NJ Business Matters: The Blog of the CIANJ

NJ's Unemployment Fund: Still Broke, Still Unreformed

Yesterday, the State of New Jersey took a snapshot of the state's Unemployment Insurance (UI) fund, and confirmed that it is depleted. With the fund running a deficit and borrowing from the federal government since 2009, employers face an automatic tax increase if nothing is done. That payroll tax hike charged to NJ companies would average $400 per employee, and be a job killer.

Governor Christie has put forth a proposal, introduced by Senator Pennacchio, that would return the fund to solvency in a more timely manner, and reduce the employer tax increase to about $130 per worker. To do that, the governor has proposed, among other changes, to,

• Change the structure of the UI tax so that rates can only rise incrementally year-to-year
• Require unemployed New Jerseyans to wait one week before receiving benefits
• Tighten restrictions on those who were dismissed for misconduct and apply for benefits
• Reduce the maximum weekly benefit amount from $600 per week to $550 per week for those who apply for benefits after July 1.

The principle reason the UI fund is broke is legislative mismanagement. Between 1993 and 2005, the legislature raided $4.7 billion from the fund and diverted it to other budget needs. Now companies will be forced to pay twice for the same employee benefit.

If adopted in total, NJ would still have the third most generous UI benefits in the country. In times of need, elected officials rightfully move to help those who have lost their job. However, to continue adding to the length someone is eligible for UI benefits (it's now at 99 weeks) while taxing companies that must create jobs to grow the economy does not move the state forward.

With the snapshot taken, the legislature must move quickly to avoid making the problem of unemployment in New Jersey even worse.

Trial Lawyers Declare: V-I-C-T-O-R-Y

An editorial in today's Washington Times details the big wins for trial lawyers in the recently passed health-care reform bill. Dozens of amendments were defeated, as the trial bar successfully lobbied to keep the status quo in tact regarding many areas, and even enhance their standing in the courts.

The final version of Obamacare, as signed into law, is a dream come true for big-money plaintiffs' lawyers.

That was the message in a letter the president of the American Association for Justice wrote to his membership and posted on the group's Web site. The misnamed AAJ - which was formerly and more accurately called the Association of Trial Lawyers of America - is the house organ for the national plaintiffs' bar and a major source of campaign cash for congressional Democrats.

Reporting on reformers' efforts to protect doctors and hospitals from predatory lawsuits, AAJ President Anthony Tarricone wrote, "I am very pleased to report that the health care bill is clear of any [such] provisions. ... While there is a provision for demonstration projects, it provides an absolute opt-out clause for plaintiffs at any time."

That took what was supposed to be a measure of tort reform, and instead made health courts another option for venue shopping.

The editorial also points out that the Congressional Budget Office estimates (conservatively) that medial liability reform could save taxpayers $11 billion annually. Furthermore, states with malpractice award caps similar to what Congress shot down have more doctors per capita than states without the caps.

Congratulations on your big win, trial lawyers.

Pension Bills (Eventually) Pass the Assembly, Signed Into Law

It took some time, but the General Assembly adjourned yesterday having approved the three public employee pension reform bills previously supported 36-0 by the Senate. While the overwhelming majority of savings will not be realized into the future because the changes largely exempt current employees, the package is a necessary step toward bringing public salaries and benefits in line with the private sector.

The state’s pension gap — calculated at $46 billion as of June — is largely the result of stock market losses and the state failing to make payments into the investment fund. But the number of workers in the system has soared by 20 percent since 1999, while retirees have increased 43 percent, placing a greater burden on state and local governments.

The new laws ban future part-time workers from the pension system, instead requiring part-timers who make more than $5,000 to join a 401(k)-style plan. It also makes pensions for future hires less generous, rolling back a 9 percent increase granted in 2001, requires pension payments to be based on one job, and limits payments of accrued sick leave for future workers to $15,000. The bills do not affect those already retired.

The only bill with a tallied savings is one that would require public workers to pay at least 1.5 percent of their salary toward their health care. That is expected to save local governments at least $314 million a year.

