Five Reasons Why New Jersey Must Quickly Establish a Health Insurance Exchange

 by Raymond J Castro  |  Published in NJPP Blog: As a Matter of Fact ...

Fifteen states are busy setting up their own health insurance exchanges under the Affordable Care Act (ACA). Not New Jersey. Despite several years of prep work by stakeholders, legislators and health care representatives, New Jersey has not established an exchange, which is essential to provide about 800,000 uninsured individuals and many small business employees access to affordable health coverage starting January 1, 2014.

Although the legislature passed a bill creating an exchange on March 15, the governor vetoed it on May 10, saying he wanted to wait until the Supreme Court determined the constitutionality of the Affordable Care Act (ACA).

The Court upheld most of the health reform law on June 28. Now the governor says he wants to wait until after this November’s presidential election to either implement a state exchange, let the federal government do it, or stand by as his party continues its efforts to repeal the ACA.

Waiting any longer is bad for New Jersey. Here’s why:

1. Waiting means an unnecessary delay in crucial funding

Federal funds are available now to fully fund the design and launch of the exchange, as well as the first year’s operating costs. New Jersey can’t receive those funds unless it authorizes a state exchange. While these grants will be provided through 2014, the sooner New Jersey obtains the funds, the sooner it can put them to work to create a high-quality exchange and the better prepared we will be to reach uninsured New Jerseyans. In addition, key elements of the exchange – including outreach and consumer assistance – aren’t funded by the federal government, but by fees on insurers (these fees will also fund the entire cost of the exchange after 2014). But New Jersey can’t collect any fees until it creates an exchange. This is particularly problematic because outreach and consumer assistance should be ready to roll early in 2013.

2. Waiting makes it less likely that an exchange will meet New Jersey’s special circumstances

By November 16, New Jersey must notify the feds if it intends to run its own exchange, or leave it to Washington. Coming 10 days after the presidential elections, this leaves little time for reviewing a lot of complicated information and sharing it with the federal government.

If New Jersey opts for its own exchange, it has to show “sufficient progress” in setting it up by January 1, 2013 or the federal government will take over. Delay increases the risk that New Jersey will not be ready and will turn its fortunes over to an exchange it does not appoint or control.

While a federal exchange would help many of New Jersey’s 1.3 million uninsured residents obtain health insurance, it would probably not meet the unique needs of New Jersey.

• The proposed state exchange creates an oversight board that prohibits conflicts of interest; a federal exchange may not have as strong a protection against decisions that favor private over public interests.

• The proposed state exchange actively negotiates on behalf of consumers to get the lowest insurance rates; a federal exchange will not do this for at least the first few years.

• The proposed state exchange allows for a seamless consumer enrollment experience by creating a “one-stop-shop” for insurance, whether the resident is seeking Medicaid, private-market insurance, or any other type of coverage. A federal exchange will make it more difficult to create an easy-to-use interface for New Jerseyans.

• New Jersey already has some of the highest standards for health insurance in the nation; these standards should be considered when creating an exchange – a more likely scenario if the state sets it up than if the federal government does.

3. Waiting means fewer people are likely to become insured

“If you build it, he will come” might work in the movie Field of Dreams, but it does not apply to public programs. The Congressional Budget Office estimates that 57 percent of the uninsured nationally will obtain insurance in the exchange but the Urban Institute concluded that estimate could be as high as 75 percent for states with exceptional outreach which in New Jersey would represent about 100,000 additional insured individuals.

It is very unlikely, however, that New Jersey would achieve the higher rate in the first year unless it has the time to design and implement a state-of-the-art outreach and consumer assistance program. That extra effort will be particularly important in the exchange because many of the people who will be eligible for subsidies have never used publicly subsidized insurance before and will need help. A federal exchange would only make matters worse because the federal government does not have knowledge of, or existing relationships with, the many community-based organizations that will be needed to provide the consumer assistance, nor does it have the federal funding that will be needed in 2013 for these activities.

4. Waiting ties the hands of policymakers and threatens important consumer protections

New Jersey has done a good job in the initial planning for the exchange and in soliciting input from the public. But now the state has to decide what the policies of the exchange will be, so stakeholders can move their discussions from guessing what might be included to developing strategies to implement the policies. Some of the most important and consumer friendly policies will take the most time to implement, such as selecting board members who don’t have conflicts of interest and designing criteria for selecting participating insurance plans that will offer the best possible deals for consumers.

