national average.

The bad news:

• While still below the national average, New Jersey's unemployment rate climbed from 4.2% in November to 4.5% in December.
• From December 2006 through December 2007, New Jersey added less than 30,000 jobs. The go-go years of the 1990's added 70,000 jobs a year.

The raw data is available online. Job gains were led by education and health services, leasiure and hospitality, and professional/business services. The economy lost the most jobs in construction, financial activities and manufacturing.

Haste Makes Electronic Waste

The final legislative day may offer all New Jerseyans insight as to what can go wrong when the legislature works in haste. Today's example: a proposed electronic waste recycling program.

CIANJ does not oppose the creation of an e-waste program. However, legislators may choose to jettison an industry-supported compromise and place NJ and US-based facilities at a disadvantage to their overseas competitors.

The debate that surrounding the e-waste program is whether NJ should follow a “producer pays” model or one funded by a point-of-sale Advanced Recovery Fee (ARF). In a "producer pays" system, a manufacturer would pay the NJ Department of Environmental Protraction a $5,000 registration fee and then either develop its own recycling program or pay its "fair share" of what it costs to operate a state-administered one. An ARF model requires consumers to pay $10 at the point of sale to fund a state-run recycling program.

In general, computer manufacturers support a producer pays system, largely because of what can be salvaged from old computer parts. TV manufactuers prefer a producer pays model because of the number of TV companies that come into and go out of existence and the difficulty of enforcing registration fees and 'fair share' costs to a facility not based in the US. So, a CIANJ supported compromise did just that - it allowed computer companies to pay a $5k registration fee and recycle their own products, while consumers would fund a TV recycling program.

Last-minute amendments to the legislation have now eliminated that compromise, bringing television manufacturers into a producer-pays model. CIANJ has several specific objections to the substitute of S-554/A-3572, which we believe was hastily developed and would place additional costs on products created in the United States. The industry employs 30,000 New Jerseyans whose jobs would be impacted by an improper implementation of this program.

The last minute changes are largely unenforceable on foreign television manufacturers, placing those that produce their products in the US at a competitive disadvantage. CIANJ believes that the substitutes for S-554/A-3572:

• Place a burden on companies that produce their products in New Jersey and the United States. Companies, especially those that manufacture their products overseas, which dissolve with the end of peak retail cycles, will not face the same recycling program costs, giving their products an edge over those made at stable US-based facilities.
• Create a competitive advantage for companies not located within New Jersey. As presently written, companies may develop and participate in their own recycling programs, provided they are approved of by the DEP. However, because they would be based on return share and not market share, companies with no presence in New Jersey may be exempt from such requirements.
• Create an easily-diverted legislative fund, making it possible the e-recycling program will never be fully fulfilled. Section 5 mandates registration fees be paid by each manufacturer into a fund, which the legislature would then appropriate. However, ambiguous language in the bill creates a scenario whereby the funds might never go toward their intended purpose.

Because of all the confusion created by the changes made on Thursday, CIANJ has withdrawn its support for the legislation and is urging legislators to consider a new version of the bill in the next legislative session - which begins tomorrow.

UPDATED: Bringing Jobs to New Jersey's Cities

Update: The legislation, S-3043/A-4666 was passed by both committees today and is likely to be voted on by the full Senate and General Assembly on Monday.

Today's Star-Ledger reports on legislation we first noted here at NJ Business Matters last week. The proposal would develop a program to incentivize companies (including TD Bank) to make major investments within New Jersey's transit hubs by offering tax credits to those creating large numbers of jobs around our rail stations. Eligible areas under the CIANJ-supported bill would be within a half-mile of transit stations in the cities of Camden, Trenton, Newark, New Brunswick, Paterson, Elizabeth, Jersey City and East Orange.

A target of the legislation is TD Bank, which is working toward acquiring Cherry Hill based Commerce Bank, and may open a new office in the Garden State.

A U.S. subsidiary of the Toronto-based bank already owns a smaller bank, based in Maine, and has a financial stake in Ameritrade, based in Jersey City. TD Bank previously said it is considering a move to New Jersey, among other states.

The bill (S3043) is sponsored by Senate President Richard Codey (D-Essex), but is the brainchild of Rose's economic growth office.

