February 2013
Strengthening NJ's Economy

Governor Chris Christie commends state's strong bipartisan response to Superstorm Sandy recovery efforts, while legislative and business leaders discuss the major economic issues of 2013 at the New Jersey Business & Industry Association's Public Policy Forum

By Anthony Birritteri, Editor-in-Chief

Governor Chris Christie commends state’s strong bipartisan response to Superstorm Sandy recovery efforts, while legislative and business leaders discuss the major economic issues of 2013 at the New Jersey Business & Industry Association’s Public Policy Forum.

When Governor Chris Christie took to the podium at this year’s NJBIA Public Policy Forum, held recently at the Renaissance Woodbridge Hotel, he made it clear that rebuilding the state after Superstorm Sandy is his biggest priority and one that will “define success or failure for the state and this administration.” He added, “This is a moment within the greatest crisis New Jersey has ever faced, and so far, we have passed through it with flying colors. Now, we stand in front of the challenge to rebuild the hopes, the dreams, the homes, the businesses and the livelihoods of our citizens. We are going to fight as much as we possibly can … including advocating for more funds for businesses from the federal government.”

Christie’s commitment about funding would be underscored three weeks later in the immediate aftermath of the fiscal cliff vote in the House of Representatives on New Year’s Day, which gained notoriety when an expected vote on a $60-billion Sandy relief bill never occurred. In a press conference the following day, Christie lashed out at House Speaker John Boehner, blaming him for “the continued suffering of innocent victims.”

The result? The House made an about face a few days later, with Congress approving $9.7 billion to replenish the National Flood Insurance Program. On January 15th, the House approved a $50.7-billion emergency aid package. The Senate was expected to vote on the matter a week later.

At the Public Policy Forum, Christie outlined the initiatives the state is taking to get businesses up and running and people back into their homes, such as creating the Office of Recovery and Rebuilding within the Governor’s Office. Headed by former Executive Assistant Attorney General Marc Ferzan, the cabinet level position has the responsibility for overseeing and directing the governor’s long-term recovery efforts in cooperation with all federal, state, local, private and nongovernmental partners.

According to Christie, “Every governor I have spoken with, who has gone through something as severe as this [hurricane], told me there has to be one person responsible to the governor, who makes sure things don’t fall through the cracks, who brings together all cabinet officers, the private sector, local and county government concerns to make sure everyone is working in one direction.”

He said the state’s Business Action Center can also help businesses learn about what federal relief programs are available and who to contact for financial support, technical assistance and temporary space, for example. Grants are also available through the New Jersey Economic Development Authority, and fees are waived for certain programs, such as a commercial line of credit of up to $500,000 that can help businesses recover while they await insurance proceeds.

The governor discussed a new trio of grant programs launched by the New Jersey Department of Labor and Workforce Development (LWD) totaling $26 million. Designed to keep jobs from fleeing the state in the aftermath of the hurricane, these programs include:

• Approximately $4 million in Recovery4Jersey grants that will be used to train newly hired workers for recovery and rebuilding efforts in the utility, construction and other clean-up related businesses. The LWD will additionally make $7 million available for local Workforce Investment Boards (WIBs) under this initiative.

• The $11-million Skills4Jersey training grants that will go towards the retention of highly-skilled and highwage jobs in the state “so we don’t lose these employees to other states and other jobs,” Christie said.

• Under the Opportunity4Jersey program, LWD will make $4 million available for an initiative that will fill the skills gap reported by employers. This initiative is modeled after the Fabricated Metal Products Manufacturing Training Program, a collaboration between NJBIA, LWD and the Community College Consortium for Workforce and Economic Growth.

Christie said he was extremely gratified with the way the state has come together since the hurricane. “New Jersey has set an example for the nation in terms of bipartisanship,” he said, adding the problems of the state are too big and the needs of the people too great to let partisanship get in the way.

Legislative Leadership Panel

Topics ranging from shared services and the minimum wage, to Superstorm Sandy rebuilding efforts and the results of NJBIA’s Business Outlook Survey were topics covered by the Legislative Leadership Panel discussion moderated by Kevin McArdle, Statehouse correspondent for NJ 101.5 Radio.

