I n his first budget address on March 21, Governor Jon Corzine called for a mix of tax hikes and spending cuts to close a $4.3 billion deficit for fiscal year 2007, which begins July 1. Corzine's proposed $30.9 billion budget would increase spending by $2.6 billion over current levels, mostly in court-mandated education spending and formula-driven increases to State pensions and benefits.

The good news is the Governor proposed no suspension of net operating loss (NOL) deductions, no extension of the alternative minimum assessment (AMA), and no diversion from the State's Unemployment Insurance (UI) fund. He also proposed reinstating a phaseout of corporation business taxes on S corporations.

NOL deductions allow businesses to deduct losses suffered during unprofitable years from taxable income in profitable years. The suspension ended January 1. The AMA taxes a company's gross receipts and prohibits deductions for legitimate business expenses like employees' wages and health benefits. The AMA is scheduled to expire July 1.

The NOL and AMA provisions have cost employers more than $1.5 billion in higher taxes over the last four years. No other state in the nation imposed these taxes on business, and NJBIA believes the Legislature should not continue them.

The Governor has also proposed the continued phaseout of corporation business taxes on S corporations, lowering the tax rate from 1.33 percent to 0.67 percent. This has been suspended since 2002.

Also, the proposed budget does not divert UI fund contributions to the general treasury. Over the last 12 years, the State has diverted $4.7 billion in payroll taxes away from the UI fund, risking a $400 million payroll tax increase next year.

There are some tax hikes in the budget, however. The Governor has proposed adding a 2.5 percent surcharge onto the Corporation Business Tax (CBT) that will cost business about $60 million per year.

Corzine also proposed expanding the sales tax to items that are not currently taxed, such as landscaping and health club fees. He also proposed increasing the water tax to 4 cents per 1,000 gallons. NJBIA opposes these tax increases.

For more information, contact Art Maurice at ext. 247.

Legislation that would require employers to give three months notice before making employee layoffs was released by the Assembly Labor Committee recently. A-1044 (Van Drew, Johnson) would require employers to give at least 90 days notice before laying off 50 or more employees within a 90-day period. Under current federal law, employers with 100 or more employees must give 60 days notice.

NJBIA opposes this bill. It would apply regardless of whether layoffs are caused by poor economic conditions, a plant closing or business relocation. Employers would even have to keep track of layoffs made for noneconomic reasons, such as poor job performance, and report them once they reach the threshold. Employers who fail to provide proper notice would be required to pay employees an additional week of severance for each year worked. Employers who experience sudden economic downturns, lose a major contract or fail to get critical financing would be unfairly penalized. The bill now heads to the full Assembly. For more information, contact John Rogers at ext. 209.

New Jersey would become the only State in the nation in which employers could not require employees to submit their work-related disputes to arbitration, under legislation released recently by the Assembly Labor Committee. If A-2469 (Cohen) becomes law, many employers who now use arbitration would face dramatically higher legal bills as most workplace disputes would be decided in court.

The bill would overturn a 2002 decision by the New Jersey State Supreme Court, entitled Martindale v. Sandvik. In that decision, the court upheld the employer's right to include arbitration as a condition of employment.

Arbitration is an affordable option for both employers and employees. It allows the parties to resolve work-related differences without years of delay and tens of thousands of dollars in legal expenses. In arbitration, employees are eligible for the full range of remedies available to them in court, including monetary damages. The only difference is the forum in which the dispute is considered. For more information, contact John Rogers at ext. 209.

New Jersey will be able to continue funding new road construction and repair projects under a Transportation Trust Fund (TTF) financing bill, S-1470 (Lesniak)/A-2813 (Wisniewski) , signed into law on March 23. Without this law, all revenues going into the TTF would have been dedicated to paying off old bonds used in past projects, leaving no funding for future road construction projects. The law will allow for new bonds by refinancing the trust fund's existing debt, freeing up about $105 million a year; dedicating all of the existing 10.5-cents-per-gallon gas tax (right now, only 9 cents goes to the fund) for another $78 million per year; and adding another $12 million a year from new toll road revenues. The TTF is the main source of funding for road and public transportation construction. NJBIA supports the measure. For more information, contact Frank Robinson at ext. 225.

“The AMA punishes business for doing the very things that we should be encouraging them to do. No one around here is going to be sorry to see the AMA go.”

- Melanie Willoughby , speaking at the Meet the Legislative Leaders breakfast March 15. The Alternative Minimum Assessment (AMA) taxes a company's gross receipts and is scheduled to expire on July 1.

After every legislative election, NJBIA hosts a Legislative Reception to give members an opportunity to meet the newly elected Senators and Assembly members and renew their relationships with the veterans who won reelection. This year's event was held March 2 at the Trenton Marriott.

NJBIA thanks its Legislative Reception sponsors:

Alcoa • BP • ConocoPhillips Bayway Refinery • Horizon Blue Cross Blue Shield of New Jersey • Jersey Central Power & Light Company, a FirstEnergy Company • MyWireless.org • NJM Insurance Group/NJM Bank FSB • New Jersey American Water • New Jersey Natural Gas Company • Oxford Health Plans LLC, a United Healthcare Company • Schering-Plough Corporation • South Jersey Industries • Wakefern Food Corporation.

