Governor James E. McGreevey has signed a $28 billion State budget for fiscal year 2005 that increases spending by almost 17 percent over last year. The Governor has also signed several related measures that will help finance the spending plan for the fiscal year that began on July 1. As a result, employers can expect a mixed bag of tax changes and fees that will affect their cost of doing business. Several provisions in the budget were approved with NJBIA backing, including:

• A deduction of up to 50 percent of net operating losses (NOLs), a $140 million tax savings to employers. Originally, the State was not going to restore the NOL deductions at all, but lobbying from NJBIA helped convince the Administration to at least partially restore this deduction. NOL deductions allow businesses to deduct losses incurred in unprofitable years from income realized in profitable years.
• Elimination of a proposed $150 million tax hike on petroleum products.
• An increase in the Manufacturing Equipment Investment Tax Credit to 4 percent from 2 percent for manufacturers with fewer than 50 employees.
• A tax incentive program for manufacturers that relocate within New Jersey and employ 250 or more people.

• A new tax on HMO insurance premiums of 1 percent that is supposed to last just one year. For employers providing health benefits to their employees through HMOs, this will likely increase premiums by about $45 to $70 per employee.
• A 41 percent income-tax rate increase for those making more than $500,000 per year. The tax rate will rise from 6.37 percent to 8.97 percent. This will impact the owners of many S corporations, LLCs and partnerships.
• A 90-cents-per-month tax on every telephone, fax or modem line, and cellular phone line.

NJBIA supports efforts to inform consumers about the quality and costs of healthcare. As the primary source of health insurance for most New Jersey workers and their families, employers can no longer tolerate wasteful spending on care that does not benefit patients.

The bill, A-2444 (Bateman, McKeon), would ensure that purchasers who are not responsible for causing pollution at a site would not have to conduct expensive off-site cleanups.

The NJ Department of Environmental Protect (DEP) is suing companies for NRDs if contamination at their sites has caused environmental harm to natural areas. Similarly, other property owners can seek cleanup costs from their neighbors if it can be proven that contamination has migrated from one site to another. Properties purchased before 1997 are already exempt under the statute of limitations.

NJBIA supports this common sense measure. Property owners who purchased their property in good faith should not be penalized for the actions of the previous owners. For more information, contact Jim Sinclair at ext. 236 or jsinclair@njbia.org.

The new law calls for expedited consideration of permits for applicants willing to pay an additional fee. The new law will help address one of the most persistent problems plaguing employers-the drawn-out permit-approval process at the NJ Department of Environmental Protection (DEP) and other agencies.

It also creates a Smart Growth Ombudsman, who will have the power to change or eliminate regulations that are inconsistent with building in designated smart growth areas. On July 16, the Governor appointed Department of Community Affairs Commissioner Susan Bass Levin as the ombudsman. For more information, contact Jim Sinclair at ext. 236 or jsinclair@njbia.org.

To learn more about NJBIA's Manufacturing Counts campaign, visit our Manufacturing Counts Web site at www.njbia.org/manufacturing

Why is NJBIA doing this now?
In the last recession (2001-2003), 74,000 manufacturing jobs vanished in New Jersey, 18 percent of the pre-recession total. This decline has accelerated a longer-term trend of manufacturing employment losses in this State. Today, New Jersey continues to be at risk of losing valuable manufacturing jobs.

Manufacturers still directly employ about 350,000 New Jersey workers. These companies pay above-average wages and benefits, and support almost 200,000 jobs in other industries.

Manufacturers generate 12 percent of the State's economic output and produce 90 percent of New Jersey's exports. But the State's remaining manufacturing jobs are threatened, not only by global competition, but also by the high and rising cost of doing business in New Jersey.

Why is manufacturing important to the State's economy?
Manufacturing has a bigger impact on the overall economy than other industry sectors. There is nothing as beneficial to a regional economy as using raw materials to create a product that can be shipped and sold all over the nation and the world.

Manufacturers use more intermediate goods and services than other industries to make their final products. Every $1.00 of final manufactured output generates an additional $1.43 in other intermediate economic output.

New Jersey manufacturers generate 90 percent of New Jersey's annual exports of $17 billion. State manufacturers generated $42 billion in economic output in 2001 or 12 percent of New Jersey's total gross state product.

Manufacturing also supports large numbers of jobs in other industries. New Jersey manufacturers currently support 531,000 jobs-347,000 in manufacturing and about 184,000 in other industries.