5. Waiting makes it more difficult to establish an effective eligibility system

Under the proposed exchange, the state will create a website where individuals and small businesses can obtain health coverage and learn if they are eligible for any subsidies. This website must be as user-friendly and efficient as possible, and it will take a great deal of time to ensure that’s the case. With just over 14 months to go until applications will be accepted, delaying the exchange greatly increases the possibility that there could be major disruptions in the eligibility process that could result in incorrectly denying or delaying assistance. It also gives the developers of the technology and the interface less time to make the website easy to understand and use.

Op-Ed: Tax Cuts: Wasting New Jersey’s Recovery

by Gordon MacInnes  |  Published in Editorials & Op-Eds, NJPP Blog: As a Matter of Fact ...
This op-ed appeared in the June 19, 2012 edition of the Bergen Record

Tax cuts are all the rage. Governor Christie and Senate President Sweeney are seeking to reduce taxes by10 percent for households earning $400,000 or less. They would add to New Jersey’s high debt level by borrowing the money to finance the cuts.

Assembly Majority Leader Louis Greenwald, D-Camden, is pushing a similar but larger plan, which would reduce taxes by 20 percent and be partially paid for with a higher rate on high-income taxpayers.

Only Warren Buffet thinks his taxes are too low. The rest of us would delight in having more money stay in our pockets. Unless, that is, the tax cuts would kill New Jersey’s ability to regain its competitive edge.

The governor asserts that the state’s finances are in such good order that he can find $1.35 billion that the state won’t need by 2016. Actually, the evidence is overwhelming that New Jersey is still spiraling downward: Unemployment (5th highest rate naitonally), economic growth (4th lowest) and credit rating (3rd lowest).

We are one of only six states to suffer a decline in economic activity in 2011 — New Jersey is still in a recession.

For the sake of argument, let’s assume that the governor is right: New Jersey has a cushion of $200 million this year, $650 million to $700 million in FY2014, $1 billion in the following year and $1.35 billion by 2016.

Does it make sense to distribute these funds in barely noticeable amounts to millions of households, or would we be better off investing in regaining our competitive edge to attract well-paying jobs and providing concrete opportunities to struggling families?

Not so many years ago, New Jersey was a hotbed of research and development. Bell Labs attracted thousands of scientists, engineers and researchers (including Nobel Prize winners).

New Jersey’s boom years

This was the “World’s Pill Box,” in part because it was the center of the pharmaceutical industry with headquarters, manufacturing and, yes, research and development laboratories. With two world-class research universities at Princeton and Rutgers, the state enjoyed boom years with high wealth and income.

Gov. Tom Kean understood that New Jersey could maintain its place by only investing in new technologies and research. Build the laboratories and computer centers and they — the world’s best educated scientists, engineers and researchers — will come. In his tenure, New Jersey voters approved two bond issues that would be worth almost one billion in today’s dollars to create new centers of exploration on the campuses of Rutgers, Princeton, the New Jersey Institute of Technology and the University of Medicine and Dentistry of New Jersey.

Kean’s raising the visibility of higher education with bond issues and operating-budget support, paired with the construction of state-of-the-art research facilities, produced what is still called “the golden age” of higher education in New Jersey.

In recent years, New Jersey has lost its competitive advantages. States like North Carolina, Virginia, Maryland, California and Massachusetts have been eating our lunch.

Instead of dribbling out modest tax cuts to everyone, New Jersey should concentrate any “cushion” on building on the science, research and technology foundation that brought us prosperity in the first place.

The amount required for the Christie-Sweeney tax cut, which would total $1.35 billion by 2016, could have a major impact on New Jersey’s restoration.

Starting with $200 million in the first year to assist higher education institutions with planning costs, a noticeable boost could be given to graduate, undergraduate and postdoctoral scholarships in specified fields like mathematics, computer science, genetics and nanotechnology.

By the second year, the investments would represent a 35 percent increase or so in state support for higher education, reversing decades of disinvestment.

To put the decline in context, matching the $231 million appropriation for Rutgers operating support in Governor Kean’s last budget in 1990 would require an appropriation of $408 million in FY2013. Instead, the governor’s recommendation is $241 million.

Tuition assistance

The other investment Governor Christie could include is to adjust the Tuition Aid Grants and Education Opportunity Fund scholarships to reflect the steep rise in tuition. A step in this direction would send a message to New Jersey’s striving students that the state wants to hold onto them by helping with rising tuitions and avoiding even higher student loan debt.

The choice is simple: invest in New Jersey’s future or play for short-term political points.

The state is stumbling at the bottom of the recovery from the Great Recession. Our leaders should drop “Comeback” and replace it with “investment” and “opportunity.”

