2008 Business Outlook Survey: NJBIA Members Remain Concerned About Economy Read
Membership Alert: Oppose Paid Leave Read
NJPRO Study: NJ Workers’ Compensation System is Fair and Efficient Read
Task Force: Fix Health Benefits System for Public Employees Read
Employee Benefits Rise in 2008 Read

Following two years of weakened business activity, a majority of New Jersey businesses remain pessimistic about the State’s near-term economic outlook, and they continue to give the Garden State poor grades for its business climate and its ability to control costs like taxes and health insurance.

These are among the major findings of the New Jersey Business & Industry Association’s 2008 Business Outlook Survey, in which more than 1,300 businesses participated.

“Half of our survey participants believe business conditions in New Jersey will get worse before they get better, and most remain unhappy with the State’s business climate,” said NJBIA President Philip Kirschner, speaking at a news conference at the Association’s Trenton headquarters. 

This survey also revealed that favorable conditions in New Jersey’s current economic expansion peaked in 2005, two years ago.

Forty-nine percent of businesses expect business conditions in New Jersey to weaken in the first six months of the year, while just 13 percent expect those conditions to improve.  This is only marginally better than last year’s outlook, which was among the weakest since the 1989-92 recession years.  However, as was true last year, most respondents who expect a worsening of conditions anticipate that it will be only moderate.

Only 19 percent of respondents (up from a record low of 17 percent last year) said New Jersey is a good place for expansion of their business facilities.  They identified the high overall cost of doing business as one of the three biggest problems they face in New Jersey, along with the cost of health insurance and property taxes.

Large majorities of survey respondents said New Jersey does a worse job than other states in controlling specific costs that figure prominently in overall high costs, such as government spending, taxes, health insurance and regulatory compliance.  Most respondents also said New Jersey has a worse attitude toward business than other states.

The 2008 survey also found that businesses’ collective hiring plans remain close to last year’s restrained levels.  Twenty-five percent anticipate hiring more workers, 14 percent anticipate a reduction in employment, and the rest (61 percent) expect to keep employment stable.  This outlook is consistent with the pattern of modest employment expectations and weak job growth seen over the past several years, and it signals the likelihood that private-sector employment will continue to grow slowly in New Jersey in 2008.

A more hopeful survey finding is businesses’ outlook for their own sales and profits, which has improved from last year’s low levels.   Fifty-seven percent expect sales to rise in the year ahead, up from 43 percent having this expectation a year ago.  And 51 percent expect profits to increase, up from 37 percent last year.  (The outlook for sales and profits had declined in NJBIA’s two previous surveys, falling close to levels seen in the 2001 recession, as shown in the chart below.)

“Given the recent slowdown in economic activity, the improved outlook for sales and profits comes as a relief, but it’s not a reason to celebrate,” Kirschner said.   “Had the outlook for these core indicators fallen from last year’s already low levels, this almost assuredly would have signaled an imminent economic downturn.”

In other survey findings:

Outlook by Industry

Businesses are more positive in their outlook for their own industries than they are for the US or NJ economies.  Overall, 25 percent expect conditions in their own industries to improve in the first half of 2008, compared with 33 percent who expect conditions to worsen.

Analyzing the outlook by industry sector, one finds that those in the regulated communications and utility industries are most optimistic.  The manufacturing and various service industries are more or less evenly divided in their outlook.  About three in ten expect conditions to get better in their sectors, and another three in ten expect conditions to get worse, with the rest expecting little change.  In the finance/insurance/real estate sector, 29 percent expect to see an improvement, while 36 percent foresee a decline.

The most pessimistic sectors are construction (44 percent, worse; 20 percent, better), retail trade (43 percent, worse; 20 percent, better), wholesale trade (38 percent, worse; 16 percent, better), and transportation (37 percent worse; 12 percent, better).

Wages

In the wage and salary area, 72 percent plan to boost pay levels in 2008, while 26 percent plan to keep pay at current levels, and 2 percent plan reductions.  Half of all survey respondents said they plan to give pay raises ranging from 2-5 percent, while 10 percent said their raises would be less than 2 percent and another 12 percent said their raises will exceed 5 percent.

Assessing Government Leaders

Governor Jon Corzine received a good-to-excellent rating from 22 percent of survey respondents, down slightly from 23 percent last year.  Forty-one percent gave the Governor a fair rating and 37 percent a poor rating, little changed from last year.

The NJ Legislature fared somewhat better this year, receiving a good-to-excellent rating from 12 percent of survey participants, up from 9 percent last year.  Thirty-nine percent said the Legislature is doing a fair job, and 49 percent, a poor job.

President Bush’s approval ratings have continued to plummet.  Eighteen percent said the President is doing a good-to-excellent job, down from 31 percent last year and 65 percent at the height of the President’s popularity six years ago.

