The 11 percent increase marked the third consecutive year of double-digit inflation as measured by the Association’s annual survey of New Jersey employers. It followed a 13 percent increase in 2003 and a 15 percent increase in 2002. Over the last three years, participants in the NJBIA Health Benefits Survey have seen their health plan costs rise by an average of 13 percent annually. This is more than four times the rate of consumer inflation for the same period, which averaged 3 percent annually in the New York/New Jersey region. (See Chart 1.)

Looking ahead, survey participants said they expect their costs to rise by an average of 12 percent in 2005. In response to exploding costs, fewer employers provided coverage in 2004, the first such decline in the survey’s 12-year history.

"Years of relentless price increases have pushed the price of health insurance beyond the reach of many small companies. Now they are dropping coverage because they simply can’t afford it. This is an alarming trend," NJBIA President Philip Kirschner said during the press conference.

Survey participants paid an average of $7,307 per covered employee to provide health insurance in 2004, up $735 or 11 percent from the year before. The average cost of $7,307 per employee equaled 16 percent of reported average wages, also a record. This was the amount paid by the employer. It did not include any share of premium costs paid by covered employees.

For the first time in the survey’s 12-year history, the number of employers providing health coverage declined. Ninety percent of survey participants said they provided coverage for full-time employees in 2004, down from 94 percent the year before. Eighty-seven percent of small companies (2-19 employees) provided coverage, down from 92 percent. (See Table 2.)

The survey found that employers are aggressively trying to control their health- care costs by shopping around for new plans, offering less comprehensive coverage, requiring their employees to share in the growing cost, and in the case of larger companies, negotiating better deals. Employers frequently reported taking more than one of these actions.

Seventy-three percent of survey participants who reported taking cost control actions required employees to pay an increased share of those costs, either through higher deductibles or co-payments or by paying a larger share of the premium.

Among other survey findings:

• The smallest companies, those with 2-19 employees, not only paid the highest costs in 2004, but also experienced the highest cost increases. These employers saw their average cost rise by an average of $813, or 12 percent, to $7,444 per employee. (See Table 1.)
  
• These small companies also saw the biggest decline in coverage. The percentage of small businesses providing coverage for full-time employees and their dependents fell to 61 percent in 2004 from 67 percent the year before, the lowest level since 1995. The percentage of all companies providing coverage for full-time employees and their dependents fell to 69 percent last year, down from 75 percent the year before.

NJBIA urged State government leaders to make controlling the cost of health insurance a top legislative priority. NJBIA has proposed a comprehensive health insurance reform plan that would:

• authorize Health Savings Accounts;
  
• limit legislatively imposed mandates that add as much as 20 percent to the cost of premiums;
  
• provide more insurance coverage choices to employers so policies more closely reflect employers’ needs;
  
• provide direct tax incentives to employers who provide health insurance benefits; and
  
• reform the small employer and individual health insurance markets by reducing costly overregulation.

For more information, contact Christine Stearns at ext. 260 or cstearns@njbia.org.

About the Survey

NJBIA’s Health Benefits Survey was mailed in January 2005 to the Association’s approximately 20,000 member companies employing two or more people. The results are based on the first 1,563 valid responses.

As a group, the respondents generally reflect the Association’s membership profile. They represent every industry in every region of the State.

The survey participants came from all 21 New Jersey counties. The vast majority were small companies employing less than 50 people. Sixty-seven percent had 2-19 employees; 19 percent, 20-50 employees; and 14 percent, more than 50 employees. Twenty-one percent were in manufacturing, 18 percent in wholesale and retail trade, and 10 percent in construction. Most of the remaining respondents were in various service industries.

NJ Businesses Could Be Required to Retrofit Diesel Engines

Many New Jersey companies would be required to retrofit diesel engines on trucks, tractors, generators and other vehicles and equipment under legislation released March 7 by the Senate Environment Committee. Proponents of the legislation, S-1759 (B. Smith), claim it would help reduce the fine particles known as PM 2.5 in diesel-engine emissions, but engine retrofits are expensive, costing as much as $8,000 per vehicle.

The Senate committee also voted to have the State pay for the retrofit program. Under the original bill, New Jersey trucking companies, contractors and other businesses would have been forced to absorb the cost, putting those companies at a competitive disadvantage with out-of-state companies. The amended bill would require owners of ten or more vehicles or equipment with diesel engines to have the retrofits performed by State retrofit centers, which would be operated or funded directly by the State. Financing would come from the "Diesel Risk Management Fund," which would be funded from the portion of Corporation Business Taxes (CBT) already earmarked for environmental projects.

