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MonthlyNewsletter June 2002 Issue
Legislative News
Administration Unveils Details to Revise Business Taxes and Raise $1 Billion Read.
Bill Would Limit Ability of Schools to Save Money by Subcontracting Read.
Energy Aggregation Bill Could Force Businesses into Energy Buying Pools Read.
NJBIA Calls for Improved Tech-Ed Standards Read.
Union-Only Deals on Public Construction Projects Fails in Senate Labor Committee Read.
Committee Defeats Bill Allowing Creation of Unions Without Elections Read.
Trade Promotion Authority passes US Senate Read.
Quote of the Month
NJBIA Vice President Jeff Stoller Read.
New Jersey Employment Watch
Despite Continuing Job Losses, Solid Recovery Appears Underway Read.
New Good Neighbor Awards
Meet Your New Good Neighbors! They Keep New Jersey Growing Read.
Calendar of Events
Friday, June 28-Power NJ Energy Choices and Opportunities Expo Read.
Tuesday, July 16-Golf & Tennis Day Read.
Wednesday, September 25-NEW JOBS Night at the Meadowlands Read.
2002 NJBIA Sponsorship Opportunities Read.
Administration Unveils Long Awaited Details to Revise
Business Taxes and Raise $1 Billion
The Administration has released its plan to revise business taxes, which will raise an additional $1 billion in taxes from employers. The plan includes a new alternative minimum tax of 0.3 percent on gross receipts or 0.6 percent on gross profits (gross receipts minus the cost of goods). While this is a significant cut from the 1 percent tax on gross receipts proposed by the Governor in his budget address in March, NJBIA believes that the tax still raises too much money from small businesses that do not use loopholes and must be lowered further or eliminated.

The plan also provides for a welcome 1-percentage-point reduction in the current Corporation Business Tax (CBT) rate for companies with net profits of up to $50,000. The plan includes several provisions to tax out-of-state royalties, interest and dividends between affiliated companies. Furthermore, companies that pay no corporate taxes on sales in other states would now have those sales taxed in New Jersey. Finally, it suspends net operating loss carry forwards for two years.

Additionally, a new $150 fee would be imposed on owners of LLCs and partnerships.

Legislation, S-1556 (Kenny)/A-2501 (Sires, Roberts), containing the changes was recently introduced. The changes will raise an estimated $1 billion in additional CBT revenue annually. This is a large amount in a weak economy. The recent drop in corporate tax collections is caused by the recession and the weak economy, not by any fundamental problem with the corporate tax. Indeed, employers paid 60 percent more in corporate taxes in 2000 than they did in 1992. Here is a look at some of the plan's key provisions:

  • Alternative Minimum Tax (AMT): C corporations would calculate their taxes two ways-one using the current system and one using the new Alternative Minimum Tax-then pay the higher of the two. The AMT consists of a 0.3 percent tax on gross receipts or 0.6 percent tax on their gross profits (gross receipts minus the cost of goods), whichever a company chooses. The first $1 million in gross receipts or the first $500,000 in gross profits is exempt.

    Businesses that are losing money must still pay the new AMT, but would be allowed to deduct these taxes against future CBT payments in profitable years. The total gross receipts/profits tax would be capped at $5 million for any one company and $15 million for any related group of corporate entities. The AMT provisions would expire in five years.

  • Fees on LLCs and Partnerships: A new $150 "processing fee" would be imposed on each partner of New Jersey partnerships, limited liability corporations and limited liability partnerships. Entities with only one or two partners would be exempt.

  • Small-Business Tax Cut: Businesses that earn less than $50,000 in net profits would see their CBT rate cut from 7.5 percent to 6.5 percent.

  • Net Operating Loss Suspension: For two years, businesses would be prohibited from deducting past net operating losses (NOL) from their current CBT. (Companies that lost money in the past seven years have been able to apply those losses to profitable years and reduce their tax liability.) The NOL deductions would resume after a two-year period.

  • Expanding the Corporate Tax Base: Companies would no longer be able to deduct certain intra-company transfers of royalties, dividends and interest. Also, companies that pay no corporate taxes on sales in other states would now have those sales taxed in New Jersey (the throw-out rule).
The bill contains the long-awaited details to a proposal Governor McGreevey first unveiled-in very broad, vague terms-during his March 26 budget address to the Legislature.

In the ensuing months, the Administration blamed flagging CBT collections on so-called tax "loopholes" that some businesses use to "avoid paying their fair share."

