February 2012
NJBIA's Public Policy Forum: Strengthening New Jersey's Business Climate

Business leaders at NJBIA’s recent Public Policy Forum are cautiously optimistic about the economy. They also give a vote of confidence to Governor Christie and the State Legislature for improving the state’s business climate.

By Anthony Birritteri, Editor-in-Chief

Economic Outlook Panel Sizes Up the Recovery

During the economic panel discussion at this year’s Public Policy Forum, held at the Renaissance Woodbridge Hotel, New Jersey State Economist Charles Steindel and five business leaders said they are cautiously optimistic concerning the state and national economies.

Moderator Bernie Flynn, NJM Insurance Group president and CEO, began the panel discussion by describing how his views on the economy are based on how NJM’s workers’ compensation line of business is doing.

“NJM invests its premium dollars conservatively, but you cannot get the [investment] returns today that you got a few years ago,” Flynn said. “We need the broader U.S. and global economies to turn around.”

The insurance company bases its premiums on payroll, but with the past recession and tepid recovery, the workers’ compensation premium [for all insurance companies in the U.S.] has dwindled,” Flynn said.

Flynn sees stability in 2012. “We have some optimism for the future, but it is cautious optimism,” he said, adding that he was pleased with the positive results of NJBIA’s Business Outlook Survey and the favorable views Governor Christie and the Legislature received.

Charles Steindel said that the recession of 2008-2009 was “enormous, but … it wasn’t off the charts. In terms of actual output and employment declines, the recession period wasn’t radically larger than the 1973-1975 or 1980-1982 recessions. What the problem [today] has been is the post-recession period.”

The issue is the lack of significant job creation. While GDP has already inched past its peak from late 2007, the nation only added 2.5 million jobs since the start of 2010. “While this sounds good, we have to add more than 6 million additional jobs to get back to prerecession-level employment,” Steindel said, adding that the nation should get back to 2007 employment levels by 2015.

The situation is “radically” different in New Jersey, Steindel said. The state’s job count is 25,000 above its lowest recessionary point. “Our numbers look a little softer than the rest of the nation, but that’s because we were early in the game of cutting public sector jobs. The rest of the nation is now catching up,” Steindel said. “Looking at the private sector, New Jersey has added about 50,000 private sector jobs since the low [point].”

His forecast is for staggered growth. Corporate America has incredible amounts of cash and companies are getting into a position of restocking because there is a pent up demand for capital goods,” he said.

Robert Doherty, New Jersey president for Bank of America, echoed some of Steindel’s comments, saying that the financial institution’s business clients are “lean, mean and very productive.” Companies have learned to stabilize their businesses and show profits without hiring people. “Additionally, there is pent up demand to replace worn-out assets and replenish inventories … to spend in general,” Doherty said.

Focusing on New Jersey, he said employers are convinced that the Christie Administration and Legislature are restoring fiscal stability and creating the conditions necessary to grow and expand business. However, the state still has a high tax and strong regulatory environment.

Discussing the real estate industry, Michael McBride, managing partner of the Roseland-based law firm Connell Foley, said that the commercial office market is sluggish with many developers cautious about undertaking large construction projects. Conversely, construction costs are competitive, which is good for owners, but contractors have to bid below costs to get work.

Regarding the legal environment, McBride says rates are flexible today with companies taking bids for legal representation. Getting paid is also a challenge. “I tell my partners to work out a payment schedule with their clients. Keep communications open because things will turn around,” he said.

The views of certified public accountants was presented by Caroline Hedinger, president of the New Jersey Society of CPAs. Based on results from an American Institute of CPAs survey, senior level partners at accounting firms feel the economy improved in the last quarter of 2011.

“While 40 percent of CPAs are still pessimistic about domestic conditions [in the U.S.], 37 percent feel that way in the Northeast,” Hedinger said. “On the upside, 59 percent expect their businesses to expand in the next 12 months. Approximately 45 percent believe the economy is heading towards a double dip recession, down from 61 percent in the previous quarter.

“The bad news is 50 percent of companies don’t plan to return to prerecession employment levels for at least 12 months, a third don’t expect to get to that level in the foreseeable future and 25 percent report they have too few employees, but remain reluctant to hire because of economic uncertainties.”

Discussing the dichotomy that exists in healthcare, Barry Ostrowsky, president and CEO of Barnabas Health, said that in order for Barnabas’ hospitals to deliver healthcare “that will make you proud and that will attract people to move to New Jersey, we have to make investments in new technology, all of which takes capital, something of which our industry doesn’t have. And if we are going to make these investments and spend more money, we are going to add to the cost of healthcare,” he said.

To cope with the dilemma, hospitals, physician groups and other healthcare providers have been consolidating operations, but that also means fewer jobs.