The retrofit legislation is tied directly to a proposed State constitutional amendment, SCR-113 (Smith, Adler), which would allow for the dedication of CBT revenues for this purpose. Both measures await action in the Senate Budget and Appropriations Committee.

NJBIA is opposed to forcing New Jersey businesses to retrofit their vehicles. This program would have little impact on overall emissions. If the State wants to reduce emissions, it should concentrate on its huge fleet of government vehicles and buses. Additionally, new federal regulations will take effect in 2006 and 2007 that will reduce emissions in vehicles nationwide. For more information, contact Jim Sinclair at ext. 236.

NJBIA Backs Governor’s Spending Cuts

Legislators should follow Governor Richard Codey’s lead on the budget and favor spending cuts over broad business tax increases, more borrowing, and one-shot revenue fixes, NJBIA told the Senate Budget and Appropriations Committee on March 15. Testifying two weeks after Codey proposed reducing spending $600 million, NJBIA First Vice President Art Maurice said NJBIA supports the direction of the proposal because recent growth in spending has burdened employers with higher taxes.

Although NJBIA supports the Governor’s proposed spending cuts, the Association has concerns about several provisions in the proposed budget, Maurice said. One concern is a continuation of the 1 percent tax on HMO insurance premiums, which adds $70 per employee to the cost of health insurance. Employers are already struggling with huge annual increases in their health plan costs.

Additionally, Maurice said, NJBIA is deeply concerned about the continued raid on Unemployment Insurance (UI) Trust Fund revenues. The proposed budget would divert another $250 million in UI taxes for purposes unrelated to the payment of unemployment benefits. NJBIA is concerned that the fund balance could fall below the amount needed to pay unemployment claims sometime next year, triggering an automatic payroll tax increase. For more information, contact Art Maurice at ext. 247.

Air Toxics Surcharge Repeal Approved by Assembly

Legislation that would repeal a nine-month-old tax on air emissions that turned out to be much broader and more expensive than intended was approved by the Assembly on March 14. The bill, A-3667 (Sires, Van Drew), has the backing of the NJ Departments of Treasury, Commerce and Environmental Protection.

The surcharge was imposed last June as part of the fiscal year 2005 budget with the intent of assessing a new retroactive tax on facilities that generated certain types of air emissions. The tax, however, cost some businesses hundreds of thousands of dollars for emissions that had already been approved by DEP and even penalized facilities that had reduced emissions. For more information, contact Jim Sinclair at ext. 236.

Manufacturers Demand Senate Lower NJ’s Cost of Doing Business

Health insurance. Energy. Taxes and regulations. According to three NJBIA members, these are some of the forces driving up New Jersey’s business costs, which are already among the highest in the nation and threatening manufacturers’ ability to compete in a global market. Alexander "Sandy" McWilliams II, president of McWilliams Forge Company, Inc. in Rockaway; Scott Ernst, director of human resources for Air Cruisers Company of Belmar; and Robert Staudinger, president and CEO of National Manufacturing Company, Inc. in Chatham testified March 14 with NJBIA President Philip Kirschner at a Senate Legislative Oversight Committee hearing on New Jersey manufacturing.

"This is the first Senate committee hearing in 20 years to look into the obstacles that manufacturers face, and you are to be commended for it," Kirschner told Committee Chairman Paul Sarlo. The message manufacturers delivered was clear the State must get serious about curtailing the cost of doing business.

Take energy costs, for example. McWilliams Forge, which has manufactured engine parts for Boeing and Honeywell for 64 years, depends on natural gas and electricity to heat metals used in its manufacturing process.

McWilliams Forge took a huge risk in 1999 by building a new $15 million forging press that would help it compete globally.

McWilliams said the company has had to absorb a 58 percent increase in energy costs in four years (it paid $1.6 million in 2004) and ever higher taxes on that energy. In 2004 alone, McWilliams paid $62,000 in energy taxes and, with the increase in the "social benefits charge," the company expects to pay about $75,000 in 2005. "These are two taxes on an essential commodity to run our business that lowered our bottom line by 10 percent in 2004," McWilliams explained.