Speaking March 15 before a group of 100 business people, four legislative leaders from central New Jersey said they opposed extending the alternative minimum assessment (AMA) beyond the end of the fiscal year.

Senate Health Committee Chairman Joseph Vitale, Senate Republican Leader Leonard Lance, Assembly Assistant Majority Leader Pat Diegnan, and Assemblyman Bill Baroni also offered their views on balancing the State budget, reforming healthcare, and keeping the Unemployment Insurance (UI) fund solvent. They participated in an hour-long panel discussion moderated by NJBIA Vice President Frank Robinson as NJBIA kicked off the first of its three Meet the Legislative Leaders breakfasts.

The clearest agreement came on the AMA. The AMA was instituted as part of the $1.5 billion Corporation Business Tax (CBT) hike in 2002. It taxes the gross receipts of many C corporations without allowing deductions for legitimate business expenses, like wages, health benefits and utility bills. The AMA is set to expire July 1, and NJBIA is pushing hard to keep lawmakers from extending it as part of a plan to balance the State budget.

“Yes,” Diegnan said, when asked if he would let it expire. “It never really made sense to me from the beginning.”

Lance noted that the Senate Republicans opposed the AMA from the beginning, while Vitale and Baroni said eliminating the AMA would have a positive impact on business.

When it came to healthcare reform, the four leaders focused on different aspects of the problem. Vitale said he supported a British-style, single-payer system that could be supplemented with private health insurance, but noted “that is not going to happen.” He indicated that big companies have a responsibility to provide adequate health insurance for all their employees. “I can't support a company where 900 employees—even if 30,000 have health insurance—get their health insurance from FamilyCare (a State program that provides health insurance to low-income families).”

Baroni called a single-payer system “the last thing New Jersey wants” and added “there is no way we are going to do anything about the cost of healthcare…without reforming medical malpractice.”

Lance said he was focusing on the soaring cost of Medicaid and wants to establish an auditing process. Diegnan added that while the State can step up with some reforms, the most meaningful reforms would have to be done nationally.

On the UI fund, all four said that continuing the practice of diverting UI tax revenues to pay for non-UI expenses was a bad idea. Lance said he “remained 100 percent opposed to continuing UI raids” and Baroni said “just stop raiding it.” Vitale added that raiding the fund was a mistake, but he and Diegnan pointed out that the UI diversions went to pay for charity care (payments to hospitals for people who cannot pay the bills for their treatment) and that without these diversions, funding charity care will be difficult.

NJBIA wishes to thank its Central New Jersey Meet the Legislative Leaders breakfast sponsors:

AT&T • Jersey Central Power and Light Co., A First- Energy Co. • MyWireless.org • NJM Insurance Group/NJM Bank FSB

The NJBIA Tax Committee and Economic Development Council met on March 24 with Acting Deputy Director of Taxation Maureen Adams and Assistant Director for Audit Rich Schrader to discuss Governor Corzine's FY 2007 State Budget proposal.

Adams assured the group that recent staffing changes in the leadership of the NJ Division of Taxation would not affect its ability to promptly respond to employer tax concerns and questions. She detailed the proposed sales tax increase of one cent, the proposed expansion of the sales tax to various services, and changes in the existing Urban Enterprise Zone (UEZ) sales tax exemption.

Regarding UEZs, she noted that purchases by UEZ-based businesses for their own consumption will no longer be automatically tax exempt. Only such purchases related to new construction, facility expansion and associated facility fit-up will be tax exempt, and businesses must initially pay the tax and later apply for a tax refund. She explained that this change will only apply to nonmanufacturing UEZ-based businesses.

Schrader described the “business friendly” changes in the proposed State budget. He noted that the proposed budget allows for the expiration of two of the most heinous business tax hikes enacted in 2002 – suspension of net operating loss deductions and imposition of the alternative minimum assessment on corporate receipts.

The Assembly Education Committee recently voted to ensure that an education reform task force hears the views of New Jersey 's business community. Before voting to release A-1363 (Watson-Coleman, Roberts), which would create the 30-member Task Force on Education Reform, the committee amended the bill to include at least one NJBIA member.

The task force would study the best practices of education systems across the nation and make recommendations for a more successful and cost-effective public education system. For more information, contact Christopher Emigholz at ext. 201.

New Jersey 's recent pattern of weak job growth has continued into early 2006, with the State suffering a net loss of 2,200 private-sector jobs in January and February, even as private-sector employment grew by 406,000 jobs nationwide.

The NJ Department of Labor reported recently that New Jersey gained 2,800 private-sector jobs in February. However, this was more than offset by a loss of 5,000 jobs in January, yielding a net loss of 2,200 private-sector jobs in the first two months of the year.

The two-month loss of 2,200 jobs continues a pattern of weak and inconsistent private-sector job growth that has plagued New Jersey since the onset of the 2001 recession. Private-sector employment in New Jersey is still 10,100 jobs below the pre-recession peak of 3.43 million jobs set in December 2000 (see table). Most of the losses have come in manufacturing, although service-sector job growth has been unusually weak compared with the two previous expansions.