What is the Agenda for Manufacturing Renewal in New Jersey?
The NJBIA Agenda for Manufacturing Renewal in New Jersey contains 31 recommendations for improving New Jersey's manufacturing climate. These ideas for legislative, regulatory and executive action are designed to address the biggest state-level obstacles to manufacturing success in this State. They are designed to encourage manufacturers to stay in New Jersey and to expand their operations here.

How did you identify the problems in New Jersey?
NJBIA surveyed its more than 3,700 manufacturing-industry members in January 2004. Over 400 manufacturers participated in the survey, and they identified the state-level problems that they considered to be the biggest obstacles to the success of their New Jersey operations. Eighty-five percent of the survey participants were small companies with between two and 50 full-time workers. They represented diverse industries, including fabricated metals, machinery, plastics, chemicals, apparel and food. They came from every region of the State.

What are the obstacles to manufacturing success in New Jersey?
Most of the state-level obstacles to manufacturing success in New Jersey share a common theme. The costs of doing business in this State are very high-from health insurance and taxes to State environmental regulations and energy. In fact, the overall cost of doing business in New Jersey is third highest in the nation, behind only Massachusetts and California.

And it continues to rise.

Yet, most manufacturers in recent years have been unable to raise their prices to offset higher costs. For example, 82 percent of manufacturers participating in NJBIA's 2004 Business Outlook Survey said they left prices unchanged or even lowered them within the last year. This is primarily a result of intense domestic and global competition.

The high cost of doing business in New Jersey and weak pricing power have combined to drive manufacturers out of this State. This has eliminated good-paying manufacturing jobs, taking valuable business away from suppliers, reducing private-sector employment, and lowering State tax revenues. The decline of manufacturing damages the State's economic growth potential, and as such is a loss for all New Jerseyans.

What are some examples of high costs that are hurting manufacturers?
According to a recent survey of our manufacturing members, health insurance costs were identified as the single biggest obstacle to the retention or expansion of manufacturing businesses in New Jersey, followed by the overall cost of doing business in this State, which would include such things as the high cost of health insurance, property taxes, State business taxes, energy and environmental regulations.

State government's attitude toward business and high property taxes shared third place in the ranking of obstacles. Survey participants also expressed significant concerns about the costs of energy, other insurance costs (outside of healthcare), and the availability of skilled labor, wage and labor costs, State regulations and State taxes.

In the area of taxation, State corporate and business taxes were seen as a "big problem" by half of respondents, compared with 56 percent who said property taxes were a big problem. In the regulatory arena, State environmental regulations were seen as the biggest problem.

What is the NJBIA Manufacturing Council?
NJBIA's Manufacturing Council will be a broad coalition of manufacturers who will provide guidance to the Association in its Campaign for Manufacturing Renewal. The Council will be the advocate for manufacturing in New Jersey. The council members will give NJBIA real-world feedback on any proposed State law or regulation that would either help or harm manufacturers in their efforts to stay competitive in New Jersey.

We intend to exchange ideas and refine issues through the use of e-mail, a Web site and a limited number of meetings. Council members will also speak directlywith State policymakers involved in the shaping of these laws and regulations and thus will have a real and potentially powerful voice in the outcome.

What is the Campaign for Manufacturing Renewal?
We kicked off our Campaign on June 16 with a Manufacturing Summit in Newark that was attended by 200 New Jersey manufacturers. Our Campaign seeks to focus attention on the importance of manufacturing to all sectors of the State economy, to address the obstacles that stand in the way of manufacturing success, and to promote a State policy agenda that will lower the costs of doing business in this State.

An important part of our efforts will be to demystify manufacturing for the public and to educate policy makers about the real issues impacting New Jersey production facilities.

What is the mission of the Campaign?

1. To raise awareness among State policymakers, the media and the public about why a strong manufacturing sector is important to New Jersey,
2. To call attention to the challenges faced by New Jersey's manufacturers to stay competitive in New Jersey, and
3. To identify and advocate changes in State policy that will support and strengthen this vital sector of the State economy.

Any NJBIA members who would like to get involved with the NJBIA Manufacturing Council should contact Jim Sinclair at 609-393-7707, ext. 236, or jsinclair@njbia.org.

NJBIA First Vice President Jim Sinclair

On Forsgate's links, Bob Kruger of PSE&G shot a 69 on the Palmer Course to win that low gross prize, while John Samerjan of the Senate Republican Office took low gross on the Banks Course with a 73. Assembly Speaker Albio Sires shot a net 71 using the Calloway scoring system to grab the low net prize on the Palmer Course. On the Banks Course, Warren Tamaroff of Hall's Fast Motor Freight, Inc. took home the low net prize with a 71. The Women's low net went to Leslie Dunn of Headlines International. She had a net 75 on the Palmer Course.