Ernst, of Air Cruisers, said his company, which manufactures aircraft evacuation slides for commercial airliners, has been coping with huge increases in its health insurance. The company’s insurance carrier is now requesting a whopping 45 percent increase. The company even considered paying the employees the money it spent on health benefits to let them purchase their own insurance. "From a socially responsible position we quickly ruled this out as a possible solution," Ernst said. But the problem of funding such a large premium increase remains.

One of the most onerous taxes is the "air toxics surcharge." Staudinger said the surcharge will create a retroactive tax burden of close to $300,000 for his company, despite the fact that the company has spent a lot of money improving its processes and environmental compliance. "National has a 60-year history in New Jersey, and for a company of our size, this new tax would be devastating and will force a re-evaluation of our business operations in New Jersey," Staudinger said. The Assembly voted that day to repeal the tax.

Governor Signs Minimum Wage Increase

Legislation increasing New Jersey’s minimum wage by 39 percent was signed into law by Governor Richard Codey on April 12. The law will increase New Jersey’s minimum wage from $5.15 per hour to $6.15 per hour on October 1, 2005, and $7.15 per hour on October 1, 2006.

The law also establishes a NJ Minimum Wage Advisory Commission that will annually evaluate the minimum wage, taking into account factors such as New Jersey’s cost of living and changes in the purchasing power of the minimum wage. The Commission is likely to approve annual increases in the minimum wage rate. Also, the law allows local governments to require their vendors and contractors to pay an even higher minimum wage.

Quote of the Month

"These are two taxes on an essential commodity (energy from electricity and natural gas) to run our business that lowered our bottom line by 10 percent in 2004."

Alexander "Sandy" McWilliams II, president of McWilliams Forge Company, Inc. in Rockaway, testifying before a Senate Committee on energy costs.

Bill Establishes Convention on Property Taxes, Which Could Increase Business Taxes

Legislation that would establish the scope and nature of a Property Tax Constitutional Convention, creating a process NJBIA believes would increase the tax burden on businesses, was released by the Assembly State Government Committee on March 10.

If approved, A-5269 (Roberts, Greenstein) would put a referendum to voters this November, asking them whether or not the State should hold a convention. If that referendum is approved, voters would elect two convention delegates from each of the State’s 40 legislative districts in April 2006.

The committee also released ACR-25 (Roberts), which would allow the convention to propose laws that would be placed directly before voters in a process similar to Initiative and Referendum (I&R). Without it, the convention could only propose amendments to the New Jersey State Constitution.

The bill would allow convention delegates to only consider new taxes. Delegates would be prohibited from considering the issue of government spending, including spending levels for education and public employee contracts.

The convention could recommend other taxes, such as a local government income tax or personal property taxes on a company’s net worth. NJBIA is also concerned the convention would change the "uniformity clause" of the State Constitution, which guarantees that residential and nonresidential properties are taxed at the same rate. Convention delegates could recommend taxing commercial properties at higher rates. For more information, contact Arthur Maurice at ext. 247.

Productivity and Precision Keep L’Oreal’s Manufacturing Globally Competitive

Productivity and precision.

L’Oreal USA in Clark has used these ideals to make the France-based company’s products for American consumers since 1953.

Even today, in a world where globalization has sent many companies overseas or to low-cost states, the Clark facility remains the flagship for US operations of the internationally renowned cosmetics and hair care products manufacturer.

During a recent NJBIA site visit, Geoffrey J. Ladue, vice president for manufacturing operations, showed Assemblywoman Linda Stender how they keep their competitive edge.

The Clark facility was the first L’Oreal plant established in the US, but as the company’s American presence grew, it expanded in other areas of the State and the nation because there was no room for expansion at Clark.

"Fifty years ago, we made everything in Clark—hair care products, nail enamel, cosmetics," said Ladue, "but as the company grew, that was no longer feasible."

Today, L’Oreal has four manufacturing facilities in New Jersey, with L’Oreal plants located in West Caldwell, Piscataway and Somerset and facilities throughout the nation. These days, the Clark facility specializes in hair coloring kits, non-aerosol hair sprays and hair styling gels.

Locally, the economic benefits are phenomenal. The union-represented workforce earns very competitive wages when compared to other companies in the area. Workers also receive a full benefits package. Ladue said L’Oreal’s employee turnover rate of less than 2 percent annually can be attributed to the good working relationship between the union and the company.

"We have to be smart about our use of labor in New Jersey if we are going to survive," Ladue said. "(The employees) understand this."