OLS Revises Revenue Numbers Down … Again; Will Leaders Step Up to Stop the Tax Cut Madness?

by David Rousseau  |  Published in NJPP Blog: As a Matter of Fact ...


The news on the income side of the state’s bank ledger got even worse yesterday, with the Office of Legislative Services (OLS) notifying budget committee members that FY 2012 revenue is $50 million to $100 million below its estimates of just two weeks ago. As New Jersey’s potential shortfall reaches $1.5 billion, will the growing chorus calling to reject any tax cut grow louder?
 
May revenue collections from the major taxes came in “somewhat” below OLS’s expectations – expectations that were already more than $600 million below the Christie administration’s most recent projections.

The biggest surprise to OLS was the sales tax, which was actually 2.3 percent lower than last May, bringing the year-to-date growth in sales tax to 2.4 percent. In order to reach the administration’s target, sales tax would now have to grow by 8.3 percent in June; to reach OLS’s target, collections would have to increase by 7.2 percent. That’s asking a lot of any month.

Likewise, income and corporate business taxes are showing slow year-to-date growth (2.4 percent and 1.8 percent) and would have to increase at a much quicker pace in June (4.3 percent and 15 percent) if this year’s revenue targets are to be hit.

With the poor May numbers now in hand, OLS says revenue for the current year will be $50 million to $100 million below its forecast from just two weeks ago. If you adjust next year’s revenue for the new projected shortfall, the overall gap could increase between $100 million to $200 million. This could bring the shortfall to a total of $1.5 billion more than the governor originally estimated, and $800 million more than what the treasurer suggested it would be two weeks ago.

To their credit, Senators Codey and Lesniak have already gone on record saying that now is not the time to reduce state revenues. In addition, Assembly Budget Committee Chairman Prieto has repeatedly raised concerns about the validity of the “New Jersey Comeback” and cited the need to be cautious about any revenue reductions.

The politics among Democratic legislators is getting trickier as Senate President Sweeney continues to push a Christie-Sweeney tax cut. What might have made sense in February, when the projected two-year deficit was a more manageable $500 million or so looks increasingly dangerous to the state’s financial health. In March, no one expected that we would have to borrow the money from our kids to pay for our tax cut. Now, the treasurer says that we must.

A true fiscal conservative would never support more borrowing for less revenue in a state still in the throes of the Great Recession. The latest numbers should make fiscal conservatives of Democrats and Republicans alike.

One Month to Go: What Updated Budget Information Means for Deliberations

 by David Rousseau  |  Published in NJPP Blog: As a Matter of Fact ...

Last week’s presentations to the budget committees by the treasurer and the Office of Legislative Services (OLS) complete the legislature’s public review of the governor’s proposed FY 2013 budget, and they will provide the framework for negotiations between the administration and legislators leading up to the June 30 budget deadline.

So what do the new revenue projections and spending updates mean for next year’s budget? The answer to that lies in the answer to a number of key questions:

What is the significance of the more than $600 million revenue difference between OLS ($1.3 billion shortfall) and the Christie Administration ($676 million shortfall)?

Based on the history of revenue estimating, it is safe to assume that both updated revenue estimates will be wrong. The questions will be by how far and in what direction.

In periods of economic recovery, the administration and OLS generally both underestimate actual revenue. This year, however, with the difference being so large, the actual collections could fall in between the two estimates.

While the more than $600 million difference in projected revenue represents only a 1 percent difference in revenue over a two-year period, it does represent the largest difference since 2001 when OLS was nearly $1.6 billion below the DiFrancesco administration’s estimates. The 1 percent differential is also similar to 2009, when OLS was $574 million below the estimates of the Corzine administration.

Despite its statistically small size, the difference is significant since it represents more than double the amount of the surplus estimated in the budget.

What are the potential consequences of using the OLS estimates?

If legislative leaders decided to adopt the non-partisan revenue estimates that are $628 million lower than the administration’s revised estimates, they would have to a similar amount in additional spending reductions and/or revenue to offset the loss. Due to the cuts that have been made by the Corzine and Christie administrations there are not many – if any – additional spending reductions that would not have substantial impact on state programs and residents.

An easy way to make up some of that money would be to nix the tax cut plans, at least for this year. But even doing that would only save the state $183 million next year – or less than 30 percent of the overall shortfall. The legislature would still need to find an additional $444 million in budget reductions or new revenues. This would not be an easy task.

Using the OLS numbers would severely impact the legislature’s ability to deal with other concerns in the governor’s budget. In fact, addressing some of the major concerns in the governor’s budget would likely be improbable since the legislature would first have to find the $627 million to cover the OLS shortfall, and then find additional reductions or revenue to fund any policy changes they may want to make to the budget.