NJBIA’s survey, which Association President Phillip Kirschner presented to attendees earlier at the event, revealed that business confidence among New Jersey employers reached its highest level in the past five years. Of particular note, the outlook for individual company sales, profits and employment reached its most positive level since the onset of the 2008-2009 recession (see January issue of New Jersey Business magazine for the full survey report).

Senate President Stephen Sweeney said the results of the survey are positive and that the Legislature, over the past three years, has been trying to find ways to improve the state’s business climate. “We did some things that the business community wanted for a long time, such as implementing the single sales factor, enhancing the net operating loss carry-forwards tax incentive and passing other tax credits and cuts to help the economy,” he said, adding, “I am proud of the fact that even where we have our disagreements (between parties), New Jersey is viewed as a state that cares about people first … not politics.”

According to Senate Republican Leader Tom Kean, Jr., the results of the NJBIA survey show that Governor Christie’s “leadership and competence matters.” Kean also gave credit to the bipartisanship of the New Jersey Legislature and its stark difference when compared to fiscal cliff negotiations in Washington, DC. “You have a real contrast between uncertainty at the federal level versus [certainty] on the state level,” he said.

When the legislative leaders were asked what they could do to help individuals and businesses impacted by Hurricane Sandy obtain federal grant money, Jon Bramnick, Assembly Republican leader, responded that the New Jersey Legislature will continue to work (on a bipartisan basis) with the federal government on obtaining aid, similar to how Governor Christie worked with President Obama in his quest for hurricane relief money. He said the most important thing is “the confidence that is being generated in the state. You can have all the grants in the world, but if you don’t feel better about what is happening in New Jersey, you are not going to rebuild.”

McArdle then asked the legislators what they can do “to stave off businesses that, after receiving their Hurricane Sandy insurance claims checks, still decide to close operations and leave the state?”

Sweeney responded, “There is the reality that some people just can’t rebuild because the money is not there. That is why grants are important. … Our job is to make sure that whatever grant money comes in gets to businesses so they can rebuild, get their lights back on and get the state moving forward.”

According to Assembly Speaker Sheila Oliver, “creativity” and “innovation” are needed to bring money to impacted small businesses. She said one of the biggest challenges in affected communities is stabilizing tax ratables. “If some of these businesses are gone, mayors and governing bodies cannot go to other taxpayers and ask them to sustain a taxable base,” she said.

When McArdle asked about a bipartisan movement on shared services legislation, which passed in the Senate and is now being considered in the Assembly, Sweeney said, “The resistance and reluctance to share is frustrating. This is a home rule state, but if we ever want to put New Jersey where it needs to be, it’s through squeezing down the size of government.”

Oliver said the Assembly will be taking up the bill. “We are not adverse to the issue of shared services, but we have concerns about the implication of shared services in towns that have civil service employees,” she said.

Meanwhile, Kean said the 2 percent property tax cap has been forcing the conversation about reducing the size and scope of government. “The cap has allowed pension and benefit reform to be accomplished,” he gave as an example. However, he believes that the consolidation and aggregation of government is not the right thing to do in every situation. “County and regional governments make good sense in certain parts of the state. In other parts, municipal governments are more efficient. My hope is that shared services will not be a stalking horse for larger, controlling government. Whatever legislation passes, it must have flexibility. We can’t say ‘Let’s put everything on the county level.’”

Divided views were expressed on the topic of increasing the state’s minimum wage from $7.25 to $8.25 or $8.50 per hour (based on two bills in the Legislature), indexing future increases to the rate of inflation or the Consumer Price Index and having all this accomplished via a constitutional amendment, as approved by the Democratically controlled Senate and Assembly. At press-time, the governor has until January 17 to act on minimum wage legislation.

According to Bramnick, “I think everyone agrees an increase in the minimum wage is a possibility through negotiations, but at this point in time, especially post Hurricane Sandy and after many years of a bad business climate, this is not the time to throw a monkey wrench into the process. … We are trying to get the economy and small business into recovery mode. To change the constitution and to put an automatic burden on businesses every year, regardless of what the Legislature, governor and the people feel, is a built-in negative for the road to recovery.”

Oliver commented, “As a prime sponsor of the minimum wage bill, I make no apologies for my vigilant aggression in terms of putting this issue on the table. I don’t think there is a person in this room who could live on $7.25 per hour at 40 hours per week. In the region we live in, this issue has to be addressed.”