NJBIA believes that New Jersey businesses already pay their fair share. As indicated earlier, corporate tax collections rose 60% from $911 million in 1992 to $1.45 billion in 2000. The recession is the reason for lower CBT collections.

Also, New Jersey companies not only provide millions of jobs, but in 2001 they paid $3.1 billion in local property taxes and $1.2 billion in payroll taxes (unemployment insurance, temporary disability insurance, etc.).

NJBIA urges all its members to contact their legislators and oppose this bill. If you need your legislator's address or phone number, go here. For more information, contact Art Maurice at ext. 247 or amaurice@njbia.org.

Bill Would Limit Ability of Schools to Save Money by Subcontracting
Legislation that would severely restrict the ability of public schools and institutions of higher education to save money by subcontracting noneducational services to private companies was released by the Assembly Labor Committee on May 13. The bill, A-1714 (Friscia), would require public school districts, state colleges and universities, and community colleges to obtain union agreement before subcontracting noneducational services with private-sector companies. Currently, this is a management decision.

This proposal would severely limit the ability of local school districts and institutions of higher education to save money by seeking competitive bids. Private businesses can provide noneducational services such as custodial services, food services, and busing at reduced costs with better service. In 2000, the ability of local school districts to make these subcontracting decisions independently saved an estimated $28 million, according to a survey by the New Jersey School Boards Association. Similarly, higher education institutions saved approximately $20 million through subcontracting.

Passage of this legislation will hamper the ability of school districts, colleges and universities to deal with severe budget shortfalls. In the proposed state budget, aid to local school districts will be at or near last year's levels; state colleges and universities face a 5 percent across-the-board cut in state aid.

School districts must maintain the ability to shop for the best quality services at the lowest possible price when it comes to such items as transportation, food service and janitorial services. If school boards cannot economize on noneducational services, spending on educational programs such as curriculum, technology and additional staff will have to be curtailed. For more information, contact Art Maurice at ext. 247 or amaurice@njbia.org.


Energy Aggregation Bill Could ForceBusinesses into
Energy Buying Pools
Legislation that could force businesses to join energy buying pools and purchase electricity and/or natural gas from local governments at the price they dictate was released by the Assembly Telecommunications and Utilities Committee on May 16.

The bill, ACS-2165 (Burzi-chelli, Fisher), would require municipalities and counties to give businesses only 30 days to opt out of energy buying pools, and it would allow them to enroll businesses that fail to respond. Businesses could be forced to purchase energy from the local government at the government price, even if it is higher than what the utility charges.

NJBIA strongly opposes the bill. Businesses should only be added to energy buying pools if they explicitly choose to join. This legislation does the opposite-forcing businesses into such pools unless they explicitly opt out. For details contact Art Maurice at ext. 247 or amaurice@njbia.org.

NJBIA Calls for Improved Tech-Ed Standards
New Jersey should strengthen technology education in public schools by emphasizing science and technology instead of just science, by requiring a minimum of five graduation credits in technology and by certifying teachers in technology education, NJBIA Assistant Vice President Libby Vinson told the New Jersey State Board of Education on May 15. The board is in the process of revising its Core Curriculum Content Standards for all K-12 public school students.

New Jersey employers frequently find that entry-level workers lack the technological and problem-solving skills they need. Even with rising unemployment, employers are still struggling to find employees with a strong understanding of technology and how to use it in the workplace.

NJBIA has recommended that the board:

  1. Adopt the proposed "science standard 5.4 (nature of technology)" that will provide all students with a conceptual understanding of technology;

  2. Rename the science standard "Science and Technology" to emphasize the importance of technology;

  3. Create a new "teacher of technology education" certification that is established as a specialty under "science and technology;" and

  4. Require students to earn five graduation credits in technology under the science and technology category.
For more information, contact Libby Vinson at ext. 201.

Union-Only Deals on Public Construction Projects
Fails to Win Approval in Senate Labor Committee
For the third time in as many meetings, the Senate Labor Committee on May 30 was unable to get the votes necessary to release legislation providing for union-only agreements on public construction projects. The three Republican members of the six-member committee-Senators Leonard Lance, Robert Littell, and Joseph Palaia-abstained from voting on the bill, S-1044 (Sweeney, Cafiero). They deserve our thanks.

S-1044 provides that all levels of state and local governments can enter into project labor agreements with unions for the construction of schools, highways, libraries and other public projects. Under project labor agreements, unions are basically given the exclusive right to work on a public project, barring nonunion contractors from participating.