It is interesting to note that the FY 2013 impact of the “millionaires’ tax” that was vetoed by the governor last year is about $800 million. If Democrats wanted to cover the shortfall this year, a similar proposal could easily do so, while providing an extra $180 million to address other policy concerns. But don’t hold your breath; even if the measure didn’t face a certain veto, Democrats would want any “fair share” tax to help fund popular programs like property tax relief or education, not to cover a revenue shortfall.

If the legislature adopts the OLS revenue estimates, and actual revenue collections during the year are closer or even above the administration estimates, the governor would then have this additional revenue to use in the FY 2014 budget (the possible reelection budget). In other words, the legislature would take the heat for any cuts or other actions they took to offset the shortfall, and the governor might get extra revenue for politically driven election-year proposals.

And if the legislature adopts the OLS estimates and they turn out to be on point, there is still no major downside for the administration, as it won’t have to make any cuts or adjustments – that dirty work will have already been done by legislators.

What are the potential consequences of using the administration’s estimates?

There are relatively no short-term negative consequences to using the administration’s revenue numbers, even though they are $628 million more optimistic than OLS’s. The administration is willing to risk that its numbers will be correct; if they aren’t, it won’t likely have to be dealt with – or even acknowledged – until the governor prepares his FY 2014 budget next February.

Politically, using the higher revenue estimates allows the administration to keep the same growth rates it had assumed in February, thus maintaining the illusion of stronger economic growth as part of the “New Jersey Comeback.” It also allows the administration to continue to push for its tax cuts, since it has already covered the shortfall in its revised plan.

If the actual collections are lower than the estimates, the administration will need to make adjustments to the budget to address the additional shortfall. Unless there is a major negative change in the economy in the next six months, any shortfall will likely not materialize until the second half of the year, and would be dealt with as part of the FY 2014 budget.

In the short term, the administration will have to defend these revenue projections to the rating agencies as they prepare their annual review of the state budget and make pronouncements on the state’s fiscal health. It should be noted that Moody’s recently stated that they expect revenue growth for FY 2014 would be similar to the growth in the current year. If that pans out, OLS says, there could be a total revenue shortfall of over $2 billion.

What estimates are likely to be used for the budget?

Even though the Democratic leadership jumped to the estimates of OLS last June you should not bet the mortgage on the Democrats being consistent. Last year OLS had projected more revenue than the administration, so the use of those estimates allowed the Democrats to propose additional spending.

But “consistency” is not an adjective that can be used to describe decision-making by legislators. It is highly likely that this year, they will defer to the governor and use the estimates presented by the state treasurer.

Unless the administration reduces its estimates further based on collections over the next few weeks, the budget will likely be based on the administration’s numbers. With more money to play with, legislators can move forward with their own tax-cut plans, and possibly address other minor concerns that have bubbled up during the budget hearings.

As A Matter Of Fact...Reality Check: Income Taxes Don’t Impede Economic Growth

by Jon Whiten | Published in NJPP Blog: As a Matter of Fact ...


As Gov. Chris Christie prepares to unveil the specifics of his proposed 10-percent income tax cut at next week’s budget address, he’s working under a key tenet of conservative economics: that high tax rates harm economic growth.

There’s just one problem, according to a new national report by the Institute on Taxation and Economic Policy (ITEP): that tenet doesn’t match up with reality.

These claims are based largely on misleading analyses generated by Arthur Laffer, long-time spokesman of a supply-side economic theory that President George H. W. Bush once called “voodoo economics” because of its bizarre insistence that tax cuts very often lead to higher revenues. Recently, Laffer’s consulting firm has been very successful (with the help of the American Legislative Exchange Council, Americans for Prosperity, and the Wall Street Journal’s editorial page) in spreading the talking point that the nine states without personal income taxes have economies that far outperform those in the nine states with the highest top tax rates.

In reality, however, residents of “high rate” income tax states are actually experiencing economic conditions at least as good, if not better, than those living in states lacking a personal income tax.

The report pits the nine “high rate” states identified by Laffer (a list that includes New Jersey) against the nine states that don’t have a broad-based personal income tax in three categories: growth per capita, median family income and unemployment rate.



From 2001 to 2010, the “high rate” states have seen stronger growth per capita and less erosion of median family income, while the average unemployment rate has been the same as the un-taxed states.

The bottom line, according to ITEP?

“There is no reason for states to expect that reducing or repealing their income taxes will improve the performance of their economies.”