“In our attempt to reconcile pursuing a mission like this (delivering quality healthcare), we are looking at entirely different formats of delivery,” Ostrowsky said. “You will see and have seen an incredible movement to merge the financing and delivery of healthcare. Insurance companies are buying hospitals. The hope is to produce higher quality and more efficient services.”

State’s Top Legislative Leaders Discuss Key Business Issues

In a session moderated by Kevin McArdle of NJ 101.5 Radio, the state’s top legislative leaders discussed topics ranging from the hard choices they have made in a bipartisan fashion to improve the state’s business climate, to the work that still needs to be done in reducing property taxes.

Panel participants were additionally pleased with the results of NJBIA’s Business Outlook Survey, in which 28 percent of respondents reported that state lawmakers were doing a good-to-excellent job, up from 15 percent in 2010 and up 5 percent the year before that.

“I am thrilled with the survey results because it shows that we worked hard … in a bipartisan fashion,” said Senate President Stephen Sweeney. “We worked hard, and unlike Washington D.C., we worked together.”

“When you look at New Jersey today, more people in the state feel we are going in the right direction,” added Senate Republican Leader Tom Kean. “That is because we have been advocating and pushing through bold solutions, including the 2 percent property tax cap, pension benefit reform, lower budgets and overall predictability.”

Assemblyman Republican Whip David Rible said confidence in New Jersey government will translate into businesses hiring people and moving forward with investment projects. He mentioned that one of the first things Governor Christie did was to create the Red Tape Review Commission. This has made working with government entities, such as the DEP, a little bit easier. “Projects are starting to move quicker. … We are finally seeing a commitment from business owners.”

High property taxes, however, are still impeding growth in the state.

Assembly Majority Leader Louis Greenwald commented that, on average, New Jersey residents pay double the amount in property taxes than the rest of the country. “The problem must be addressed, and it is not going to be resolved in 30 second sound bites from both parties,” he said. “We need to dive deeply into work and restructure our tax system.”

Sweeney said the Senate is going to move aggressively on a shared service bill.

Kean added that sick pay reform for public employees must also happen in order to solve the property tax crisis. “We need to control municipal government expenses, and we have to give municipalities more tools so that they can make the tough decisions on behalf of their citizens.”

He added that state government is taking care of its problems, but those problems took 30 years to come to fruition. They may not be quickly solved. However, “New Jersey is doing something that is not being done in other states or at the federal level. That is why people are frustrated when they look at Washington D.C. or Europe. They are not seeing real solutions,” Kean said. “Under the governor’s leadership and bipartisanship in the Legislature, we are able to focus on real problems that will make the state more affordable.”

Lt. Governor Says Job Creation is the Common Denominator

Lt. Governor Kim Guadagno, who delivered the keynote address at the Public Policy Forum, reported that the state’s business climate has taken a turn for the better ever since Governor Chris Christie took office in January of 2010, but the major issue in the state is still job creation. “All of the problems in the state have one fundamental common denominator, and that is the fact that we don’t have enough jobs in New Jersey. If we are able to address that problem, a lot of the more serious problems facing us will be easier to handle, and in some cases, go away,” she said.

Yet, the Lt. Governor did point out the strides the administration was making. Compared to 117,000 private sector job losses in the state prior to the administration taking office, some 50,000 private-sector jobs were created in 2011. She pointed to the $180 million in business tax cuts in the previous state budget, $1 billion in tax cuts over the next four years and the progress the Red Tape Review Commission has made in getting rid of onerous regulations that hinder business growth.

Additionally, she said businesses are gaining confidence in state government, as reported in NJBIA’s Business Outlook Survey, which revealed that 74 percent of respondents said they believe the Christie Administration is doing a good to excellent job. Coupled with other positive surveys from business organizations and academia, the Lt. Governor said, “These independent [surveys] show that the economy is turning around. That is half the battle. People outside of New Jersey are now starting to recognize that we have gotten our fiscal house in some semblance of order. We have a lot more to do, but we are on the right path.”

Saying that her job is to bring jobs to the state, “so that workers can give their families a decent standard of living,” the Lt. Governor mentioned companies that are remaining and expanding operations in New Jersey, such as Coca-Cola, Honeywell, Panasonic, Goya, Bayer and Realogy.

Many of these companies received incentives from the state’s Economic Development Authority, which has generated more than $274 million in economic activity, including 5,700 new permanent jobs and 5,800 construction jobs in 2010 and 2011, Guadagno said. Last year, the EDA had three times more projects funded than in 2010.

Guadagno mentioned that Governor Christie will continue to veto any tax increase, and that is the message she plans to take to New York, Connecticut and Pennsylvania. “We spent the last two years convincing the people in this room (New Jersey business owners) that we were serious about lowering taxes, getting the regulation environment under control and making you feel welcome again. The future will be to convince the rest of the region, the country and the [world] that they need to be in New Jersey,” she said.