L’Oreal is still bringing in new jobs, Ladue said, describing the company as being "always in hiring mode." Just recently, the Clark plant added 15 new line operators and recruited six new engineers from New Jersey colleges. The company also supports about ten internships a year and typically offers about half of the interns full-time jobs when they graduate.

Economic benefits do not stop at L’Oreal’s door. Like many manufacturing operations, the Clark facility supports surrounding businesses and jobs.

Ladue explained that L’Oreal purchases all packaging materials—the tubes, bottles, and containers as well as the boxes in which they are sold—from area companies. The Clark facility simply does not have the room to make its own packages or keep a large inventory, so packaging is delivered every day, Ladue said.

L’Oreal’s manufacturing process is all about precision and efficiency.
Making hair dyes, gels and other products is similar to following a recipe for baking a cake. When the raw materials are brought in, they are tested by L’Oreal’s on-site lab to ensure they meet company standards. Workers then measure out the ingredients to the precise weights that will be needed for each formula and repackage them.
Each package is given a bar code. The pre-weighed packages for one particular "recipe" are delivered to kettles.

Products are made in batches measured in thousands of kilograms. Technicians scan the bar codes of the pre-weighed ingredients to make sure they are the right ones for the recipe, and then add them to the kettle when prompted by the computer.

Pointing to one hair-dye kettle, Ladue explained that just one batch would make enough dye for 35,000 kits.

The product is pumped from the kettles into mobile tanks on the first floor, which are then hooked up to assembly lines for packaging. Precision machines operated by technicians fill bottles, screw on caps, crimp tubes, and assemble the kits automatically.

Over the years, L’Oreal has added newer and better machines. "As the formulas get more sophisticated, the equipment needs to be more sophisticated," Ladue said.

Governor’s Top Advisors Draw a Big Crowd at ‘Meet the Decision Makers’ Breakfast Briefing

Nearly 500 people recently got first hand briefings from Governor Richard Codey’s top officials on environment, labor, economic development and other policy initiatives for the year ahead.

It was part of NJBIA’s Meet the Decision-Makers Briefing Breakfast Series that featured Peter Cammarano, Codey’s Chief of Staff, Paul Fader, the Governor’s Chief Counsel, and Counselor to the Governor Eric Shuffler on February 1; Environmental Commissioner Bradley Campbell on March 15; and Labor Commissioner Tom Carver and Deputy Commissioners A. J. Sabath and Janet Zatz on April 1.

Cammarano said Codey’s first priority when he became the State’s chief executive in November was to restore order and ethics. The Governor’s Office had been rattled by multiple investigations and scandals. After two and a half months on the job, Cammarano said he came to the conclusion: "Hey, you know what, this job’s not that bad." But, he added jokingly: "One of the toughest jobs (I have) is negotiating between the Senate President and the Governor. They don’t always agree." (As Acting Governor, Codey also serves as Senate President.)

While acknowledging that Codey and the business community may disagree on issues like the minimum wage—Codey championed a recently enacted 39 percent minimum wage hike—Cammarano said healthcare costs and economic development are high priorities for Codey, and he believes the Administration and the business community can work together on them.

At the environmental briefing, Campbell assured participants that despite a growing number of environmental regulations, the regulatory burden on employers can be reduced.

As evidence, he pointed to a shrinking backlog of permit applications. Campbell said that when he was appointed Department of Environmental Protection (DEP) chief three years ago, hundreds of permit decisions were pending in backlogs that had stretched on for years. Since then, he said, the backlog has been cut dramatically, reducing pending water-allocation permits by two-thirds, air permits by 80 percent, operating permits by 80 percent, and pollution-discharge permits by two-thirds. DEP was able to achieve this while implementing 75 new programs and mandates from the State Legislature and despite having a staff that is 20 percent smaller than it was in 1994. Campbell said his top goal over the next year is to leave a department that can "reasonably be described as backlog free."

Campbell said the DEP is implementing new procedures to make it easier for businesses to comply, such as shorter forms and easier structures so employers can spend less time on paperwork and greater use of general permits. He credited NJBIA’s "15 Good Ideas," submitted to the new Administration in 2002, as providing the underpinning for many of the changes.

At the labor briefing, Carver said the role of the Department of Labor and Workforce Development is not so much to regulate the way businesses provide jobs as to work with the business community to look for ways to create new jobs.

"We have to be a driving force in working with you," Carver said. "It’s a business agency. Our job is to put people to work, keep them working, and keep our economy going."

