TO: Members of the New Jersey State Senate

FROM: Hilary Chebra, Manager, Government Affairs, CCSNJ

RE: S-20 (Sarlo/Cunningham)

DATE: June 29, 2020

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. Thank you for the opportunity to provide our thoughts on S-20 (Sarlo/Cunningham).

The CCSNJ acknowledges that the financial implications of the COVID-19 pandemic on the state’s budget has been significant and will continue to grow. Difficult decisions had to be made to get us to this point and there is still much more work to be done. The CCSNJ commends Governor Murphy and Legislature for their hard work identifying a “holdover” budget that will bridge the state’s finances until the new FY2021 state budget deadline of September 30, 2020.

The CCSNJ’s guiding principle during any state budget negotiation is that tax increases should be an option of last resort, instituted only after all responsible measures to control costs have been identified and implemented. As a result, we are pleased to see S-20 (Sarlo/Cunningham) does not rely on revenue from any new taxes or fees, as was initially proposed by the Governor in the FY2021 state budget pre-COVID-19. The CCSNJ respectfully requests the Legislature’s continued restraint on tax increases as we look towards September 30.

Additionally, the state’s decision to not borrow in the short-term is another welcome decision, one that the CCSNJ believes is responsible given the long-term implications associated with doing so. As for cost savings, this weekend’s ratification of the deal announced between Governor Murphy and the Communications Workers of America-New Jersey (CWA-NJ) last week was a welcome one; although, the CCSNJ respectfully argues that much more can be done to identify greater public sector savings given the state’s unprecedented revenue shortfall.

Still, no one can predict what state finances will look like as the economy reopens and the pandemic continues. It is fair to assume that COVID-19’s impact will be felt for months, if not years in New Jersey and the so-called “fifth quarter” budget that is next to be negotiated will be an important first step on the state’s path forward for residents and businesses alike. As the Executive and Legislative branches of government continue to weigh the necessities of what the state needs now, the CCSNJ respectfully requests adequate consideration be given to the long-term implications and affordability of each decision as budget negotiations continue.

Specifically, Governor Murphy recently proposed a plan, which the General Assembly supports, that would allow the state to borrow upwards of $14 billion in the wake of the state’s fiscal crisis. The CCSNJ is not naïve to the fact that some borrowing may be necessary over the coming months; however, it should be done so sparingly, with a dedicated purpose and not for operational spending uses. The longstanding impact of any borrowing plan cannot be understated – adding to the state’s already enormous debt, which can only lead to higher taxes on an already incredibly overburdened population. The CCSNJ urges the Senate to await clearer budget projections and consider more responsible alternatives before moving the Governor’s borrowing proposal.

Additionally, as the Legislature looks towards September 30, it is important to consider COVID-19’s severe impact on business before proposing tax increases. At the start of the COVID-19 pandemic, the Federal Reserve Bank of Philadelphia conducted the South Jersey Business Survey. The South Jersey Business Survey is a quarterly survey of CCSNJ member companies in which regional businesses indicate the change in overall business activity in the various measures of activity at their companies: employment, total sales, big ticket sales, inventories, prices paid, and prices received.

The Q1 survey (January 1 – March 31) was tailored to gain a better understanding of the economic damage COVID-19 is causing and took into consideration the significant impact that the pandemic is having on business. The results, reflective only of the very start of the pandemic, are startling. Some of the key takeaways are as follows:

• 65 percent of the respondents reported declines in sales, while only 12 percent reported increases – this is the lowest readings in the 29‐year history of the survey
• Looking ahead to Q2 (April 1 – June 30), 57 percent of respondents were most concerned about
• maintaining adequate cash flow, specifically: 
  • 51 percent anticipated issues collecting payables from customers, and
  • 30 percent anticipated incurring excessive debt
• 51 percent of businesses expect employment declines in the next six months

These statistics provide a very small snapshot into the burden facing businesses in the coming weeks and months. They also make clear that now is not the time to increase of the rate of taxation on incomes in excess of $1 million from the current rate of 8.97 percent to 10.75 percent, as initially proposed in the FY2021 state budget. It is important to note that this tax is a tax on business, as more than 90 percent of businesses (sole proprietorships, partnerships and S-Corporations) file their taxes through the personal income tax. This fact is even more alarming seeing sole proprietors and many micro-businesses had the hardest time obtaining state or federal pandemic assistance due to their mere size or business classification.

CCSNJ members that are coping with the challenges presented from COVID-19 continue to struggle with operating in an extraordinarily high-cost, high tax and heavily regulated state. Along with the severe fiscal situation due to the pandemic, the fact remains that New Jersey has the highest property taxes in the nation, highest Corporation Business Tax in the nation, the second highest top marginal personal income tax rate in the nation and a slew of other taxes and fees that impact business operations. All of these factors should be of high priority as the

Legislature works to solidify a state budget by September 30.

The CCSNJ looks forward to continuing to weigh in on the state budget deliberations, advocating for lower spending, limited borrowing and no tax increases – all of which will help the businesses of New Jersey, and therefore the New Jersey economy, recover swiftly amid these trying times. 

Thank you for the opportunity to present our position on the supplemental spending bill, S-20 (Sarlo/Cunningham).