The Senate, Assembly and governor were all united in their call for change, despite the threats, illogic and giant rats rolled out by big labor. They are to be commended and we hope to see the same recognition for change in this year's budget process.

Virginia: Just Being Alive is Not Interstate Commerce

Virginia Attorney General Ken Cuccinelli has made the Old Dominion the first state commonwealth to file a federal lawsuit challenging the constitutionality of the recently-passed health care "reform" legislation.

From the AG Office's press release,

With this law, the federal government will force citizens to buy health insurance, claiming it has the authority to do so because of its power to regulate interstate commerce. We contend that if a person decides not to buy health insurance, that person – by definition – is not engaging in commerce, and therefore, is not subject to a federal mandate.

Virginia is in a unique situation that allows it the standing to file such a suit since Virginia is the only state so far to pass a law protecting its citizens from a government-imposed mandate to buy health insurance. The health care reform bill, with its insurance mandate, creates a conflict of laws between the federal government and Virginia. Normally, such conflicts are decided in favor of the federal government, but because we believe the federal law is unconstitutional, Virginia’s law should prevail.

Just being alive is not interstate commerce. If it were, there would be no limit to the U.S. Constitution’s commerce clause and to Congress’s authority to regulate everything we do. There has never been a point in our history where the federal government has been given the authority to require citizens to buy goods or services.

Seems pretty rational.

Senate Panel Moves Affordable Housing Reform Forward

The Senate Economic Growth Committee has just advanced S-1, which would eliminate COAH and replace it with a system governed by greater local control while using market forces, unanimously.

S-1 (Lesniak/Bateman) would do away with the current command-and-control style of generating affordable housing that has typified COAH. Instead, it would recognize that half of NJ's municipalities already provide a reasonable opportunity for low- and moderate-income New Jerseyans to attain housing. The other half would be required to set aside 20% of their vacant, developable land for affordable housing. The bill will also allow some previously agreed-to Regional Contribution Agreements (RCAs) that were banned to go back into effect. RCAs were agreements between municipalities in which one would send cash to another in exchange for that town taking on part or all of the other's affordable housing requirement.

CIANJ supports the bill advanced today, and hopes to see consideration by the full Senate soon. The bill uses market forces to address the Supreme Court mandate set forth in the Mount Laurel case. It also allows municipalities to use local tools to meet Court's requirements.

Senator Lesniak's statement on S-1 is available at this link, and includes a list of towns that would be defined as "inclusionary" if the bill were to become law.

March Issue of Commerce Magazine Now Available

The March issue of COMMERCE Magazine, the flagship publication of CIANJ, is arriving in mailboxes today. The on-line version has already been posted to CIANJ's website and is available at this link.

Some of the issues and interviews featured this month are,

• A discussion with Presidential Advisor Paul Volcker
• An exclusive interview with John Crowley, whose life-story is the basis for Extraordinary Measures
• Key HR issues facing New Jersey's employers
• The future of the flavors and fragrances industry
• CIANJ's perspective on the Supreme Court's latest campaign finance ruling

A complimentary subscription to COMMERCE Magazine is a benefit for every CIANJ member. To learn more about it, visit our website.

Senate President Urges Quick Action on Pension Reform

Senate President Steven Sweeney just issued a statement urging his colleagues to advance public employee pension reform now, and deal with the issue of commissions, boards and authorities on a parallel track. Melding the two issues into existing legislation would require a second vote by the Senate on a package of reforms that were advanced 36-0 on Monday.

His full statement is available at this link, and includes,

Sweeney said the first goal for legislators should be to see the pension and benefits reform package signed into law as soon as possible so towns and school districts can account for the anticipated savings in next year's budgets.

"The most important thing must be to make these bills law so local governments can immediately begin to reap their benefits," said Sweeney (D-Gloucester/Cumberland/Salem). "School districts already are nearing the end of their budget process, and many towns are now beginning theirs. They need to know how they can budget now for achievable savings next year and beyond, especially where the cost of health care is concerned

The Office of Legislative Services estimates towns can save a combined $300 million next year in health care and pension costs.

