The Governor's proposed budget includes the continued suspension of Net Operating Loss (NOL) deductions for C corporations, a decoupling from federal 50 percent bonus depreciation rules, and $150 million in "petrochemical environmental impact fees" that translates into a 3-cent per gallon production tax on gasoline and other petroleum products. The Governor's budget would also increase taxes on new cars, new-home sales and cellular phone towers. At the same time, State spending would increase 7 percent to $26.3 billion. The proposed budget must be voted on by the Legislature and signed into law by July 1.

NJBIA objects to many items in the Governor's budget that would directly impact employers. The top two are the continued NOL suspension and the decoupling from accelerated federal depreciation rules for investments in new equipment. These changes are in addition to the doubling of the Corporation Business Tax (CBT) enacted in 2002.

"There's no good news for the business community in this budget," NJBIA President Philip Kirschner told reporters at the State House immediately following the Governor's budget address. "Spending is increased and New Jersey's employers will foot the bill."

The NOL provision allows businesses to deduct losses in one tax year from years in which they show a profit. In 2002, as part of the $1.5 billion CBT hike, the State suspended the net operating loss provisions for two years-meaning businesses with losses in prior years have not been able to deduct those losses in tax returns for the 2002 and 2003 tax years.

This suspension was supposed to be temporary, allowing business to deduct these losses in the 2004 tax year. If enacted, the continued suspension would cost New Jersey companies about $275 million and hurt manufacturers and other businesses that are struggling to recover from a weak economy.

Furthermore, the budget would prevent companies from taking full advantage of a new federal law aimed at stimulating business investment. Under new federal depreciation rules, companies can depreciate up to 50 percent of the value of new equipment in the first year. The proposed budget would not allow companies to use the accelerated depreciation on their State tax returns, costing employers an estimated $50 million a year and discouraging business investment in new equipment.

NJBIA also took issue with the Governor's assessment of the strength of New Jersey's economy. While the economy has improved, job growth remains weak.

In fact, a week after the Governor's budget address, the Department of Labor published a downward revision of its employment data for 2003. The revised data shows that only 12,000 jobs were created in the private sector last year, 60 percent less than the 29,400 originally reported.

The numbers represent a growth of only one third of one percent of the State's private sector workforce. At this stage in an economic recovery, New Jersey should be generating at least 50,000 private sector jobs per year. During the late 1990s, prior to the recession, the State was adding about 80,000 jobs per year.

"We aren't even close to creating the number of jobs we should be. The Governor and the Legislature should be very concerned that employment growth remains so weak at this stage of the economic cycle," Kirschner said. "Our leaders should work to lower the excessively high cost of doing business in New Jersey."

The Assembly Labor Committee on February 19 released separate bills extending union-only project labor agreements to all projects, including roads, and expanding the scope of expensive union-scale prevailing wages. The measures are designed to increase the ability of union-only firms to get construction work and shut out nonunion contractors from publicly financed projects.

The project labor agreement bill, A-2363 (Egan), increases the scope of the union-only project labor agreements law enacted in 2002. The measure would extend that law to road, rail and transit construction projects as well as water and sewer construction. If the bill is enacted, any State or local government could require contractors to use mostly union labor on any road widening, resurfacing, bridge repair or other transportation or utility project, thereby shutting out qualified, lower cost, nonunion firms. On January 25, the Senate Labor Committee released S-653 (Sweeney), which would extend the law to utility construction, but not to roads. NJBIA strongly objects to bills that block qualified contractors from obtaining government contracts.

The prevailing wage bill, A-1819 (Egan), would, for the first time, require projects funded largely by private funds to pay inflated union-scale prevailing wages. Specifically, the bill would impact projects administered by the New Jersey Health Care Facilities Financing Authority (hospitals), New Jersey Educational Facilities Authority (college buildings), Casino Reinvestment Development Authority, and any county improvement authority. A similar bill, S-598 (Madden), was released by the Senate Labor Committee on February 9.

Prevailing wage is the standardized regional wage scale that all contractors must use when working on government contracts. Prevailing wages generally inflate construction costs by 20 to 30 percent, costs which are absorbed by property taxpayers. Under current law, publicly funded construction contracts by state, county and local governments and school boards are subject to the prevailing wage. NJBIA strongly opposes this legislation.