Carver stressed the Department’s role in providing job training programs for new and existing workers. For instance, the Customized Training program has provided $66 million in grants that have provided job training and retraining for 116,000 people who already had jobs, but needed new skills to keep them competitive.

Carver noted that the effort is paying off, with a record 4 million people employed in New Jersey and a low unemployment rate.

Thank You to Our Sponsors

Altria Corporate Services, Inc.
AmeriHealth New Jersey
AT&T
Cole, Schotz, Meisel, Forman & Leonard PA
Federal Express
Genova, Burns & Vernoia
Harrah’s Casino Hotel
Hill Wallack
Joseph Jingoli & Son, Inc.
New Jersey American Water
New Jersey Association of Osteopathic Physicians & Surgeons
New Jersey Council of County Colleges
Oxford Health Plans
PNC Bank
Public Affairs Management, LLC
Public Strategies Impact, LLC
Saul Ewing, LLP
Schering-Plough Corporation
United Water New Jersey
Verizon New Jersey
William Paterson University, Christos M. Cotsakos College of Business

Calendar of Events

FRIDAY, MAY 13
Hot Legal Topics for Employers
Some of the State’s foremost attorneys will address a host of current legal issues at NJBIA’s Hot Legal Topics seminar on May 13 at Forsgate Country Club in Monroe Township. Learn how your company should handle important human resource issues such as hiring, sexual harassment, age discrimination, employee privacy, employee handbooks, and family and medical leave. The program begins at 9:00 a.m. and ends at 12:30 p.m. The cost per person is $105 for NJBIA members and $139 for nonmembers. To register, call Stacy Wichner at 609-393-7707, ext. 213.

FRIDAY, MAY 13 DEADLINE!
Awards for Excellence - Call for Nominations!
Are you proud of your track record in rewarding your employees, protecting the environment, serving your community or creating jobs? Then nominate your company or another NJBIA member company for an NJBIA Award for Excellence. This year’s nominations must be returned to NJBIA by May 13. To obtain your nomination form, contact Katie Wittkamp at 609-393-7707, ext. 239.

TUESDAY, MAY 17
NEW JOBS South Jersey Legislative Reception
This event is South Jersey’s regional fund-raiser for probusiness candidates for the State Legislature. Remember, it is important to support candidates who advocate a better business climate! This reception will be held at The Mansion on Main Street in Voorhees from 6:00 p.m. until 8:00 p.m. The price is $200 per person. To register, call Sherry Esteves at 609-393-7707, ext. 219, or register online at www.newjobspac.com.

FRIDAY, MAY 20
Health Insurance: How to be a Savvy Purchaser
This seminar will tackle some of the critical issues facing employers in providing health benefits. It will be held at Forsgate Country Club in Monroe Twp. The cost is $105 per person for NJBIA members and $139 for nonmembers. The program begins at 8:30 a.m. and ends at 12:00 p.m. For more information, contact Katie Wittkamp at 609-393-7707, ext. 239.

FRIDAY, JUNE 3
New Good Neighbor Awards Luncheon
NJBIA’s 45th Annual New Good Neighbor Awards Luncheon will be held at the Somerset Marriott. Awards will be presented to New Jersey businesses that have recently built or renovated outstanding commercial facilities. A reception will be held at 11:45 a.m. followed by lunch from 12:30 p.m.- 2:00 p.m. Tickets may be purchased for $65 each. For more information, contact Stacy Wichner at 609-393-7707, ext. 213. To become a sponsor or advertiser, contact Sherry Esteves, ext. 219.

TUESDAY, JUNE 14
ELC Dinner
The Employer Legislative Committee (ELC) Dinner will feature the first post-primary appearance of New Jersey’s gubernatorial candidates. The ELCs are a statewide grassroots network founded by NJBIA in 1959 to bring lawmakers and businesspeople together. This event will be held at the Hyatt Regency in Princeton. Cocktails are at 6:00 p.m. and dinner is at 7:00 p.m. The price is $120 per person with tables of 10 available. Contact Sherry Esteves at 609-393-7707, ext. 219.

TUESDAY, JULY 19
Golf & Tennis Day
NJBIA will hold its 35th 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 300 golfers each year. Cost per person: $260 for golf and dinner, $145 for tennis and dinner, and $99 for dinner only. To register, or for more information, call Stacy Wichner at 609-393-7707, ext. 213. To become a sponsor, contact Sherry Esteves at 609-393-7707, ext. 219.

Register for NJBIA events online. Visit "Events and Programs" at www.njbia.org