Political Panel Discusses 2012 Election Possibilities

In a wide-ranging panel discussion moderated by “NJ Today” Senior Correspondent Michael Aron, Former Republican Governor Donad DiFrancesco, Republican Strategist Dale Florio, and Democratic Stategists Harold Hodes and Bill Pascrell covered everything in New Jersey politics from the upcoming presidential race to next year’s legislative contests.

Hodes, of Public Strategies Impact, said the key to President Barack Obama’s reelection this year is the economy, but that the issue was complicated. The economy is improving, he said, but the question is whether or not it will lead to the kind of job growth that will garner votes.

“It’s going to be an interesting dynamic,” he said.

Florio, on the other hand, said he didn’t see Obama getting 50 percent of the vote and that the president’s best chance was for a credible third-party candidate to fragment the electorate.

“(Obama) won’t get more than 48 percent of the vote,” said Florio, of Princeton Public Affairs Group. “He needs a third-party candidate who is seen as a Republican.”

Looking ahead to the 2013 legislative races, DiFrancesco disputed the conventional wisdom that the newly drawn legislative districts preclude having a Republican majority in the near future.

“With the right amount of money and the right candidates, Republicans can win with this map,” DiFrancesco said.

Pascrell, of Princeton Public Affairs Group, said having Governor Christie running would change the dynamic of the races.

“I think the governor at the top of the ticket is a chief concern of the Democratic party,” he said.

<b>Senators Sweeney & Oroho Receive the Paul L. Troast Award</b>

Senate President Stephen Sweeney and Senator Steven Oroho were the recipients of the Paul L. Troast Award this year. Named after Paul Troast, who served as chairman of NJBIA from 1963 to 1972, the award is given to individuals who have made outstanding contributions to the state and its business community.

In presenting the award to both legislators, Max Crane, managing partner of the law firm Sills Cummis & Gross P.C., said it is being given to two well deserving public servants, people who have “made New Jersey a better state in which to have a business.”

Of Sweeney, Crane said the Senate President has “presided over what has to be one of the most productive Senate sessions in New Jersey history. I can’t remember a time when more big problems were tackled in one time: pension reform, public employee health benefit costs, property tax and arbitration award caps, budget deficits and implementing long overdue business tax reforms.”

Commenting on Senator Oroho, Crane said the Senator has been a tireless advocate of small businesses. “As a member of the Senate Budget Appropriations and Economic Growth Committee, Senator Oroho fought to rein in state spending and improve the state’s business climate by reforming the tax system.”

Oroho was a sponsor of a law that allows small businesses to carry their net operating losses forward for as long as 20 years, similar to large corporations. He also sponsored legislation that will implement a single sales factor formula. “We were taxing New Jersey companies at a higher rate for having jobs and facilities in the state, while out-of-state companies, with little in the way of employees or facilities here, made out much better,” Crane explained. “Thanks to Senator Oroho, corporate taxes will be based only on in-state sales. This not only promotes fairness, but makes us more competitive with Pennsylvania, New York and other states.”

Clifford Lindholm, III, Presented with the Leonard C. Johnson Award.

NJBIA Chairman Douglas Kuiken presented Cliff ord Lindholm, III, with the Leonard C. Johnson Award, which recognizes an individual who has demonstrated a long-term commitment to the work of the association. Leonard C. Johnson was a past president of the association, serving from 1963 to 1977, and was an advisor to four New Jersey governors.

Lindholm is a NJBIA trustee and president and CEO of Falstrom Company. He is chair of NJBIA’s Manufacturing Network, which consists of some 3,000 companies. According to Kuiken, from the moment Lindholm joined the association’s Board of Trustees, “Cliff brought a tremendous amount of energy to his job. He is passionate about the state’s manufacturing sector, discussing the industry with governors and testifying before legislative committees in favor of pro-manufacturing legislation.

“Thanks to Cliff’s efforts, New Jersey manufacturers have a great tool and strong advocate to help them compete and succeed in the global economy,” Kuiken said.

Lindholm thanked the NJBIA staff , including its Government Aff airs team, for making his work at the association meaningful. “Under the leadership of Phil Kirschner, NJBIA recognized that manufacturing is a significant part of the state’s economy,” he said. Commenting on NJBIA’s Manufacturing Counts Campaign, the Agenda for Manufacturing Renewal, the Manufacturing Council and now the Manufacturing Network, Lindholm said he has been fortunate to be a part of NJBIA’s “sharp thinking. I would encourage all members to be more involved in the association,” he told the audience. “I am blessed to have the privilege of running a manufacturing business that has been around for 141 years. Through the eff orts of NJBIA, we hope to be in business for another 141 years.”

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