NJBIA testified against the bill and led a broad coalition representing contractors, minority contractors, businesses and school boards that testified against the measure. The Coalition for Competitive Public Bidding Laws believes that all contractors should have the opportunity to obtain public contracts based on their track record of performance, not on whether they use union labor. Project labor agreements are simply a sweetheart deal for unions at the expense of taxpayers.

A similar bill, A-1926 (Egan, Malone), has been released from the Assembly Labor Committee.

For more information, contact Jeff Stoller at ext. 209 or jeffstoller@njbia.org.


Committee Defeats Bill Allowing Creation of Unions Without Elections
After business organizations blasted the proposal, the Senate Labor Committee on May 9 defeated legislation that would have done away with the traditional election to determine whether or not employees want to unionize. Under the bill, private businesses would become unionized if a majority of workers merely expressed an interest in having a union by signing a card. The strong showing by employers helped convince committee members to vote against the bill. Senators Leonard Lance, Anthony Bucco and Joseph Palaia cast the deciding votes against the measure.

Under the bill, S-665 (Smith), union organizers could get employees to sign a card indicating "interest" in having a union, and once a majority of employees signed such a card, a union would be legally formed. Under current law, such cards are simply the first step in a deliberate process towards a union election. S-665 would allow union organizers and coworkers to use intimidation to pressure employees to sign the cards instead of letting them cast their vote in the privacy of a voting booth.

The bill also would undermine one of the basic tenets of the National Labor Relations Act-namely that employees have a choice to join or not join a union. Current law mandates that the final decision on unionization be made by employees in a private ballot election, free from coercion by either the union or employer.

Furthermore, union organizers could begin collecting employee signatures without the employer's knowledge. Employees would decide on unionization without hearing their employer's side.

S-665 would unfairly tilt the decision-making process in favor of unions. Organized labor hopes to increase its membership by allowing unions to organize businesses whose employees would otherwise vote against unionization. Under the current system of private ballots, about half of all unionization attempts are voted down by employees.

For more information, contact Jeff Stoller at ext. 209 or jeffstoller@njbia.org.

Quote of the Month
"This is shameful, discriminatory legislation that would effectively prevent thousands of qualified nonunion contractors from participating in public works contracts."


NEW JERSEY EMPLOYMENT WATCH
Despite Continuing Job Losses, Solid Recovery Appears Underway
What a difference one month can make!

Economists are pointing to positive signs of a turnaround in the long depressed manufacturing sector, both in this region and the nation, as evidence that a durable economic recovery is underway. Their renewed optimism comes on the heels of a spate of pessimistic rumblings about a weakening economy.

Nonetheless, a continued loss of employment in the private sector has led some to speculate that this may be a "jobless recovery," at least in its initial stages.

Since hitting a peak of more than 3.43 million in June of 2001, employment in New Jersey's private sector as of April had declined by 27,600 jobs, with 13,200 of those job losses coming in the first four months of this year.

The bulk of the losses have come in the state's beleaguered manufacturing industries, which shed 10,800 jobs in the first four months of this year on top of a loss of 26,300 jobs in 2001, the worst one-year decline in a decade.

Manufacturing employment has declined steadily over the last 20 years. Since hitting a peak of more than 800,000 jobs in 1979, manufacturing employment has declined by nearly 50 percent to its current level of 427,200 jobs.

Employment in the state's service sector (not including government), which accounts for 80 percent of employment in the private sector, has been erratic over the last ten months. As of April, only 3,900 jobs had been lost in that sector, a decline of just one tenth of one percent from the June 2001 peak of nearly 2.82 million.

The construction industry has held its own, eking out a gain of 400 jobs since last June. As of April, construction employment stood at 161,400.

In their recent employment report, Rutgers University economists noted that "this pattern of jobless economic growth (in NJ and the US) harkens back more than a decade to the aftermath of the last US recession," when unemployment "topped out at 7.8 percent in June 1992, fully 15 months after the recession had come to an end."

However, they were quick to point out that this time around it's more likely the early stages of our economic expansion will be supported by moderate employment growth.

In April, the last month for which employment data was available from the NJ Department of Labor, New Jersey's private-sector lost a mere 600 jobs. Declines in manufacturing and construction were offset by a gain of 3,400 jobs in the service industries. The Rutgers economists said this suggests "a near stabilization in private employment."