CIANJ agrees with the Senate President. The package that passed the Senate on Monday should not be viewed by anyone as the final step in a reform process needed to protect New Jersey's overburdened taxpayers. Advancing existing bills in time for municipalities to take advantage of them this year only benefits the taxpayer as Trenton continues to work toward the comprehensive reform needed.

Jobs and Energy At Stake Today in Lacey

Down in Lacey Township, the NJDEP is holding a hearing on a plan that could result in the shutdown of the Oyster Creek Nuclear Generating Station.

A year after the NRC issued Oyster Creek a 20 year operating permit extension, the DEP (and some in the legislature) are proposing to require cooling towers be constructed on site. The plant operator says the cost of the towers is prohibitive and such a requirement would result in the closing of the facility.

Just like he did before the Senate, CIANJ President John Galandak is testifying about the ripple effect that would have on the state's economy, and electric rates. From his remarks, as prepared,

Such a closing would immediately result in the loss of 700 jobs, many of which are high paying. In the long term, the plant’s closing would take more than $120 million out of New Jersey’s economy, according to a 2007 report conducted by Bates White. That does not include the impact of energy cost increases resulting from an act that would remove six percent of New Jersey’s energy generation from the grid with no plan to replace this loss, thereby adding to New Jersey’s already high cost of doing business at a time when the state should be doing all it can to create a climate which leads to job creation.

Finally, we believe this permit runs contrary to the public policy goals set by the legislature when it passed the Global Warming Response Act, and by the state’s Energy Master Plan. In order to achieve the CO2 reduction standards set forth by the Act and the Energy Master Plan, nuclear power needs to be part of the matrix of energy systems utilized by the state. At this point in our history, nuclear energy remains the only technology we have that can provide a reliable and substantial baseload while emitting virtually zero greenhouse gas emissions.

Written comments from the public will be accepted by the DEP until March 15.

36-0

The New Jersey Senate today unanimously passed a CIANJ-supported package of public employee pension reforms that are designed to help bring stability to an unsustainable pension system.

Some of the major changes include:

• Requiring current employees and future retirees to contribute at least 1.5% of their salaries toward health benefits
• Placing new hires who work less than 35 hours per week into a defined-contribution system
• Rolling back the 9% pension increase passed by the legislature in 2001
• Capping sick time cashouts at $15,000 upon retirement for all public workers

The Senate did not vote on a proposed Constitutional Amendment that would mandate the legislature appropriate a full contribution to the pension fund each year. The Assembly is expected to begin consideration of the package within the next two weeks.

Despite union claims (and a giant rat) to the contrary, this does not represent a "pension betrayal". If anything, the reforms do not go far enough and will likely need to be revisited. Because most of the reforms do not impact current employees, it will take up to 20 years before a majority of state workers fall under the above-guidelines. Also contrary to big labor's position, these were not passed in a hurried manner. The reforms were first put forth by a joint legislative committee in 2006.

Although the Association maintains concerns about the overall health of the pension fund, CIANJ is supportive of the measures and commends the legislature for choosing to improve the status quo. The 36-0 vote in the face of such fierce lobbying demonstrates a commitment to better governing.

Special thanks are in order for Senate President Sweeney and Senate Republican Leader Kean who came together on this critical taxpayer issue.

Christie Says CBT Surcharge Won't Come Back to Life

Yesterday, Governor Christie told business leaders he would not include a Corporate Business Tax (CBT) surcharge passed in 2006 in next year's budget.

The surcharge took a company's corporate tax liability and then added 4% to it. The tax increase was supposed to expire in Fiscal Year 2009, but was extended by Governor Corzine and the legislature as part of last year's budget. The governor's announcement helps ensure the surcharge will not be extended once again.

From The Record,

Paul Tyahla, vice president-government affairs for the Commerce and Industry Association of New Jersey in Paramus, said it could help attract companies thinking of relocating to the state.

 “When a business makes a decision where to relocate, they need predictability,” Tyahla said. “A government that goes back on its word diminishes that predictability.”

Christie said undoing the corporate business tax surcharge will give businesses “more money for them to hire more people.”

We urge the governor and legislature to apply the same maxim when considering the extension of last year's income tax surcharge.