Stearns is an attorney with wide political and legislative experience who has been involved in New Jersey politics for more than 15 years. Before joining NJBIA, Stearns was a Senior Associate at Princeton Public Affairs Group. Christine Stearns can be contacted at ext. 260 or cstearns@njbia.org.

NJBIA President Philip Kirschner on the Governor's Budget Address.

NJBIA is concerned the process could be used by disgruntled residents and workers to harass companies. This would have a chilling effect on economic growth and development in urban areas.

Under the plan, as few as 50 workers and residents from a community can petition for special consideration from a panel of senior administration officials, named the Environmental Justice Task Force.

If the petition is accepted, the task force will meet directly with the designated communities to hear complaints and develop an "action plan" to address them. For more information, contact Jim Sinclair at ext. 236 or jsinclair@njbia.org.

The money would establish the "New Jersey Clean Water, Drought Mitigation and Water Resource Security Trust Fund" under the New Jersey Department of Environmental Protection (DEP). It would be used to train water supply personnel in water security measures aimed at protecting New Jersey's drinking water supply from deliberate contamination by terrorists. It would also fund drought mitigation programs, such as diverting water from one source to another to avert a drought emergency.

NJBIA believes the Legislature should look to alternative sources of funding beyond taxes. For more information, contact Jim Sinclair at ext. 236 or jsinclair@njbia.org.

NJBIA believes this could double payments, and that such a huge increase in one year would cause workers' compensation premiums to rise sharply.

Workers' compensation benefits for permanently disabled workers have not been increased since New Jersey overhauled the system in 1980. The reform established higher weekly benefit payments for permanently injured workers but eliminated annual COLAs.

While some adjustment for inflation may be reasonable, doing so all at once could send insurance costs soaring at a time when workers' compensation premiums are already increasing.

The added benefits are expected to cost $60 million and would be paid through the State's Second Injury Fund, which is financed through a 7.05 percent surcharge on employers. Furthermore, the bill might not even help beneficiaries as increasing benefits could cost recipients some or all of their Social Security benefits by putting them over the maximum income limit.

New Jersey's private-sector employers are the State's main engine of economic growth and prosperity. Increasingly, they are challenged by domestic and global competition, rising production costs, a growing burden of State and federal regulations, and some of the highest costs of doing business in the nation. At the same time, other states are aggressively courting our businesses, sometimes successfully taking our jobs elsewhere. To keep our economy strong and create new jobs, government at all levels must seek to reduce business costs, avoid costly mandates not seen in other states, and offer incentives for economic growth.

ECONOMIC DEVELOPMENT
NJBIA advocates a strong focus on economic development. This is key to New Jersey's future prosperity and its ability to create new jobs.

In its economic growth policies, State government should devote as much attention and resources to companies that are currently in New Jersey as it does to out-of-state companies.

New Jersey should use targeted incentives to encourage business investment and job creation. Particular attention should be given to promising growth industries and to vital sectors that are struggling, such as manufacturing.

New Jersey should develop a funding plan to maintain and strengthen its essential infrastructure, including transportation, education, security and telecommunications.

EDUCATION
One of New Jersey's great competitive advantages is its skilled workforce. New Jersey must work to ensure that it maintains one of the nation's most literate, skilled and well-trained workforces.

New Jersey must maintain high academic standards, rigorous standards-based assessments, and better accountability measures to track progress in reaching those standards.

New Jersey must maintain a flexible workforce training and development program that can adapt to rapid and dramatic changes in labor market composition and demand.

Public schools, colleges and universities must integrate technology training and business applications into their curriculum to meet the State's future workforce needs.

ENERGY
New Jersey businesses need a reliable and affordable energy supply. NJBIA supports competitive energy markets to reduce already high costs.

Energy prices should be determined fairly by the competitive market. Consumers should be able to choose between competitive suppliers for energy and other services.

Commercial and industrial consumers should not subsidize residential consumers in electricity, natural gas or telecommunications charges.

Public utility regulations should encourage public utilities to keep costs as low as possible while maintaining quality of service and investing in infrastructure for growth.