Meanwhile, US manufacturing in May grew at its fastest pace in more than two years and for the fourth consecutive month was in an expansion mode following an 18-month slump that began in August 2000. Factory orders have been bolstered by continued strength in new home sales, which are on track this year to register the second-best performance since setting a record in 2001.

The pickup in manufacturing activity is also evident in this region. In its May report, the Federal Reserve Bank of Philadelphia said the "region's manufacturing sector is continuing its recovery" with manufacturing executives "generally optimistic that business conditions will improve over the next six months."

The Philadelphia Fed also reported that manufacturing employment showed its first sign of positive growth in 19 months, with more firms reporting increases in employment than decreases.


Meet Your New Good Neighbors!
They Keep New Jersey Growing
On June 11, the New Jersey Business & Industry Association and New Jersey Business magazine bestowed their New Good Neighbor Award on eleven private development projects and two public projects.

Now in its 42nd year, the awards program is held annually to cast a bright light on architecturally noteworthy projects that have both created jobs and made significant civic contributions to their local communities.

As is tradition, a panel of independent judges selected our winners, but the judges had a particularly tough job this year. They selected the winners from among 45 nominated projects, the largest number in many years. These projects represent more than $1 billion in construction costs, more than 13,600 permanent jobs, and thousands more construction jobs!

The New Good Neighbor Luncheon is unique in that it annually brings together, under one roof, a dynamic group of architects, engineers and builders who are responsible for much of the state's impressive new construction and renovation. Even in recession years, a remarkable number of new facilities are constructed.

This year's luncheon is sponsored by AT&T, Cardolite Corporation, Champion Container, Fleet Bank, Pharmacia, New Jersey Resources and Schering-Plough Corporation.

This year's winners demonstrate the incredible economic diversity of our state, which is one of its core strengths.

New Good Neighbor Awards
2002 Winners

10 Park Place, Morristown-Morristown
Architect: Kimmerle Architects, PA / Builder: Lanyi & Tevald Inc.

Campbell's Field-Camden
Architect: Clarke Caton Hintz
Builder: Quaker Construction Management Inc.

First Union National Bank-South Brunswick
Architect: HACBM Architects Engineers Planners, Inc.
Builder: Wade Ray & Associates Construction, Inc.

Givaudan Fragrances Corporation-Mount Olive
Architect: STV Inc. / Builder: Sordoni Skanska Inc.

Merck-Medco Child Development Center-Franklin Lakes
Architect: SNS Architects & Engineers
Builder: Barr & Barr, Inc. - Builders

Merrill Lynch Hopewell-Pennington
Architect: Thompson, Ventulett, Stainback & Associates, Inc.
Builder: Hunt Construction Group

The Robert Wood Johnson Foundation-Princeton
Architect: Hillier / Builder: Sordoni Skanska Inc.

Rockefeller Group Corporate Park, Building 105-Florham Park
Architect: Cooper, Robertson & Partners
Builder: Joseph A. Natoli Construction Corp.

Tice's Corner Marketplace-Woodcliff Lake
Architect: The Montoro Architectural Group P.C.
Builder: March Associates

Van Dyk Park Place-Hawthorne
Architect: LAN Associates, Engineering, Planning,
Architecture, Surveying, Inc. / Builder: Holt Construction Corp.

Wyndham Newark Airport-Elizabeth
Architect: Cooper Carry Architects & Planners
Builder: Jayeff Construction Corp

SPECIAL

Asbury Park State Office Building-Asbury Park
Architect: NK Architects / Builder: Sordoni Skanska Inc.

State House Annex-Trenton
Architect: STV Inc. / Builder: Haverstick-Borthwick Company


Friday, June 28
Power NJ Energy Choices and Opportunities Expo
Because energy concerns matter to your business, this is one event you can't afford to miss. With a new Governor, new leadership at the Board of Public Utilities, and new energy conservation programs, it is a new world for energy consumers and producers. Learn from the experts how to benefit from this new environment. Meet New Jersey's policymakers and energy experts at this Expo, which will be held at the Sheraton at Woodbridge Place, Iselin, from 8:30 a.m.-2:00 p.m. Cost to attend is $75 per person for NJBIA members and $95 for nonmembers. A limited number of exhibit tables are available. Contact Sherry Esteves at 609-393-7707, ext. 219, for details.