In the tennis tournament, the team of Ken Persson of Maywood Furniture and Warren Victor of Action Business Consultants took first place. Dave Shames of Meridian Health and Sara Maurer of the Olde Mill Inn were runners-up.

"This is the one event of the year where we can put business and politics aside and just have a good time," NJBIA President Philip Kirschner said in welcoming the participants at the dinner. "We had beautiful weather and great fun. That's all we need to make the event successful."

The annual event brings businesspeople and legislators together for a relaxed day of competition and conversation. More than 100 sponsors generously contributed to the event. Among special prizes awarded, the Professional Golf Association (PGA) donated week-long VIP passes to the 2005 PGA Tournament, to be held at the Baltusrol Country Club in Springfield, New Jersey.

While it may have taken its lumps in recent years, New Jersey's manufacturing sector is still a vibrant part of New Jersey's economy, creating jobs and supporting other industries, according to a new study by the New Jersey Policy Research Organization (NJPRO).

"A lot of people just assume that competition from low-cost states in the South has dealt manufacturing a terrible blow in New Jersey," NJPRO Executive Director Jim Sinclair said. "But when you look at the facts, manufacturing continues to play a vital role in our economy. This should be a wake-up call to our political leaders-manufacturing is worth fighting for."

According to the NJPRO paper, Why Manufacturing Counts in New Jersey, manufacturers in this State employ 345,000 production workers, directly support another 184,000 jobs in other industries, and pay an average annual wage of $53,028, which is $9,316 more than the average wage paid by all private-sector employers in New Jersey.

What's more, manufacturers generated $42 billion in economic output in 2001, representing 12 percent of the New Jersey's gross state product. In global trade, manufacturing dominates with 90 percent of all New Jersey exports-$15.3-billion-worth in 2003.

Manufacturing also uses more intermediate goods and services than other industries, generating an additional $1.43 in economic output for every $1.00 worth of final product.

In its analysis, NJPRO concluded that most manufacturing jobs were located in the northeast corner of the State (Bergen, Essex, Hudson, Passaic, and Union Counties), where manufacturers provided more than 151,000 jobs.

According to the NJ Department of Labor, most manufacturing employment is in pharmaceuticals and medical products with 40,000 jobs, followed by chemical manufacturing (34,200), computer and electronic products (32,300) and food products (31,700).

While it remains an important part of the State's economy, manufacturing's share of overall employment has been steadily slipping.

In the most recent recession (2001-2003), for example, the state lost 74,000 manufacturing jobs, accelerating a long-term trend of declining employment in this important sector.

The NJPRO Foundation is the public policy research affiliate of NJBIA. For more information, contact NJPRO Executive Director Jim Sinclair at jsinclair@njbia.org, or 609-393-7707, ext. 236.

Seabrook's food-processing plant is the sole building in a sea of corn stalks from the very farms that provide it with the fresh vegetables the company freezes and packages for customers all over the world.

As President James Seabrook Jr. explained to Assemblyman Jeff Van Drew, what Seabrook Brothers and Sons produces depends on what is being harvested.

"June is peas all the time," Seabrook said. "Right now, it's green beans. By the end of the week it will be corn."

Seabrook Jr. and his father, Chairman and CEO James Seabrook Sr., took Van Drew on a tour of the plant as part of NJBIA's Site Visit program, which seeks to educate legislators about businesses in their area and the issues they face.

Located in Upper Deerfield Township in western Cumberland County, Seabrook Brothers and Sons is one of the largest frozen vegetable packagers in the nation, producing 150 million pounds a year of everything from asparagus to zucchini.

And with 500 employees, it is also one of the largest employers in South Jersey.

As the Seabrooks demonstrated, their manufacturing process centers around preserving the freshness of vegetables picked right from the field.

On this day, truckloads of green beans were being fed through a thresher that was removing the stems and leaves. The beans are then thoroughly washed and employees sort through the produce by hand, removing any misshapen or poor looking beans.

The beans are then cut to the length specified by the customer and blanched to preserve the color and freshness.

"You have to blanch them first," Seabrook Jr. said. "You have to blanch the enzymes in the bean first. If you try to freeze them raw, they will turn brown."

The beans then travel to a freezer the size of a football field where they are flash frozen and packaged.

Seabrook Jr. said that about 50 percent of the produce they package comes from farms in Cumberland and Salem Counties, with the rest being shipped in from eastern Pennsylvania and Delaware.

"The closer the produce is to us, the better," Seabrook Jr. said.