ENVIRONMENTAL PROTECTION
NJBIA supports sensible environmental laws and regulations that protect the public's health. All regulations should be based in sound science and related to actual risk. We support a cooperative approach to environmental regulation that encourages compliance, avoids excessive penalties, and recognizes good actors.

State permitting procedures should be efficient and effective, ensuring the timely issuance of permits.

All new laws and regulations should result in a measurable and meaningful improvement to public health and the environment.

Proposed laws and rules should take into account their impact on employment and the competitiveness of New Jersey's business community.

The regulated community should be given the flexibility to achieve compliance through performance-based standards and alternative compliance programs.

If proposed State standards are to exceed federal standards, a compelling and justifiable benefit must be demonstrated.

HEALTHCARE
The vast majority of New Jersey citizens enjoy health insurance coverage provided by their employers. But rapidly escalating premiums are making that coverage very costly. Government should make insurance more affordable and accessible, but it should also ensure a high quality of medical care.

Health insurance laws should give employers the flexibility they need to respond to rapid changes in the healthcare marketplace. A flexible system of community rating is needed to keep costs equitable among different groups of employers. One group should not have to bear an unfair burden by subsidizing costs for another group.

Government should carefully review all proposed health coverage mandates for their potential impact on the cost of health insurance. Costly mandates drive up the price of already expensive health insurance premiums.

LEGAL SYSTEM
New Jersey's laws and legal system must permit employers and citizens to compete effectively with other states.

Civil justice policies must discourage the use of the court system to harass employers or pursue repetitive or frivolous claims against them.

Penalties, fines and costs should be proportionate to the level of harm and not duplicative. Civil sanctions should be premised upon fairness and constitutional protections.

New Jersey's laws, regulations, and other guidance should be clear, consistent and readily available.

TAXATION
NJBIA supports business tax policies that will encourage, rather than discourage, economic growth and job creation.

New Jersey tax laws should be comparable to tax laws in other states.

State and local governments should seek to balance their budgets without raising taxes.

New Jersey's business-tax enforcement program should be simplified.

WORKPLACE
NJBIA supports fair wages and safe working conditions for all employees. State labor laws must be reasonable and balanced, permitting New Jersey employers to compete on an equal footing with employers in other states.

All employers, union and nonunion, should be allowed to compete fairly for public contracts. Contracts should be awarded solely on the basis of price, quality and experience.

New Jersey should maintain its current workers' compensation system. It is a model for other states and provides fair and reasonable medical coverage for workers injured on the job.

Taxes paid by employers to fund unemployment compensation and job training should be used for those purposes only.

Mandated employee benefits should not exceed those imposed by competing states. New Jersey should not be the first in the nation to impose costly workplace mandates.

Economic Development and Taxes-New Jersey should enact carefully targeted economic development incentives to make us competitive with neighboring states. We should:

• Amend the Business Retention Act to clarify that machinery and equipment are not real property and should not be subject to property taxes, as the original law intended;
• Repeal the Alternative Minimum Tax on corporate income;
• Adopt a single-sales factor tax structure that will equalize tax policies for in-state and out-of-state manufacturers;
• Simplify sales tax collection and administration by adopting a national "streamlined sales tax" model;
• Expand the Business Employment Incentive Program (BEIP) to help New Jersey manufacturers that invest in new machinery and equipment; and
• Create a Manufacturing Advocate in the Governor's Office to make sure state regulations do not unfairly hurt manufacturers.

Workplace Issues-Workplace regulations should not put New Jersey out of step with the rest of the nation. The State should:

• Dedicate Unemployment Insurance taxes paid by employers solely to jobless benefits and job-training programs;
• Award State and local government contracts on the basis of a contractor's price, ability and qualifications, not on the basis of their union affiliation; and
• Reject mandates that micromanage the workplace and require employers to pay for mandated benefits not required in competing states. Paid family leave must not be enacted.

Environmental Regulation-New Jersey can reform environmental policies to reduce the burden on business without harming the environment. The State should:

• Issue more general Department of Environmental Protection (DEP) permits, instead of unproductive technical permits, for minor or routine activities, cutting down on redundant paperwork and unnecessary administrative costs;
• Conform its laws to the federal Right to Know law so small businesses do not have to comply with two different sets of rules.
• Work with businesses to protect the environment by using self-disclosure and self-auditing rules that reward companies for finding and correcting their own environmental problems; and
• In the issuance of penalties, make a greater distinction between violations that do real harm to the environment and violations that are merely of a technical or paperwork nature.