Tuesday, July 16
Golf & Tennis Day
NJBIA will hold its 32nd Annual Golf & Tennis Day at Forsgate Country Club in Monroe Township. The event is one of the state's major business outings and largest amateur golf tournaments, attracting more than 300 golfers each year. Cost per person: $250 for golf and dinner, $140 for tennis and dinner, and $95 for dinner only. Sponsorships are available by contacting Sherry Esteves at 609-393-7707, ext. 219. To register or for more information, call Stacy Wichner, ext. 213. Tee times sell out each year, call today!

For a look at last year's Golf & Tennis Day Go Here


WEDNESDAY, SEPTEMBER 25
NEW JOBS Night at the Meadowlands
The New Jersey Organization for a Better State (NEW JOBS), the largest probusiness political action committee in New Jersey, will hold its annual Night at the Meadowlands event in the Pegasus Restaurant at the racetrack in East Rutherford. Come meet New Jersey's probusiness legislators! The event begins with cocktails at 6:00 p.m., followed by a buffet dinner at 7:00 p.m. and live racing. The price is $200 per person, and tables of 10 are available. To register, call Sherry Esteves at 609-393-7707, ext. 219.


2002 NJBIA Sponsorship Opportunities
Contact Sherry Esteves at 609-393-7707, ext. 219, to reserve the sponsorship(s) that best achieve your company's goals!

Golf and Tennis Day
July 16 - Forsgate Country Club, Monroe Township
With over 300 golfers and tennis players, this event is one of the largest amateur tournaments in the state and one of the most fun. A variety of sponsorship opportunities are available. Examples include: Tee ($200), Putting Contest ($750), Beverage Cart ($750), and Dinner cosponsor ($1,000). Call for details.

Awards for Excellence Dinner
October 22 - Princeton Marriott
Associate your business with excellence by recognizing the achievements of your corporate colleagues.

$2,000 Gold Sponsor includes:

  • Reserved table of 10
  • Recognition in the event program and signage
  • Follow-up stories in the Business Voice and New Jersey Business magazine
$500 Silver Sponsor includes:
  • Recognition in event program
  • Follow-up stories in Business Voice and New Jersey Business
Made in New Jersey Day
November (date to be determined) - State House, Trenton
New Jersey manufacturers set up displays in the halls of the State House. Legislators and the Governor stop by and visit with the exhibitors. There is also a luncheon with legislators. It is an enjoyable day.

$1,000 sponsorship includes:

  • One invitation to the luncheon
  • Signage at the event
  • Post-event publicity
Public Policy Forum
December 4 - Sheraton Woodbridge
NJBIA's Public Policy Forum typically draws over 200 New Jersey business and government leaders. Promote your company and raise your profile among New Jersey's business and political elite by becoming a sponsor.

$2,500 sponsorship includes:

  • Sponsorship of either breakfast or luncheon
  • Signage and announcements at event
  • One registration to event
  • Follow-up story in New Jersey Business  magazine
$1,000 sponsorship includes:
  • Sponsorship of panel discussion with signage at event
  • Follow-up story in New Jersey Business  magazine


US Senate Passes Trade Promotion Authority
Giving President More Power to Negotiate Deals
After a contentious voting session in which Senators defeated several amendments that were aimed at weakening the bill, the US Senate on May 23 passed the Trade Promotion Authority (TPA) bill in a 66 to 30 vote.

The measure would give the president greater negotiating power since potential trade partners would know their agreements could not be changed by Congress. The bill would prevent Congress from amending trade agreements when they are brought up for ratification, restricting the legislative role to an up or down vote on the agreement in its entirety.

The absence of TPA since 1994 has hampered US efforts to open foreign markets. With one-third of this country's economic growth over the past decade coming from exports and 12 million US jobs supported by exports, renewal of TPA is vital to expanding trade with other countries.

Foreign trade is particularly important for New Jersey. According to the New Jersey Commerce and Economic Growth Commission, New Jersey is the ninth largest state in terms of the volume of goods it exports to world markets, exporting $26 billion in goods and services in the last year. Similarly, foreign companies directly invest more than $35 billion in New Jersey, making it the eighth largest state in that category.

Approving TPA legislation would help expand foreign markets for New Jersey's goods, resulting in economic growth and prosperity in the state. This legislation is essential to preserving a free and open trading system, and the economic well-being of New Jersey, its companies and its workers.

The House, which passed its version of TPA last December, and the Senate must now meet to work out the differences in the bills before a final vote can be scheduled. For more information, contact Libby Vinson at ext. 201 or lvinson@njbia.org.


 
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102 WestState Street
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