In addition to plain frozen vegetables, the company also provides many specialty products such as Skillet Meals, Creamed pinach, and butter and cheese sauces.

Seabrook sells its vegetables to well-known brands like Bird's Eye and Green Giant and companies in South America, the Middle East and Canada.

James Seabrook Jr. is the fifth generation of Seabrooks to work in the vegetable business. Seabrook farms was founded in 1893 and Seabrook Brothers and Sons was created in 1978 as a frozen vegetable packager.

In addition to dealing with the challenges facing any other manufacturer, Seabrook also has to assume the risk of an agriculture enterprise. Poor weather or bad crops can cut into production and make for a bad year.

"Dry weather is really the best weather," Seabrook Sr. said. "When it's dry, farmers can irrigate."

Like other manufacturers, Seabrook Brothers and Sons must overcome the high cost of doing business in New Jersey, particularly when it comes to complying with environmental regulations.

As Seabrook Jr. explained, environmental standards keep changing, making it difficult for companies to comply.

"The DEP inspector will come in and tell you to do something one way, and next week a different inspector will come in and tell you its all wrong, you have to do it another way," Seabrook Jr. said. "We'll do whatever we have to to protect the environment, just tell us what it is."

So when Glenn Gerber, chairman and CEO of the Readington-based steel service center, received a letter from NJM Insurance Company a few years ago stating that his risk factor for workers' compensation insurance was increasing dramatically, he took it seriously.

"We never had a triggering event, we never had a really bad accident," Gerber said during a recent NJBIA Site Visit with Assemblyman John Wisniewski. "We just had a lot of little incidents."

Gerber instituted a company-wide safety program, educating his 38 union employees and providing them with incentives to improve the company's safety record.

With the help of Bob de Flesco from NJM's safety engineering department and Bill Connolly of the Connolly Agency, Gerber set up a system to recognize employees individually and as a group for being safe.

Under Gerber's system, safety performance is measured every 100 work days. If the entire plant goes 100 days without an accident that causes an employee to lose time at work, the employees get a $50 bonus and a barbeque during working hours. If they go another 100 days, they get another barbeque and a $60 bonus. Another 100 days, another barbeque and $70. And so on.

Wisniewski was there to help the company celebrate one of their 100-day milestones.

Employees are rewarded individually as well. Any employee who goes an entire year without an accident receives a nice financial reward, a plaque and a prize. The prizes and financial reward increase every consecutive year the employee goes without injury.

The system has worked. In the last eight years, Gerber Metal has had only one accident where an employee lost time at work.

"Our program has proven that a good way to motivate people is through peer pressure," Gerber explained. "We realized that what really pushed peoples' buttons was a little recognition and a few bucks. Now, nobody wants to be the one who breaks the streak."

Gerber is continually looking for ways to improve the system.

After a cable snapped on one of the cranes and a 46,000-pound steel coil fell, narrowly missing the crane operator standing underneath it, Gerber quickly moved to radio-operated controls that allow employees to stand well out of the way of the heavy objects being hoisted above.

The company buys the coils, which can weigh anywhere between 20,000 to 50,000 pounds each, and cuts them to specific sizes, which are then delivered to other manufacturers.

The process begins by leveling the coils into sheets for shipment as is, or for transfer to shears for further processing.

"The steel has a memory," Gerber explained. "If you take the bands off a coil, it still stays wound because it has a memory of being coiled. We take it through a series of rollers to take it past its memory point."

Gerber's experience has led him to conclude that New Jersey's workers' compensation insurance system is a well-run program that should not be changed. He urged Wisniewski to reject proposals that would alter the balance in the system, a key feature of which is the employer's use of qualified managed care organizations to treat injured workers effectively.

Wisniewski speculated that many proposals to change the current workers' compensation came from complaints from individual constituents. When he examined the entire system, however, he understood that it worked well.

The employees at Gerber Metal Supply have made it their mission to keep workers' compensation costs as low as possible. So far, it's mission accomplished.

TUESDAY, SEPTEMBER 21
Monmouth & Ocean NEW JOBS Reception
Sponsored by NEW JOBS, the State's largest political action committee for the business community, this event is South Jersey's regional fund-raiser for probusiness candidates for the State Legislature. Remember, it is important to support candidates who support a better business climate in NJ! This reception will be held at The Mill at Spring Lake Heights, from 6:00 p.m. to 8:00 p.m. The price is $150 per person. To register, call Sherry Esteves at 609-393-7707, ext. 219. For information about NEW JOBS, call Executive Director Art Maurice at ext. 247 or amaurice@njbia.org.