In 2005, New Jersey created 42,900 private-sector jobs (see chart), a growth rate of 1.3 percent, which was below the national job-growth rate of 1.6 percent. In 2004, New Jersey created only 20,200 private- sector jobs, making it 41st in the nation in its rate of private-sector job growth.

The State's poor track record in creating new jobs over the last several years has stirred concern among regional economists, business groups and Governor Jon Corzine, who has made economic growth a top priority of his new Administration.

“Governor Jon Corzine's focus on economic growth and job creation is right on target,” said NJBIA President Philip Kirschner . “We've got to create a more favorable climate for business investment and job growth in this State.”

Looking at job growth by major private-industry sectors over the last six years and two months, the construction trades have been New Jersey's biggest winner (see table). Construction employment is now 20,100 jobs above its pre-recession peak of 151,400, a gain of 13.3 percent.

Manufacturing employment has declined over the same period. The State's manufacturers now employ 321,000 people. This is 101,000 fewer workers than they employed six years and two months ago, a drop of 24 percent.

While employment in the service industries has grown, that growth has been lackluster when compared with the robust employment activity seen in the expansions of the 1980s and 1990s. Since December 2000, employment in the service industries has expanded by a mere 2.5 percent to its current level of 2,925,600 jobs, a gain of just 70,900.

Within the services subsectors, education and health services, as well as leisure and hospitality, have seen the biggest gains, growing by 12.4 percent and 12.9 percent, respectively, over the last six years and two months. Employment declines have been seen in professional and business services (-1 percent); information services (-24 percent), which includes computer and telecommunications services; and trade, transportation and utilities (-3.2 percent).

MEET THE DECISION MAKERS 2006

Find out what the Corzine Administration has planned for New Jersey over the next year. In the three remaining separate breakfast meetings, you will hear from Governor Jon Corzine's key advisors and cabinet members. Each breakfast will run from 7:45 a.m. to 10:00 a.m. at Forsgate Country Club in Monroe Township . The cost for each breakfast is $69 per person for NJBIA members and $105 for nonmembers. For more information, contact Stacy Wichner at 609-393-7707, ext. 213. Call Sherry Esteves at ext. 219 to become a sponsor. Attend one or all of these events:

FRIDAY, APRIL 21 – Commerce/EDA/Economic Growth Gary Rose, Chief, Governor's Office of Economic Growth Virginia Bauer, Commerce Commission Secretary Caren Franzini, CEO, Economic Development Authority

WEDNESDAY, APRIL 26 – Dept. of Environmental Protection Lisa Jackson, Commissioner, Department of Environmental Protection FRIDAY, MAY 5 – State Treasurer Bradley Abelow, State Treasurer

WEDNESDAY, MAY 10

NJBIA-Rutgers Economic Forum

Find out where the economy and key industry sectors are headed at this Economic Forum brought to you by NJBIA and the Rutgers Business School in Newark and New Brunswick . The Forum will be held at the Doubletree Hotel Newark Airport , Elizabeth , from 7:45 a.m. to 10:00 a.m. The cost is $49 per person for NJBIA members and $89 for nonmembers. For more information, contact Katie Wittkamp at 609-393-7707, ext. 239. To become a sponsor, contact Sherry Esteves at ext. 219.

FRIDAY, JUNE 2

New Good Neighbor Awards Luncheon

NJBIA's 46th Annual New Good Neighbor Awards Luncheon will be held at the Sheraton at Woodbridge Place , Iselin . 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. to 2:00 p.m. Tickets may be purchased for $70 each. For more information, call Stacy Wichner at 609-393-7707, ext. 213. To become a sponsor, contact Sherry Esteves at ext. 219.

WEDNESDAY, June 7

Making Sense of Family and Disability Leave

This half-day program will help you sort through bewildering levels of leave regulations and show you how to avoid costly mistakes regarding length of leave, job protection, benefits and discrimination issues. Top employment law specialists will explain how to avoid the many legal pitfalls and will share the lessons they have learned from years of struggling with leave requests. The seminar will be held at Forsgate Country Club in Monroe Township from 8:30 a.m. to 12:00 p.m. The cost is $109 per person for NJBIA members and $139 for nonmembers. To register, contact Alex Hollywood at 609-393-7707, ext. 262.

TUESDAY, JULY 18

Golf & Tennis Day

NJBIA will hold it's 36th Annual Golf and Tennis Day at Forsgate Country Club in Monroe Township . The event is one of the State's major business outings, attracting 300 golfers each year. The cost per person is $260 for golf and dinner, $145 for tennis and dinner, and $99 for dinner only. For more information, call Stacy Wichner at 609-393-7707, ext. 213. To become a sponsor, contact Sherry Esteves at ext. 219.

2006 NJBIA Sponsor Opportunities

Every year, NJBIA holds more than 20 high-profile events that attract thousands of employers from across New Jersey . These events give our event sponsors a great opportunity to reach a large and responsive business audience.

You can sponsor one event or several events. Visit www.njbia.org and click on Events and Programs for more details contact Sherry Esteves at 609-393-7707, ext. 219.