The measure would provide up to $75 million in tax credits to match a company's capital expenses -- including construction, renovation, leases, equipment and furnishings -- incurred when locating corporate offices within a half mile of a transit station in a city that is eligible for urban aid and where a large percentage of property is off the tax rolls.

The corporation's move to the city must create at least 200 new jobs, according to the bill, and the credits would be spread out over 10 consecutive years.

The legislation to bring jobs and investments near our mass transit hubs (which is of course opposed by the Sierra Club) will be considered later this morning by the Senate Budget and Appropriations Committee and the Assembly Appropriations Committee. We'll bring you the results later today. 

Over A Barrel

When you're a business lobbyist, it can be tough to draw the line from Trenton policies to the kitchen table of not only business owners, but to the state's consumers and taxpayers. Today's Asbury Park Press makes it easy, with their article on how shipping restrictions on wine here in New Jersey make it impossible for Garden State residents to order the specific wine they seek and for our wineries to grow.

New Jersey does not allow wine to be shipped directly to customers, a restriction not placed on residents or vineyards in most other states.

"If laws changed, I think it would dramatically affect our business," said (winemaker Carmen) Stark, who came to Unionville from Napa Valley.

Many regions across the country are trying to become another Napa Valley or Sonoma, with wine industries that attract tourists.

But laws in some states still prohibit wineries from shipping directly to consumers, two years after a landmark U.S. Supreme Court ruling led many to believe that all states would allow vineyards to ship wine directly to consumers across the country.

The Supreme Court ruling overturned laws in New York and Michigan that prohibited consumers from buying wine directly from out-of-state wineries. Wineries and consumers had sued, alleging those states violated the Constitution because they allowed in-state wineries to ship directly to consumers but prevented shipments from out of state.

The court said either all wineries should be allowed to ship directly to consumers or none, but each state still decides whether to allow shipments....

Allowing direct shipping would add another benefit for less prominent regions whose wines haven't been reviewed by influential wine publications, which don't want to write about wines that aren't accessible to everyone, said Jim Trezise, president of the New York Wine & Grape Foundation.

"In order to get broad-based respect, you need national distribution," he said. "You can get respect, but it's narrowly focused with the few people who can get your wines."

The ruling and a subsequent new state law allowed New Yorkers to receive wine from California and other states.

At the same time, it also opened channels of commerce to allow consumers in other states to directly receive New York wines, Trezise said. He noted that last year, the Finger Lakes region of New York State and the North Fork of Long Island landed on the cover of Wine Spectator.

That's attention emerging regions can only dream about.

Just a simple example of what restrictive policies can do to both the consumer and to local businesses, whose customer bases are artificially limited.

The article also notes that Senator Lesniak and Assemblyman Burzichelli would favor changing Jersey's arcane policies. CIANJ would be eager to work with the Chairmen of their restrictive committees.

Job Numbers In, Unemployment Slightly Up

New Jersey's Department of Labor and Workforce Development released its November job numbers to a mixed reaction as the growth of government jobs continues to outpace the growth of private sector jobs in the Garden State. Below are some of the key numbers from the report, which is available here in its entirety.

• Unemployment edged up to 4.2% from 4.1%
• 2,100 total jobs were added in November - 1,200 being government jobs and 900 generated by the private sector
• Job gains were led by education and health
• Job losses were led by financial services and manufacturing

James Hughes, dean of the Bloustein School of Planning and Public Policy at Rutgers told the Star-Ledger,

"The key office sectors combined -- information, financial activities, and professional and business services -- lost 400 jobs in November. This is not good news for the office market." When private sector employment totals for 2007 are settled next month, "it looks like the fourth quarter will be particularly weak."

The Ostrich Society here in New Jersey continues to advocate for anti-business public policy thinking it will have no impact on the state's working men and women. At some point, even they have to realize we need to reduce spending and help foster economic growth, right?

Today in Trenton: Jeopardizing New Jersey's Most Successful Job Creation Program

Here in New Jersey, different administrations and legislatures have tried different ways to spur on economic growth. The most successful of all programs in the state has been the Business Employment Incentive Program (BEIP).

