M E M O R A N D U M

TO:                      Members of the Assembly Budget Committee

FROM:                Hilary Chebra, Manager, Government Affairs, CCSNJ

RE:                       Proposed FY2023 State Budget

DATE:                  March 21, 2022

The Chamber of Commerce Southern New Jersey (CCSNJ) is the region’s largest and most influential business organization representing businesses in the seven most southern counties of New Jersey, as well as greater Philadelphia and northern Delaware.  The CCSNJ has more than 1,100 member companies, approximately 85 percent of which are small businesses that employ less than 50 people, as well as approximately 130 nonprofit members.  Thank you for the opportunity to comment on the FY2023 state budget as proposed by Governor Phil Murphy.

The CCSNJ believes that it is important to look at this budget in the context of the difficulties presented to the state over the last two years due to the pandemic. New Jersey was, and still remains, among the highest taxed states in the nation, and among one of the hardest in which to run a small business. The pandemic made these conditions considerably worse and nearly impossible for many small businesses. In fact, over a third of New Jersey’s small businesses have closed their doors since the pandemic began.

As the state emerges from the pandemic, businesses continue to struggle in a difficult business climate. In addition to the pandemic’s impact, New Jersey continues to have the nation’s highest corporate tax rate at 11.5 percent, has the highest property tax burden in the country, and has among the highest individual income taxes in the country topping off at 10.75 percent. The Tax Foundation again ranked New Jersey last in the 2022 State Business Tax Climate Index. Additionally, it has never been a more expensive time to do business. According to the South Jersey Business Survey, which the CCSNJ conducts in conjunction with the Federal Reserve Bank of Philadelphia, the cost index for the fourth quarter of 2021 reported its highest reading ever of 56.5 percent, and nearly 55 percent of the respondent’s reported increases in all price inputs. Tellingly, none of the respondents reported decreases.

As it relates to the state budget, the CCSNJ is very concerned about the growth in total spend as presented in the Governor’s proposed $48.9 billion proposal. This is a year-over-year increase of more than five percent and an increase of more than 60 percent since the FY2012 state budget. The state has seen a recent revenue surge due to higher than usual tax collections and an influx of assistance from the federal government. However, both are unique to this year, and neither are reliable long-term revenue sources that the state can depend on in the future. To maintain this level of long-term growth in spend, the state will inevitably have to raise taxes on the already overburdened residents and businesses of New Jersey.

The CCSNJ was pleased to see some steps taken in this budget to address long term fiscal issues, including the $6.82 billion pension payment, making this the second year that the annual obligation would be paid in full. The full pension payment, along with the additional $1.3 billion deposit in the 

Debt Defeasance and Prevention Fund are fiscally responsible actions that address the state’s enormous debt burden. In fact, earlier this month Moody's Investors Service cited similar actions as the rational for upgrading New Jersey credit rating. The state should continue to practice these fiscally responsible actions, which can only continue to improve New Jersey’s overall fiscal position.

However, the CCSNJ was disappointed to see that only an additional $50 million was allocated to the Main Street Recovery Fund. More financial assistance and resources are still needed to assist the small business community in recovering to pre-pandemic levels. Given the influx of federal assistance, there is no excuse not to provide a greater allocation. Over the past two years we have seen previous New Jersey Economic Development Authority (NJEDA) programs to assist businesses immediately oversubscribed, leaving many small businesses out of the process and further emphasizing the need for more grant programs. Additionally, last May the CCSNJ released its Preparing for the Next Normal report, which outlined the programs within the NJEDA that should be continued and expanded to assist small business recovery. The CCSNJ strongly believes that further resources towards several programs, including the Main Street Recovery Fund, would go a long way in assisting the small business community’s continued recovery.

While this budget does not present new taxes, there is little in the way of tax relief for businesses. The Governor’s proposed FY2023 state budget includes a revamp of the Homestead Benefit with the creation Affordable New Jersey Communities for Homeowners and Renters (ANCHOR) Property Tax Relief Program, which will provide direct property tax relief to homeowners and renters but excludes businesses. Additionally, employers currently face an Unemployment Insurance (UI) tax increase due to forced closures and layoffs as a result of the pandemic. The CCSNJ was grateful for the Legislature’s action on a bill that would spread the $1 billon over three years instead of an automatic, one-time tax hike. Still, additional support is needed and should be allocated to stop this tax increase, which is being forced on businesses through no fault of their own.

New Jersey received $6.2 billion from the American Rescue Plan’s (ARP) State Fiscal Recovery Fund in 2021. With only approximately $3 billion allocated to date, the business community asked New Jersey to follow the lead of 18 other states and use federal American Rescue Plan Act funds to fully or partially replenish UI funds. The Governor has pledged to work with the Legislature to allocate remaining funds towards short-term recovery and long-term restart efforts, including one-time investments in people, communities, and infrastructure. Using ARP money towards the UI fund would grant businesses the additional stability to move towards a more secure recovery and fall squarely in Governor Murphy’s own definition of good use of these federal dollars.