Healthcare-The vast majority of State residents receive health benefits from their employers. But rapidly escalating insurance premiums threaten that coverage.

• The State should reform its small-employer health insurance system to provide for more flexibility in plan design and risk ratings.

The New Jersey School Construction Corporation (SCC) expects to award 98 new consultant contracts in 2004 and more than 200 new construction contracts through 2005, according to Jerry Murphy, SCC managing director for policy and communications.

The news was announced at a recent NJBIA seminar, Building the Schools Update: How to Participate in New Jersey's $12 Billion School Construction Program. More than 200 attendees received practical advice on everything from how to get pre-qualified as a contractor to how to find out about projects ready to go to bid.

Contractors interested in participating must be pre-qualified by the SCC. Information on pre-qualification and upcoming bids can be found at www.njscc.com.

The SCC has committed about $3.7 billion for school construction and renovation projects to date. In 2003, design work was completed that will represent $2 billion in construction contracts.

Before the program is completed, the SCC expects to build 400 new schools and correct hundreds of millions of dollars worth of health and safety problems in existing schools. For more information, contact Art Maurice at ext. 247 or amaurice@njbia.org.

This NJBIA event was sponsored by Imperial Construction Group, Inc. and Rutgers University.

The event is held every two years following a legislative election to give NJBIA members the opportunity to meet their newly elected legislators and legislative leaders.

The event also allowed legislators to meet new NJBIA staff members. Since the last Legislative Reception, NJBIA Senior Vice President Melanie Willoughby has taken over the Association's Government Affairs operations; Vice President Frank Robinson has become the new executive director of NJBIA's grass roots affiliate, the Employer Legislative Committees; and Christine Stearns has joined the staff as vice president for health and legal affairs.

The event was sponsored by AT&T, BP America, Inc., Conectiv, ConocoPhillips Bayway Refinery, Horizon Blue Cross Blue Shield of New Jersey, South Jersey Industries, Inc., and Verizon New Jersey.

The honorees pictured here are: (back row, from left) State Senators John Girgenti, Ray Lesniak, Bill Gormley, (front row, from left) Senate President Richard Codey, NJPRO Chairman Steve Kalafer, Assemblyman Joe Azzolina, NJ Senate Majority Office Executive Director Kathleen Crotty, and State Senators Bob Littell and Byron Baer.

NJPRO is proud to honor these outstanding public servants for their work and dedication to the State of New Jersey.

That's why NJBIA has compiled its first ever Benefits Report. Based on survey responses from 688 New Jersey companies, this report gives answers to 173 different benefit questions in five separate categories. Order your copy of the NJBIA Benefits Report today! The publication is available at a cost of $95 each for NJBIA members and $200 each for nonmembers (plus 6% NJ sales tax). To order your copy, contact Christine Lopez at NJBIA at 609-393-7707, ext. 224, or clopez@njbia.org.

SPRING 2004 BRIEFING BREAKFASTS
NJBIA will join with the Employer Legislative Committees (ELCs) to host a series of five Legislative Briefing Breakfasts. These breakfasts will give you a chance to meet with legislators in your district and learn about pending and proposed legislation affecting your business. Each breakfast will begin at 7:30 a.m. with registration and end promptly at 9:30 a.m. so you can get back to work. Don't miss this excellent opportunity to network with colleagues and legislators in an informal setting. The cost is $45 per person. Call Stacy Wichner at 609-393-7707, ext. 213, for more information. Call Sherry Esteves at ext. 219 about sponsorship opportunities. Following are the dates and locations for the five Briefing Breakfasts:

• Wednesday, April 7
  Regency Palace, Mt. Laurel
• Tuesday, April 13
  Forsgate Country Club, Monroe Twp.
• Friday, April 16
  Holiday Inn, Tinton Falls
• Tuesday, April 20
  Sheraton Meadowlands Hotel, East Rutherford
• Wednesday, April 28
  Hanover Marriott, Whippany