BEIP grants work by incentivizing companies to locate to New Jersey or to expand their operations here. They offer businesses the carrot of a 10%-50% reduction on the company's share of the state income tax in exchange for creating at least 25 new jobs in the Garden State. The reduction increases to up to 80% for companies which assist the state's smart growth initiatives. Since its creation in September 2003 the state has invested $1.1 billion into the program. The result has been $11.9 billion in business activity because of the grants and 70,000 new jobs.

Today the Assembly Labor Committee will reconsider legislation that will lessen the effectiveness of the program. A-4001/S-2247 would require BEIP grant recipients to pay the prevailing union wage on any construction work done to build or grow operations. Your friendly blogger will be in Trenton testifying in opposition.

1. CIANJ opposes an expansion of the prevailing wage into the private sector. Government has already established a minimum wage and to require a business to pay an artificially higher wage drives higher costs. That whole cost should be at the intersection of supply and demand thing.
   
2. BEIP grants work because they reduce the cost of doing business. The prevailing wage increases construction costs by 10% - 25%. So the state will now have a cost reducing incentive program that can only be accepted if the grant recipient agrees to a mandatory cost increase.
   
3. The bill also requires that a landlord pay the prevailing wage if a BEIP recipient occupies at least 55% of their building. This means an unrelated third party can put a company's grant in jeopardy. It would border on irresponsible for an organization to accept a grant without full control as to whether or not all of the conditions are met.

We'll link to our testimony and final vote tallies later in the day.   

Now More Can BRRAG

The Record today covers legislation first introduced here at NJ Business Matters on Monday.  The Senate Economic Growth Committee voted in favor of S80, which broadens who is eligible for the state’s Business Relocation and Retention Assistance Grant (BRRAG) program.

Presently the program provides grants to companies expanding or locating to the state while creating a minimum of 250 jobs. S-80 would alter the program by reducing the minimum number of jobs created to 50, thus allowing smaller firms the same opportunities presently available to large companies and increasing New Jersey’s competitiveness in a global marketplace.

CIANJ applauds its movement and looks forward to again supporting it before the Senate Budget and Appropriations Committee.

People Follow Opportunity

The Small Business and Entrepreneurship Council has released its Small Business Survival Index for 2007, and for Jersey - the results aren't pretty. Our home state ranked 50th, edging out California and Rhode Island as the state most hostile toward small businesses.

Oh by the way, NJ is considering legislation that would make us only the second state to impose a Paid Family Leave mandate on all small companies.

The complete survey, which accounts for everything from tax rates, to electric rates, to health insurance mandates, is available here.

A theme we try to reinforce here at NJ Business Matters is that an unfriendly business climate has reverberations beyond the bottom lines of business owners. Anti-business legislators try to frame the argument as business owner greed versus working class need, but when businesses sour on a state, it hurts everyone.

It must be noted that countless issues play into human decision-making. But the impact of public policy often is very important. The relative governmental costs among the states will impact where people live and work, that is, where they seek opportunity. That most certainly is illustrated by where people are moving to and from among the states.

In terms of population growth, from 2000 to 2006, total U.S. population grew by 6.1%. As for the top 25 states in the 2007 Index, population growth over this period registered 8.2%, while among the bottom 26 (including the District of Columbia), population growth registered 4.1%. Therefore, the population in the top 25 states on the Index grew at double the rate of the bottom 26 on the Index over the period of 2000 to 2006. In terms of raw numbers, the top 25 added 11.1 million in population, while the bottom 26 added 7.3 million.

People follow opportunity. It's why New Jersey lost 72,000 residents last year. Hostility toward business drives companies and the jobs they create away from New Jersey. That equates to less high-paying jobs for our citizens and a depressed quality of life for us all. Public policy matters, and for a state ranked dead last in small business friendliness, it matters for us now even more.

Today in Trenton: Economic Growth Committee Considers Business Incentive Legislation

Later this morning, the Senate Economic Growth Committee is scheduled to hear legislation that would help New Jersey attract jobs and bolster its economic development programs. CIANJ has urged legislators to pass both measures to help create jobs and ease administrative burdens in Urban Enterprise Zones.

S-80, sponsored by Senators Kean and Bucco, would lower the threshold for eligibility in the state’s Business Relocation and Retention Assistance Grant (BRRAG) program. Presently the program provides grants to companies expanding or locating to the state while creating a minimum of 250 jobs. S-80 would alter the program by reducing the minimum number of jobs created to 50, thus allowing smaller firms the same opportunities presently available to large companies and increasing New Jersey’s competitiveness in a global marketplace. CIANJ supports the legislation and urges its passage.