The CCSNJ supports the $2.5 million allocation for the New Jersey Manufacturing Extension Program (NJMEP), which will help promote manufacturing and strengthen the supply chain, as well as the $5 million allocation to help establish the Wind Institute for Innovation and Training. South Jersey stands to be a national leader in the offshore wind industry with the nation’s first purpose-built offshore wind marshaling port, the New Jersey Wind Port situated in Paulsboro. The Wind Institute for Innovation and Training will ensure that there is a skilled, local workforce available to fill the hundreds of available jobs and assure this budding industry is a success. 

The CCSNJ also supports the inclusion of $25 million towards redeveloping vacant commercial properties and other stranded assets. Unfortunately, South Jersey has seen the closure of many malls and office parks due to the rise in telework and e-commerce as a result of the pandemic, leaving stranded assets, as well as the loss of businesses and jobs for the region. This funding will help to redevelop under or non-utilized single-use regional shopping centers and office parks, which will assist in the revitalization of several South Jersey communities.

Along with what has been included in the Governor’s proposed budget, the Legislature should consider additional allocations for the betterment of the state’s healthcare facilities. The CCSNJ supports a $1.5 million appropriation for Samaritan’s Expanded Access to Palliative Care Program. This program is bringing palliative care to more patients in our region, while providing education both for healthcare professionals on the provision of this care, and the community on the benefits of palliative care.  Additionally, the region’s major hospital systems are still recovering from losses caused by the closure of elective surgeries during the height of the pandemic. The CCSNJ supports seeing additional charity care funding to hospitals in the FY2023 state budget, which can be used to offset these losses and assist in their recovery.

Several CCSNJ member companies have also expressed concerns regarding the Grow NJ tax incentive program, which is overseen by the NJEDA. Last February, the NJEDA Board of Directors voted to allow some accommodations for businesses that had previously been approved for Grow NJ awards due to the circumstances surrounding the pandemic. Additionally, member companies have shared that they have compiled the required information but have yet to receive their award citing different NJEDA agents requiring different information or defining certain requirements differently than others. The lack of consistency around the program’s implementation at the NJEDA is regularly noted by businesses and in some cases, unique circumstances like the repurposing of brick-and-mortar buildings due to the pandemic have also come up as an issue for some.

The Grow NJ program was created to help businesses that wanted to relocate or expand in New Jersey while hiring local residents, all of which have the ability to be economic drivers for the state. The NJEDA’s COVID-19 accommodations allowed companies to amend their agreements to reset its employment requirements starting in 2020 provided the incentive award was recalculated and reduced to reflect the lower employment rates.

However, CCSNJ member companies have expressed concerns that once the COVID accommodations expire, they will be unable to meet the criteria to receive future awards or that some previous requirements of the program should be updated given the changes to how many businesses now operate. The CCSNJ respectfully requests the Legislature include additional funds for staff and operations at NJEDA to assist with the administration of the Grow NJ program, as well as the Legislature’s consideration of possible updates to the program that if made, would help struggling businesses use the incentive program the way it was initially intended.

Also in the FY2023 state budget, the Pinelands Municipal Pilot Program funding sees a 35 percent decrease. South Jersey towns with protected Pinelands areas desperately need this funding to offset their lack of rateables. It is important that the state not only protect our unique Pineland ecosystem, but also ensure the fiscal stability of the municipalities located in these areas by allocating the appropriate amount of funding to these towns.

To fund many of the initiatives outlined in the CCSNJ’s testimony, New Jersey must consider fundamental and structural changes to the state’s property tax system. Though the proposed ANCHOR program provides some immediate relief to homeowners and renters, the program also does not address the underlying causes of the state’s highest in the nation property taxes. New Jersey should do more to encourage the creation of K-12 regional and countywide school districts, the consolidation of which will assist in alleviating the high property tax burden. Additionally, consolidating municipal services in the state’s 565 municipalities will not only lead to tremendous cost savings, but streamline efficient services provided to taxpayers, as has been realized with the consolidation and creation of the Camden County Police Department.

In conclusion, the CCSNJ is extremely concerned about the massive increase in spending over recent fiscal years, as well as the dependence on one-time revenues to pay for spending initiatives. The business community continues to struggle from the effects of the pandemic and additional assistance is needed to ensure a healthy economic recovery.

The CCSNJ looks forward to continuing to review the details of Governor Murphy’s FY2023 state budget and encourages the Legislature to think creatively about how to how to address systemic fiscal issues, which will put the state on a more sustainable financial path. Thank you for the opportunity to present our position on Governor Murphy’s proposed Fiscal Year 2023 state budget.