While the United States is in the middle of a solid economic expansion that has restored all of the jobs lost during the Great Recession, New Jersey has regained just 55 percent of the private-sector jobs lost, and time may be running out for a “full metal jacket recovery,” a top Rutgers University economist warned yesterday.
In fact, the 122,300 jobs New Jersey has regained over the past 4 ½ years is actually more than the 77,500 jobs the state added during the anemic 2003-2007 recovery – a “lost decade” that demonstrates the underlying weakness of the state’s economy, James W. Hughes, dean of Rutgers Edward J. Bloustein School of Planning and Public Policy, told an economic roundtable convened by Assembly Republican leaders.
There are actually 97,000 fewer New Jerseyans working today than there were at the beginning of 2001, and that’s just the beginning of the bad news:
Hughes laughingly referred to himself as the “Doctor Kevorkian of the New Jersey economy,” while other business leaders call him “Doctor Doom,” noting that Gov. Chris Christie has permanently bestowed the “Doctor Kevorkian” moniker on David Rosen, the Office of Legislative Services budget analyst whose revenue forecasts so often differ from Christie’s rosy projections.
But like Rosen’s revenue forecasts, Hughes’ somber economic analysis belied Christie’s recent claims of a New Jersey “economic miracle.” The state’s persistent economic problems are the principal reason that New Jersey’s state revenues have grown just $4 billion — or 14 percent — over the past decade, and Hughes’ prognosis raises doubts about whether future revenue growth will be sufficient to meet the state’s budget needs, including the increased investment in the transportation and higher education infrastructure the state will require to compete for high-end jobs.
Hughes noted that New Jersey’s addition of 19,500 jobs from April 1 to June 30 could produce the state’s largest job growth in a decade if it continued for the rest of the year, but what looked like a strong employment rebound last year evaporated in the fourth quarter when the state lost 17,200 jobs, wiping out almost half of the 36,000 jobs gained during the first nine months.
Hughes’ analysis underscored the wide range of concerns expressed by leaders of New Jersey’s top business groups who met to discuss economic policy issues with Assembly Majority Conference Leader David Rible (R-Monmouth) and Assemblywoman Maria Rodriguez-Gregg (R-Burlington) at the Statehouse yesterday.
New Jersey’s economy is suffering from “death by a thousand cuts,” said Michael McGuinness, who heads the New Jersey chapter of the National Association of Industrial Office Parks. “That’s what makes this so challenging.”
Not surprisingly, the business leaders agreed that New Jersey’s tax structure was a major competitive disadvantage, noting that the state’s top income tax bracket of 8.97 percent for those earning over $500,000 hits small business owners hard, that the state’s 9 percent corporate income tax rate is one of the highest in the country, and that New Jersey is one of the only states in the nation that levies both an estate tax and an inheritance tax.
“One of the concerns of individuals who come to New Jersey to invest is the estate tax,” noted Anthony Russo, the New Jersey Commerce and Industry Association’s executive vice president for government affairs. “The threshold in New Jersey is $675,000, but the federal government tax kicks in on estates of $5 million. We should change on our threshold to be on a par with New York, Maryland, and the federal government.”
Michael Egenton, senior vice president for governmental relations at the New Jersey State Chamber of Commerce, expressed concern about the Democratic-controlled Legislature doing an end run around Christie by putting constitutional amendments on the ballot in the future to raise the millionaire’s tax or to require paid sick leave. That’s what the Legislature did last fall with a referendum to raise the minimum wage to $8.25 and tie future increases to the rate of inflation.
Egenton said the economic policy challenges facing the state are complex, and should be resolved by bringing in all of the stakeholders from business and labor and from the private, public, and nonprofit sectors to negotiate consensus solutions that meet the needs of the entire state. “I’m a big believer that’s how public policy should be done,” he said.
McGuinness added that the governor and Legislature needed to be willing to make tough decisions, starting with coming up with a plan to refinance the state’s Transportation Trust Fund so New Jersey can finance the highway, bridge, and mass-transit construction projects it needs to upgrade the transportation infrastructure that is so critical to the state’s economy.
“Our roads are not in good shape,” said McGuinness, who asserted that improving the highway system is critical to the state’s warehouse distribution centers, whose expansion as a sector is one of the few bright spots in New Jersey’s economy — and one of the businesses where proximity to the Port of New York and New Jersey and to the huge population centers of New York City and Philadelphia still counts as a major advantage.
Ed Waters, director of government affairs for the Chemistry Council of New Jersey, complained that it is difficult to persuade chemical companies to locate or expand in New Jersey when the state levies taxes “that don’t exist in other states,” including a spill-fund tax on raw materials and a societal benefits charge on utility bills.
What’s worse, said Brad Molotsky, executive vice president of Brandywine Realty Trust, is that the programs put in place by the state Board of Public Utilities to reduce energy consumption are underused, so the governor and Legislature end up siphoning off hundreds of millions of dollars from the Clean Energy Fund to fill holes in the state budget.
Molotsky, however, dismissed complaints about overregulation by the state Department of Environmental Protection as “a bit of a red herring,” and added that the Grow New Jersey business tax incentive program put together by the governor and Legislature “is as good as any,” and offers sufficient incentives to compete Pennsylvania, although not enough to offset the tax advantages of a state like North Carolina.
Haskell Berman, senior vice president for state affairs at the HealthCare Institute of New Jersey, which represents the pharmaceutical industry, said the merger of the University of Medicine and Dentistry of New Jersey into Rutgers University would provide a long-needed boost to the state’s research and development capability. So will Rutgers’ entry into the Big 10 Conference — not for football, he said,but for Rutgers’ inclusion in the Big 10’s Committee on Institutional Cooperation, a consortium that includes some of the nation’s top research universities.
“Our companies go anywhere in the world where they can find innovative people,” Berman said, noting that pharmaceutical giants are taking their research-and-development operations to Boston and California, “where the taxes are as high as New Jersey, the real estate costs are as high, but where they can find the R&D support or collaboration with other research institutions they need.”
New Jersey needs to do a better job of building up its R&D capability,” he said, “so we’re not sending our research dollars out to Harvard and MIT.”