Also under consideration is a bill that would ease administrative burdens for companies located solely within an Urban Enterprise Zone (UEZ). A-3938 (Burzichelli/Cryan) would change sales tax exemptions back to a point of sale model and away from the rebate system presently in place. Current law requires UEZ qualified businesses to pay the full sales tax and then apply for the rebate, creating an administrative burden that has lessened the effectiveness of the program. CIANJ favors the passage of A-3938.

We'd Like to Introduce the Star-Ledger to Themselves

Back in October, the Star-Ledger editorialized that NJ was driving businesses out in droves and that the state needed to create policies designed to attract business. Who could disagree with such a common-sense statement as,

More than anything, the Hughes-Seneca report is proof that papering over problems from one election to another doesn't work. Eventually, steps must be taken to make New Jersey a place where businesses want to locate and ordinary people can afford to live.

So naturally, Thursday the paper decides to demand that legislators pass the most anti-business piece of legislation to be seriously considered this year. The Ledger has called for Paid Family Leave to be passed during the lame duck session.

Regular readers know this all by heart. Paid leave would put New Jersey at a competitive disadvantage as only NJ and California would mandate that every company provide this time off. We only wish the editorial board at the Ledger agreed with itself when they wrote,

In a global economy, location alone isn't enough. Companies look for equitable, stable tax policies as well as a diverse and skilled work force.

The advantages of opining. 

Writing Checks No One May Be Around to Cash

Last week we blogged extensively on the loss of 72,000 residents last year and the way the trend is impacting our economy. It's already cost NJ $10 billion in income and more than $600 million in taxes paid into the state budget.

Today, a Monmouth University poll gives details as to who is leaving and why. The Ostrich Society likes to pretend actions in Trenton have little correlation to the exodus, and that factors such as retirement are the driving force behind the movement.

The Monmouth poll finds that those most likely to move are in their working years. In fact, 49% of ALL New Jerseyans would like to leave the state. Of those 54% are under fifty-years-old and 59% earn between $50,000 and $100,000 annually. Those earning more than $100,000 were almost evenly split as to whether they would like to stay or leave the state. The top reason cited is property taxes followed by high cost of living. The rest of the sour news is available here.

How much evidence is needed before we address property taxes in a way beyond rebate checks and look to reduce the nation's second-highest tax burden?

Cause and Effect

State Senator Tom Kean wrote an op-ed for yesterday's Asbury Park Press outlining the reasons for next year's projected budget shortfall and the necessity of a budget which utilizes spending cuts versus the business-as-usual model of tax increases.

New Jersey's income tax structure is progressive. More than 50% of state income taxes are paid by the top 4% of wage earners. Those high wage earners tend to have large portions of their income in corporate partnerships and investments which are not reported until the end of the year, making budget forecasts on thin margins a tricky busiuness.

New Jersey's high wage earners are also heavily reliant upon Wall Street success compared to other states. Kean aptly writes,

Given the recent downturn in the nation's housing, credit and financial markets, many economic observers expect state revenues will fall significantly short of expectations. The current state budget assumes a nearly 8 percent projected increase in income tax revenues. Those reduced collections, combined with a structural budget gap that Corzine last week projected as high as $3.5 billion, present a serious challenge to the state's fiscal stability.

In both the city and state governments in New York, Mayor Michael Bloomberg and Gov. Eliot Spitzer have acknowledged the slowdown in the economy and are beginning to reduce government spending in anticipation of a reduction in income tax revenue collections.

The Governor's office is preparing for such changes with next year's budget cycle. Sunday's Record tells of a high-level meeting at which Department heads were told to find $3 billion in cost savings. Of the state's $33 billion budget, certain gubernatorial priorities and 'mandatory' spending is considered off-limits - - about $18 billion worth. That means the remaining $15 billion requires a 20% cut. While it would still leave major areas for savings untapped, a $3 billion reduction should at least prevent digging even deeper into taxpayers' pockets. Maybe those 72,000 departures we blogged about last week are making an impact. 

The Star Ledger Says - NJ Business Matters

The Star-Ledger gets credit today for stating the obvious - NJ's status as an expensive place to live and do business greatly contributed to the departure of 72,000 residents last year.