Congress is seen as doing the worst job of all.  Only 6 percent said Congress is doing a good job (none said it was doing an excellent job), down from 11 percent last year and a high of 37 percent seven years ago.

Thirty-seven percent said Congress is doing a fair job, and 57 percent, a poor job.

In what was supposed to be a ho-hum mid-term election last month, voters surprised campaign watchers across the State by voting down two referendums—one on bonds for stem cell research and one for property tax relief—that were expected to pass.  In the legislative election, Democrats picked up one Senate seat, increasing their majority to 23-17, while Republicans gained two Assembly seats to cut the Democrats advantage in that house to 48-32.

Historically, bond issues and dedicated funds pass easily in New Jersey, and the money-related issues on the ballot this year were expected to follow suit.  One measure asked voters to approve $450 million for stem cell research, the other asked voters to dedicate another half-penny of the sales tax to property tax relief.  Voters defeated the measures by 53 to 47 percent.

Voters have sent a message to Governor Jon Corzine and legislators to stop the borrowing and fiscal gimmicks.  While polls showed strong support for the idea of stem cell research, voters rejected adding $450 million to the State’s astronomical debt.  Likewise, voters are not buying the raise-the-sales-tax-and-give-me-a-bigger-rebate plan. Voters want taxes cut and spending curbed.

Voters spoke eloquently about the need for the State to spend within its means.  They realize that the State is deep in debt and that eventually they will be the ones asked to pay when the credit card bills are due.  They know that people and businesses are leaving the State because it has become too expensive. 

Although the GOP made some gains in the legislative elections, the Democrats remained firmly in control of both houses.  Richard Codey has again been elected Senate President, but Senators of both parties have chosen new leaders for the legislative session that starts on January 8.

Senator Tom Kean, Jr. will be the new Republican Leader, and State Senator Stephen Sweeney will take over as Senate Majority Leader.  In the Assembly, Joseph Roberts was again chosen as Speaker, and party members reelected Assemblywoman Bonnie Watson Coleman as Majority Leader.  Assemblyman Alex DeCroce received another term as Republican Leader.

The Republican Party’s inroads in this election included District 12 (Monmouth, Mercer counties), where Republican Assemblywoman Jennifer Beck defeated incumbent Democratic Senator Ellen Karcher 54 percent to 46 percent and swept in her Assembly running mates Declan O’Scanlon and Caroline Casagrande, ousting Democratic incumbent Michael Panter.

Democrat James Whelan won in the traditionally Republican 2nd District (Atlantic county), defeating incumbent Sonny McCullough 57 percent to 43 percent.  Whelan becomes the first Democrat to represent the district since 1982, but Republicans were able to recapture Whelan’s open Assembly seat. Republicans Vince Polistina and John Amodeo are the new Assemblymen.

Democrats won big in the 1st District (Cape May, Cumberland, Atlantic counties) as Democrat Jeff Van Drew knocked off long-time Republican incumbent Senator Nick Asselta 56 percent to 44 percent.  Democratic Assemblyman Nelson Albano and running mate Matt Milam also won.  This is the first time since the Legislature was reorganized in the 1940s that Democrats won all three legislative seats in the 1st District.

In the 14th District (Mercer, Middlesex counties), Republican Bill Baroni handily defeated Democrat Seema Singh in the Senate contest, but Democrats gained an Assembly seat.  Democrat Wayne DeAngelo will join incumbent Democrat Linda Greenstein in the Assembly.

Finally, Republicans swept the 8th District (Burlington County), knocking off incumbent Democrat Fran Bodine, who had switched party affiliation earlier this year. Phil Haines will be the new Senator and Scott Rudder and Dawn Addiego the Assembly members.

The Election Law Enforcement Commission has again extended the deadline for nonprofits to report the 2006 contributions of their board members and officers under New Jersey’s pay-to-play law.  They now have until January 15 to report political contributions of their board members, top executives and their spouses.

As the State Legislature wraps up its current two-year session, NJBIA is urging its members to keep the pressure on lawmakers to oppose two bills that would raise their costs of doing business:  the paid family leave mandate and unlimited health insurance coverage of behavioral disorders.

S-2249 (Sweeney, Buono) and A-3812 (Albano, Panter) would mandate that all employers provide 10 weeks of paid family leave, even those with as few as two employees.  This program would be financed with a $160 million hike in employee Temporary Disability Insurance taxes.  New Jersey businesses cannot afford to be without employees for 10 weeks!

This bill will affect hundreds of thousands of small businesses that have never even had to deal with existing unpaid leave laws.  (The existing unpaid family and medical leave laws exempt small businesses with 1-49 employees.)

It’s already expensive and tough enough to operate a business in New Jersey.  The State should not make it tougher by passing a huge new paid-leave mandate.