“People at the lower end of the scale need a raise,” Sweeney added. “If we had put the CPI into a minimum wage bill back in 2005, the wage today would be $8 an hour. There would be predictability and not a 17 percent spike of a dollar and a quarter.”

Kean countered, “No one should equate the minimum wage with a family sustaining wage. Those are different issues. The goal is to make sure more people raise themselves out of poverty because they can get an education that is working on their behalf, and that jobs are being created, and that families want to stay here and not be chased out of the state because of tax policy.”

Economic Outlook Panel

Telecommunications technology, real estate, healthcare reform and recovery from Hurricane Sandy were on the minds of business leaders who participated in the Public Policy Forum’s Economic Outlook Panel titled “What Comes Next?,” moderated by New Jersey Manufacturers Insurance Group (NJM) President and CEO Bernie Flynn.

Flynn explained that NJM was prepared to handle the hurricane, and some 52,000 related claims the insurance company received, due to its experience during a March 2010 Nor’easter. “That is when we learned we had to uptick our catastrophe response plan. We always had a plan, but with the reality of getting thousands of claims as the result of one event, we had to improve … so we did.

“All totaled, we will pay out in the neighborhood of $300 million for homeowners and auto claims,” Flynn said. Of the 52,000 claims mentioned above, some 43,000 are for homeowner’s policies. Typically, NJM would process 18,000 homeowner’s claims in one year.

Jim Gerace, Verizon regional president (NY, NJ, CT), said the hurricane’s impact on Verizon’s infrastructure was significant. “Where there were roads, businesses and houses destroyed by the hurricane, so was there damage to our network,” he said, adding that the first order of business immediately after the storm was getting service restored. “That meant bringing in a lot of extra resources. We normally have 15,000 employees in the state. We now have 16,000 [storm-related infrastructure jobs], 4,000 brand new telephone poles and hundreds of miles of new fiber optics cable – all implemented in the last six weeks.”

He said one of the lessons learned from Sandy was that both the company’s fiber optics and advanced digital wireless networks proved to be “extremely” resilient. “What weren’t resilient were our traditional copper networks. They were very susceptible to water, especially corrosive salt water,” Gerace explained.

Hurricane Sandy also accelerated Verizon’s deployment of newer technologies [wireless and fiber] in New Jersey. “That’s the silver lining to Sandy. It is going to make businesses much more competitive and efficient,” he said.

Discussing the real estate market outlook for the state, Michael McBride, managing partner at Connell Foley LLP, said the construction industry was hit hard during the last recession and still reports a 20 percent unemployment rate in New Jersey. “Hurricane Sandy may change some of that, particularly in residential construction,” he said, adding that Hudson County, particularly Weehawken, Hoboken and Jersey City are bright spots in terms of rental housing, as more people seek urban lifestyles.

Michael Munoz, senior vice president of AmeriHealth, gave the audience a hard dose of economic reality when he explained the healthcare cost increases related to the Patient Protection and Affordable Care Act. “There are a lot of hidden costs for employers and insurance companies as it relates to the implementation of the act. Fees that will be built into rates amount to about a 4.5 percent surcharge that will be pass straight through to employers,” Munoz said. “In addition to that, if Governor Christie has the federal government implement the exchange [health insurance marketplace] for New Jersey, there will be a 3.5 percent surcharge that will be applied. So, starting right out of the gate, not considering the impact of additional costs by increasing the number of people who will be insured, we are starting off with an 8 percent gap you are going to have to deal with. … The only solution being offered is giving employers more personal responsibility over their healthcare. As an organization, we believe that having a fully engaged employer and individual engaging in wellness is the only way to control healthcare costs.”

As president of the New Jersey Society of CPAs, Tom Roche commented that legislation like the healthcare reform act is changing the way CPAs practice. “When I went to school, I never thought too much about healthcare. … I didn’t think the IRS would be monitoring some forms of healthcare and tie it into taxes,” he said. “Many things have converged and the job of the CPA is different from when I started 35 years ago.”

Small businesses are also being impacted by constantly- changing and hard-to-understand rules and regulation, Roche said. “Each year, legislators in Washington, DC give us a new set of laws. It’s like going halfway around the Monopoly board and the rules suddenly change.”

Vincent Schweikert, Vice President & Publisher
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Anthony Birritteri, Editor-in-Chief
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