In today's editorial, the Ledger notes the points mentioned on NJ Business Matters (we wouldn't dare say 'follows our lead') in discussing the Rutgers University study highlighting the exodus from the Garden State at the cost of $10 billion in income and $680 million to the state budget.

The state's policymakers need to enact programs that will give the state an edge in attracting businesses. In a global economy, location alone isn't enough. Companies look for equitable, stable tax policies as well as a diverse and skilled work force.

They also look for areas where their employees can afford to buy houses and pay property taxes. The average in come of New Jerseyans is 33 percent higher than the national average. But that advan tage is negated by housing costs -- including highest-in-the-nation property taxes -- that are 52 percent higher than the national average....

More than anything, the Hughes-Seneca report is proof that papering over problems from one election to another doesn't work. Eventually, steps must be taken to make New Jersey a place where businesses want to locate and ordinary people can afford to live.

The trouble with this type of an editorial is what it lacks in follow-up. If the Ledger is going to take the stance that NJ needs to attract business, will it also take the stance that in order to do that, we need to reject measures such as Paid Family Leave? Or that we need to put an end to the mandates that now account for up to 20% of health insurance costs in New Jersey?

Unfortunately, they have not yet taken that step. You would be hard pressed to find a newspaper or political candidate declare that we need a weaker economy with fewer jobs. They are all willing to give lip service to a healthy business climate but when it is time to make the public case or cast the necessary legislative vote too few are willing to follow through.

Pro-business rhetoric is great, but pro-business and pro-jobs action is the difference between prosperity or stagnation and decline.

At Least We're Not Rhode Island

It's been a rough day of studies for the state's Ostrich Society. First we learned that Jerseyans are leaving the state at a greater rate than expected, and that it is already costing the economy billions of dollars. Meanwhile, the Record points out NJ's business-friendly ranking slipped from 48th to 49th according to the Tax Foundation. Rhode Island finished last for the second consecutive year.

New Jersey has the next-to-worst individual income and property tax systems and the seventh-worst sales tax system, the study said. Rhode Island has the worst unemployment tax system, the third-worst property tax system and the fourth-worst individual income tax system.

"Companies in New Jersey are paying among the highest rates in the world," said Curtis Dubay, an economist who compiled the ranking for the Tax Foundation. He noted that companies in Rhode Island pay slightly less corporate income tax than New Jersey.

"In New Jersey, everything is bad," he said. "The only reason that New Jersey doesn't rank last is that Rhode Island is a little worse."

The Tax Foundation is the latest group to rank New Jersey as unfriendly to business -- a perception that has increasingly concerned business leaders and some politicians.

Taken another way, about 2% of land area in the US is a more expensive place in which to do business than New Jersey. 

Later this month, Governor Corzine is expected to unveil this year's updated strategy for Economic Growth. Last year, the Administration highlighted the importance of "selling" New Jersey to potential companies in an attempt to increase the number of high paying jobs. The Administration should be applauded for making the improvement of the state's economic image a priority, but the harsh tax and regulatory climate created by the legislature is counterproductive.

Those other 3.5 million square miles in America already look appealing to the 72,000 residents leaving every year. 

As If We Needed More Proof...

During the Senate Labor Committee hearing on Paid Family Leave an association President testified as to the alarming rate at which citizens were leaving the state, largely due to our high cost of living and the loss of high paying jobs to more hospitable economic climates. His claims were dismissed.

Today, the Star-Ledger highlights a Rutgers University report detailing the exodus of New Jersey's residents to states such as Florida, North Carolina and Pennsylvania.

"The population outflow is real, is approaching worrisome dimensions, and is exerting a small but increasingly negative impact on the New Jersey economy," said the study by Rutgers economists James Hughes and Joseph Seneca.

Last year alone, the loss of people cost the state economy about $10 billion in income, and about $680 million in state budget revenue.

While the economists said they are certain the exodus is growing, they are less sure of why. Possible reasons include high housing costs and the state's generally high cost of living. Society in general also is increasingly mobile, they said.

Seneca said state leaders need a broad agenda to reverse the slide. The solutions, he said, should include a further reduction in the highest-in-the-nation property tax burden, more investments in infrastructure, science and technology and new policies to restore business confidence. (emphasis ours)

Where have we heard suggestions to accomplish that before?