NJBIA members are also being urged to oppose S-807 (Vitale, Buono)/A-2512 (Gordon, Johnson, Manzo, Burzichelli, Greenstein), which would require health insurance plans to provide unlimited coverage for the treatment of hundreds of behavioral disorders and substance abuse.  This bill could be considered by the Assembly during one of the scheduled voting sessions between now and Jan. 8.

New Jersey employers already pay the highest health insurance premiums in the nation, with costs rising at three times the rate of inflation.  If health insurance is to remain in any way affordable, it cannot provide unlimited coverage for everything. 

Health plans already provide coverage for the treatment of many behavioral problems and substance abuse, but forcing plans to provide unlimited coverage would drive New Jersey’s health insurance costs even higher.  Studies show that soaring costs are forcing small employers to drop all of their health insurance coverage.  Therefore, under this bill, some people will get unlimited coverage for behavioral disorders while others will lose coverage for hospitalization and doctor visits.

Companies receiving State job creation and retention incentives will now have to make annual reports detailing their progress on meeting their employment promises.

The new law, S-1213 (Turner)/A-3450 (Gusciora, Cohen), affects companies that receive Business Employment Incentive Program (BEIP) grants and Business Relocation and Retention Assistance Grants (BRRAG).

BEIP and BRRAG are designed to create jobs in New Jersey by reimbursing companies a portion of the employee taxes paid by the new jobs they create.  In both cases, grants are provided only for jobs that would not otherwise have been created or retained.  Grants are not paid until each promised job has been in place for one full year.  BEIP grants are designed to attract companies to New Jersey, while BRRAG grants are designed to prevent New Jersey companies from leaving the State.

The new law requires companies receiving funding to submit annual reports detailing the specific number of jobs they’ve created and how that compares to the goals stated on their grant applications.  It takes effect April 29, 2008.

Despite these requirements, NJBIA is confident BEIP and BRRAG will continue to be good investments for taxpayers.  Tens of thousands of jobs have been created through these programs, generating millions of dollars more in tax revenues than have been paid out in grants.  For more information, contact Art Maurice at ext. 247, or amaurice@njbia.org.

“Most of the country is creating jobs at twice the rate that New Jersey is; this shows that business expansions are going elsewhere.”

- NJBIA President Philip Kirschner

New Jersey’s workers’ compensation system is more effective than those in most states because it provides injured workers with medical care and benefits while maintaining effective cost controls on employers’ premiums, a recent analysis by NJBIA’s research affiliate, the NJ Policy Research Organization (NJPRO) Foundation, concluded.

New Jersey’s workers’ compensation system was mandated to be the exclusive remedy for occupational injuries and illnesses.  Prior to this, employees had only one option—sue their employer in civil court and hope for the best.  NJPRO’s Facts for Discussion: Workers’ Compensation in New Jersey concludes: “This is a system designed to balance the need to control employer cost without infringing upon employee benefits.  This current configuration has served all of the stakeholders well for nearly 100 years.”

One of the keys to its success is the way benefits are administered.  In this highly successful partnership among employers, employees and insurance companies, workers who get hurt on the job receive all of the required medical care.  Additionally, injured workers out of work for more than seven days can receive wage replacement benefits of up to 70 percent of their weekly wage (capped at $711 per week in 2007) for up to 400 weeks.  Medical benefits and wage replacement benefits are provided regardless of fault, avoiding costly lawsuits.

All employers, meanwhile, are required to carry workers’ compensation insurance, but according to the study, premiums are structured in a way to promote safe workplaces.  Premiums are based not only on the number of employees and the nature of their jobs, but also on a company’s safety record.  Companies that have fewer claims receive credit modifications that lower their overall premiums.

Finally, New Jersey’s system provides effective cost controls to keep premiums reasonable.  For example, in New Jersey, the employer selects the physician, the length of time a worker can receive temporary disability payments is capped, and attorneys’ fees are capped at 20 percent of a judgment.

Various legislative proposals could alter the system for the worse.  Some of these would institute employee choice of physicians, carve out certain employee groups from the system, increase benefit levels or raise the cap on attorneys’ fees.

NJPRO is New Jersey’s leading policy organization producing innovative, timely and practical research on behalf of New Jersey employers.

To view the full report, visit www.njprofoundation.org, or contact Executive Director Sara Bluhm at ext. 204 or sbluhm@njbia.org.

A task force established by the Governor to analyze ways to make New Jersey’s healthcare system more cost effective has recommended restructuring the State Health Benefits Program for public employees to take advantage of cost-saving measures available through Medicaid.  It urges a focus on preventative measures for the most chronic health problems.

The Health Care Task Force of the Government Efficiency and Reform Commission (GEAR) concluded that significant savings were possible because New Jersey has been slow to adopt proven cost-containment strategies.  The GEAR report recommends restructuring the State Health Benefits Program to encourage wider use of more affordable plans and adopting strategies to reduce rates of obesity, diabetes and other chronic diseases.  View the full report at www.state.nj.us/governor.