Gov. Phil Murphy’s economic vision for New Jersey includes growth of an innovative, technology-driven sector, and he has proposed a $500 million state-led venture capital fund as a key to investment. With the state’s major economic-development tax-incentive programs up for renewal next year, Murphy wants an overhaul and called on lawmakers to work with him to enact more targeted initiatives that can jump-start growth in communities statewide.
Murphy, a former Goldman Sachs executive, sketched out his proposals during a major policy speech in Nutley yesterday.
“We think it’s a big deal,” Murphy said of the venture-capital proposal, which is aimed at reclaiming New Jersey’s status as a top location for such investment.
Goals for growth
The first-term Democrat also laid out several goals for overall economic growth, including a push to see 300,000 new jobs created in New Jersey by 2025. He said high-priority programs the administration is already pursuing, like expanded clean-energy production and increased aid for community college tuition, would help the state accomplish his goals. State government would also look to play a role by working more closely with small businesses and using technology to streamline government permitting.
“We cannot allow any entrepreneur to simply walk away in frustration,” Murphy said during the speech.
Afterward, lawmakers and business leaders praised Murphy for putting forward a comprehensive plan for growing the state economy. But it remains to be seen how much of the governor’s economic agenda will make it through the Legislature, which only a few months ago fought with Murphy over major tax proposals. Assembly Speaker Craig Coughlin (D-Middlesex) was in the audience yesterday, but Senate President Steve Sweeney (D-Gloucester) did not attend.
While New Jersey’s unemployment rate has improved dramatically during the recovery from the Great Recession, the pace of growth has been sluggish, and the state’s jobless rate continues to be higher than the national average. Wage growth has also been slow, and New Jersey remains one of the states with the widest gap between the very rich and the poor.
No fan of Christie-era tax incentives
Murphy, who took office earlier this year, has criticized the economic-development tax-incentive programs that were adopted during former Gov. Chris Christie’s tenure, suggesting they are overly generous and haven’t produced the type of economic growth that the state needs. Those programs are up for renewal next summer, and lawmakers have already begun discussing what to do going forward now that the state is no longer in the throes of a recession.
During yesterday’s speech, Murphy said tax credits should be “just one tool within a broad and cutting-edge strategy.”
“We need to change our mindset and move away from viewing tax credits as a strategy unto themselves,” he said.
To be sure, the state would still offer tax credits and other incentives to businesses looking to develop in New Jersey or take root here under the vision Murphy laid out yesterday. But the tax breaks would be more targeted to specific industries and types of development. They would also emphasize things like historic preservation and brownfield redevelopment that could be more beneficial to New Jersey’s urban centers and aging suburbs.
Caps would also be placed on the size of the tax incentives to keep the broader impact on the state budget in check, and in the case of the proposed venture-capital fund, the state could benefit financially if one of the investments it helps get started eventually takes off.
Murphy’s vision: auctioning off tax credits
Called the Innovation Evergreen Fund, the venture-capital initiative would see the state auction off corporate-business tax credits to companies to raise $250 million in capital. Those funds could then be paired with matching private-sector investments to generate a $500 million pot of money that could be used to help state-based startups. It would work on a revolving basis, as long as enough of the investments are successful.
“This is an innovative model,” said Tim Sullivan, chief executive of the state Economic Development Authority.
Speaking to reporters after the speech ended, Senate Budget and Appropriations Chair Paul Sarlo (D-Bergen) said he was “very intrigued” by the venture-capital proposal and Murphy’s overall vision for growth “across all levels of the economy.” New Jersey was once in the top five among U.S. states for venture-capital investment but has since fallen out of the top 10.
“I don’t think you’re going to find anybody in the Legislature who’s opposed to any of this (and) we’ll work with him on the details,” Sarlo said.
Tax breaks and the budget
Assembly Budget Committee Chair Eliana Pintor Marin (D-Essex) said New Jersey “can’t be a state that doesn’t offer incentive programs” because of the aggressive initiatives that have been put in place in surrounding states. But she also said lawmakers are mindful of the impact such tax breaks have on the budget.
“I think moving forward we’re going to be careful on what we do with incentives,” Pintor Marin said.
As for the legislative leaders, Coughlin spokeswoman Liza Acevedo said the speaker “shares Gov. Murphy’s vision to revitalize the New Jersey economy and grow the state’s innovation economy.” She also said Coughlin is planning to review Murphy’s policy proposals with the Democratic caucus.
Sweeney issued a statement that highlighted the role of public-private partnerships and the opportunity to mesh Murphy’s vision with recommendations that were recently released by a group of fiscal policy experts that Sweeney impaneled earlier this year.
Tom Bracken, president and chief executive of the New Jersey Chamber of Commerce, suggested the group’s work, which focused on ways to find cost savings, could complement Murphy’s emphasis on growing the economy. He praised the governor for putting forward a comprehensive plan that emphasized innovation, small businesses, and streamlining the permitting process.
“I’ve been here 50 years (and) this is the best economic speech I have heard in my time in New Jersey,” Bracken said. “That’s very encouraging to me.”
Michele Siekerka, president and chief executive of the New Jersey Business & Industry Association, praised Murphy’s overall vision, but suggested the state’s overall affordability for companies remains a key issue.
“We’ve been calling for an economic growth plan, so this is good. These are all good things,” Siekerka said. “However, pillar number one says a more effective business climate, and you can’t talk about that without talking about tax reform at the same time.”