Here's the kicker - short of reversing the policy trends that are likely to manage a net loss in population next year the trend may be slowed by NJ's soft housing market (if you can't sell your house, it's tough to leave).

Next year the state legislature will be faced with a budget deficit of about $2.2 billion. How they choose to address it will indicate how concerned they are that New Jersey is becoming a place too expensive to live for the people who built it. Just doesn't seem right.

Creating Jobs Through Business Incentives

Senator Joseph Kyrillos penned a column for today's Asbury Park Press in which he lays out an agenda for attracting businesses to the state. While Governor Corzine's plan to "sell" New Jersey to companies in an attempt to create jobs is good news for businesses and taxpayers alike, once companies take a serious look at the Garden State, they see conflicting messages coming from the legislature and the various divisions in the administration.

Kyrillos writes,

The effectiveness of the state's primary job creation initiative, the Business Employment Incentive Program (BEIP), is hampered by limitations, including caps on the salary and the number and types of jobs that our state seeks to attract. This is backward thinking. New Jersey needs more high-paying jobs, not fewer.

My plan would also reform the Business Retention and Relocation Assistance grants. This initiative was designed to attract and retain businesses that are considering relocation of their operations. But it needs to be strengthened by increasing the value of potential tax credits for projects that provide substantial job commitments....

Fundamentally, private investment and entrepreneurs create job opportunities, not the state government. But what we can and must demand from our government is that it not stand in the way and that it instead forge a productive partnership with new employers working to create new jobs in this state.

New Jersey has the people and the potential to lead the nation in economic opportunity, but we are squandering that potential. Our governor and legislative leaders must recognize that the fiscal and economic policy choices we make today will determine whether, 10 years from now, we will look back and remember a once strong and prosperous state that lost its way.

The BEIP program mentioned is already on the verge of sending more of those conflicting signals. It is based upon the model of reducing costs through tax advantages in exchange for job creation. Unfortunately, legislation is moving through Trenton that would put prevailing wage requirements on private companies building within the state and taking advantage of BEIP.

Put another way - BEIP exists to reduce the costs of doing business while the prevailing wage artifically increases labor costs to some point north of the supply and demand intersection. Reducing costs on one side while incresing them elsewhere would help neutralize NJ's most successful job creation program - one that's helped generate more than 60,000 jobs since its inception.

To read the entire column by Senator Kyrillos (who was endorsed by PENPAC for re-election this year), click here.

The Need to Fix FMLA

When legislators and candidates are out pandering asking for your vote this fall, one of the issues they are certain to bring up is Paid Family Leave. Regular blog readers already know the NJ proposal would allow employees from companies of all sizes up to 10 weeks of paid time off to care for a sick family member, newborn or newly adopted child. Remember that NJ is already one of about six states to offer paid maternity leave, which would be in addition to PFL and New Jersey would become only the second state with a paid leave mandate.

To that mix, add the problems with the federal government's unpaid leave mandate, the Family and Medical Leave Act (FMLA). In today's edition of Forbes on-line, National Association of Manufacturers President John Engler explains,

The Family and Medical Leave Act has become the single largest source of uncontrolled absences and, thus, the single largest source of all the costs those absences create: missed deadlines, late shipments, lost business, temporary help and overworked staff.

The most serious problems arise in the area of "intermittent leave," under which employees obtain a certification that they suffer an ongoing medical condition. This provision's intent was to accommodate employees with chronic ailments that might occasionally flare up, requiring minimal time off. But intermittent leave invites abuse. Once gaining a medical certification, a worker can leave essentially whenever he or she wants, with little, if any, notice to the boss.

In a recent survey of National Association of Manufacturers (NAM) membership, 65% of the requests received for intermittent leave were made either on the day of the leave, after the leave was taken or without any notice. You can imagine how disruptive this unexpected departure is to the workplace and the administrative nightmares it poses for employers.

Survey respondents also reported having to absorb significant operating costs due to intermittent leave in the form of lost productivity and missed deadlines. The Department of Labor's report confirms this very real harm to businesses.

The unfettered ability of employees to leave the workplace via a claim of intermittent leave also puts real burdens on co-workers. Imagine getting stuck with another employee's workload … intermittently.

