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-2697 (Sweeney/Sarlo), otherwise known as the “New Jersey COVID-19 Emergency Bond Act,”.
This measure will allow state government to borrow upwards of $9.9 billion to help offset revenue lost by the COVID-19 pandemic. The borrowed money will primarily be used for operating expenses unrelated to the pandemic but will require legislative approval, which will be considered by the newly created “Select Commission on Emergency COVID-19 Borrowing” before the Governor can finalize any borrowing. 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 overburdened residents and businesses.
New Jersey is already one of the most indebted states in the country, with the fourth highest debt ranking in the nation. Should $9.9 billion in borrowing be approved, it will come with extraordinarily high levels of interest that would take decades to pay off – all on the backs of the residents and businesses in New Jersey. It is also quite likely that this level of borrowing will cause New Jersey to receive a downgrade in credit rating and overall fiscal outlook. Tax increases are likely to pay off the debt incurred, which the Governor stated publicly last week.
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. The Federal Reserve Bank of Philadelphia conducted the South Jersey Business Survey, which is a quarterly survey of CCSNJ member companies that 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 Q2 survey (April 1 – May 31) was tailored to gain a better understanding of the economic damage COVID19 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:
While the region’s economy experienced overall declines in business activity for the second consecutive quarter, the survey’s indicators for future activity showed notable improvements, suggesting that the firms expect growth over the next six months
The survey’s measure of individual company activity increased from a low reading of -45.3 in the first quarter to -5.6 in the second quarter
The percentage of firms reporting decreased activity at their companies was 41 percent, which remained higher than the percentage of firms reporting increased activity, 36 percent
The general business activity index for the region remained at a low reading of -39.5, although it increased from the 12-year low reading of -63.7 in the first quarter
Firms expect increases in future activity over the next six months: 49 percent of the respondents expect increases in activity at their own firms compared with 23 percent that expect decreases
These statistics provide a very small snapshot into the burden facing businesses in the coming weeks and months. While some businesses are hopeful for a better second half of the year, 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. Additionally, the fact remains that New Jersey has the highest property taxes in the nation, highest Corporation Business Tax in the nation and a slew of other taxes and fees that impact business operations. Borrowing will inevitably lead to higher taxes, which the Survey shows businesses can simply not sustain.
Should borrowing have to occur it should be done on a short-term basis, not spread over many years adding enormous amounts of debt service to the state’s bottom line. Giving state government a blank check of $9.9 billion in borrowing is the opposite of fiscal responsibility and should not be supported by the Legislature, the residents and businesses of New Jersey.
There are many revenue raisers that can be and should be explored outside of tax increases. Although we are pleased to see Governor Murphy call for state departmental cuts upwards of 15 percent per department as well as the ratification of a deal with the Communications Workers of America (CWA-NJ) to save state worker money, much more can be done to in the form of frozen wages, increases, furloughs or the like. In times of crisis such as the one we are currently faced with, every option must be seriously considered that will not only help immediately, but also do the least long-term harm to New Jersey’s fiscal situation.
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.