The New Jersey program is more expansive than FMLA in that in its current form, it would allow for part-time workers to utilize the benefit (anyone earning $143 per week for 26 weeks in fact) and it would apply to companies of all sizes - FMLA offers an exemption to those with fewer than 50 employees.

Given that, isn't it time we fix FMLA before heaping another requirement on NJ's employers?

We're Number 2

New Jersey's median household income rose $600 last year, but it was not enough to maintain the title of highest income in the nation, according to today's Record. Maryland, which along with Connecticut has been consistently competitive with New Jersey, has now taken over.

While the slip to number two grabs headlines, it should not be as alarming as other economic indicators. The difference between the state with the highest per capita income and the third highest per capita income has always been minimal and the influx of government cash into Maryland and Northern Virginia has helped those economies immensely. Your friendly blogger worked in Northern Virginia (or as the locals call it, NoVA) at a time when that region added more jobs than Los Angeles. When the entire country has the option of sending money into your economy or going to jail, things tend to look good for you.

The more important figures are the state's relatively slow job growth and the fact that despite our wealth, more New Jerseyans cannot afford health insurance.

The data release came amid a growing debate over the state of New Jersey's economy, and whether it can continue to provide the high incomes and quality of life its residents are accustomed to.

Critics say New Jersey's regulations, taxes and red tape put it in danger of losing the competition with other states for corporate relocations and expansions, and the new jobs that go with them. The state has added 15,400 jobs so far in 2007, a slower job creation pace than in 2006.

Hughes and another Rutgers economist, Joseph Seneca, argue that the state is creating higher-paid jobs at a much slower rate than low-paid health, hospitality and other positions.

If you continue to punish success, you will have fewer successful people. A lesson once learned through the millionaire's tax still has not resonated with some in Trenton.

As legislators are working your local parade this Labor Day weekend seeking re-election, be sure to remind them of surveys such as this and ask if the status quo is still acceptable.

NJ Adds to Job Creation and Unemployment

New job numbers were released yesterday and while it was the strongest three months of job growth for the year, it also underlines the stagnant growth our job base has endured. From May to June, NJ added 4,800 private sector jobs and another 600 government jobs, outpacing the national average.

On the downside, unemployment rose to above the national average to 4.7%, and even with a strong quarter NJ still stands to add fewer jobs than last year and grow at a much slower pace than the historical average.

"It's confusing," said James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers.

He noted that even as New Jersey added jobs twice as fast as the nation, the state's unemployment rate rose faster than the national rate, which increased to 4.6 percent from 4.5 percent the month before.

His colleague, Joseph Seneca, said the household survey not only depicted unemployment rising but employment declining. Seneca said that in contrast to the May-to-July job increase, the state added just 15,400 jobs in the first seven months of the year.

The business community continues to use its ingenuity and intellect to grow in a competitive economy, but if Trenton continues to punish success and limit growth, remaining on top is going to become an awfully impressive feat.

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.

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. 

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.

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.

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.

Restaurant Owners Shockeroo: Government Interference Actually Does Impact Small Businesses

Our friends at the New Jersey Restaurant Association recently held a meeting among their members, Assemblyman Guy Gregg and Senator Ellen Karcher to discuss the ways in which Trenton policies impact their businesses. The Star-Ledger covered the event and highlighted some intuitive points that are sometimes forgotten in the Trenton scuttle.

We hate to sound like a broken record (or a short-circuited iPOD for the kids), but during major legislative debates, some in the General Assembly and Senate demonstrate the fact they do not see the connection between legislative activity and business development/job growth. During the debate on Paid Family Leave, Senators dismissed business community warnings as alarmist and tried to explain away sluggish private sector job growth on the fact NJ was one of the last states into a recession and will therefore be one of the last states out.

The truth is that what Trenton does matters to New Jersey's small businesses. The hard working restaurant owners are trying to deliver that message,

During a recent round-table discussion at the New Jersey Restaurant Association in Trenton, a group of family restaurant owners were asked if they want their children to follow them into the business. Their response: an emphatic chorus of "No!"

Independent restaurateurs blame Trenton for government policies and regulations, they say, have driven up their costs, and made New Jersey an increasingly difficult place to operate.

Let's hope the message of the restaurant owners, and the broader business community continues to spread through Trenton.