As A Matter Of Fact...Business Leaders Agree: Raising the Minimum Wage Makes Sense

by Jon Whiten
Published in NJPP Blog: As a Matter of Fact ...



While legislative leaders’ efforts to raise New Jersey’s minimum wage to $8.50 an hour have taken a backseat in recent weeks to the governor’s proposed income tax cut, similar legislation in New York is gaining the backing of some high-profile business advocates.

First up was a Daily News op-ed co-authored by New York City’s billionaire mayor Michael Bloomberg that used free-market ideology to argue for bolstering the minimum wage.

“[The minimum wage] helps taxpayers by reducing the number of people who might otherwise have to rely on public assistance to survive,” Bloomberg and state Assembly Speaker Sheldon Silver wrote. “Taxpayers benefit when government dependency is low – and so does the economy.”

The Daily News piece was followed a few days later by an editorial in business bible Crain’s that called for the minimum wage to be raised to $8.50 an hour and tied to inflation going forward. Crain’s said opponents’ arguments that a wage increase will destroy low-paid jobs just aren’t true; it pointed to New York’s 2004 raising of the wage as an example.

“If the change had a cataclysmic effect on businesses that depend heavily on minimum-wage workers, we certainly missed it,” the paper wrote. “Neither, quite obviously, did it shower undeserved riches on the bottom rung of workers.”

If and when the minimum wage bill here in New Jersey starts to pick up steam again, we can only hope some of the state’s leading voices for business will, like Bloomberg and Crain’s, avoid a knee-jerk dismissal of the proposal, and look instead at how it will help our entire economy to flourish.

As A Matter Of Fact ....What Do Taxes Pay For? A Better Quality of Life for Our Children

January 25th, 2012, by Jon Whiten Published in NJPP Blog: As a Matter of Fact ...





While it’s a well-worn cliché that “nobody likes to pay taxes,” one question isn’t asked often enough: what do those taxes pay for?

According to a new national study, they pay for a higher quality of life for our children.

Investing in Public Programs Matters: How State Policies Impact Children’s Lives, released last week by the Foundation for Child Development (FCD), finds “a strong relationship” between state tax rates and the overall quality of life for children.

The report’s key findings are that “higher state taxes are better for children,” and that “greater investments in government programs are strongly related to better quality-of-life for children in a state.”

The report, along with the annual KIDS COUNT data book that ranks New Jersey fifth — comes as states around the country, including New Jersey, are reacting to fiscal crises with austere, cuts-only spending plan, and it shows the folly of such an approach.

“Although states are currently revenue-starved, this is exactly the wrong time to reduce taxes,” says FCD president Rudy Takanishi. “The revenues generated by taxes should be used to invest more in the education and health of our children. Policymakers must recognize that the cost of shortchanging children today is too high a price to pay in the future.”

There’s good news here for New Jersey: the Garden State ranked first in the nation on the Child Well-Being Index, barely edging out Massachusetts. This finding, based on 2007 data, reaffirms the need to resist further cuts to education and other crucial public programs.

The stakes — our children’s well-being, and our state’s future prosperity – couldn’t be higher.

As A Matter Of Fact...New Jersey Offers Goya $80 Million to Create Nine New Jobs

October 24th, 2011 | Published in NJPP Blog: As a Matter of Fact …

Imagine you are a New Jersey job seeker (one of 418,000 unemployed in the state as of September, 2011, according to the state Department of Labor and Workforce Development) and you read in the news that a firm will be getting a state subsidy to hire 175 new workers. You would be thrilled to see those new job opportunities in the state, right?

But, in the case of Goya Foods, Inc., only nine truly new jobs are being created.

Nine.

Of the other 166 “new” workers, 66 would be moved from Goya’s location in Bethpage, New York and 100 already work for Goya as contractors based in Secaucus, according to documents from the state Economic Development Authority (EDA). So these “new” workers are actually existing employees.

Those 100 current contractors may be counted as new workers because they will be converted to direct payroll employees or become part of a professional employer organization (PEO). The National Association of Professional Employer Organizations describes PEOs as enabling “clients to cost-effectively outsource the management of human resources, employment benefits, payroll and workers’ compensation.” Counting current workers as new workers might be technically correct under the subsidy law — but it just doesn’t make sense.

The state’s tax subsidy for these nine new workers is being offered under the newly revised Urban Transit Hub Tax Credit (UTHTC) statute. It is intended to provide an incentive to a firm by lowering its state corporate business tax obligation so that a company will make capital investments in buildings in urban areas near transit and create jobs.

Earlier this month, the EDA approved the $80 million-plus UTHTC for Goya Foods. The company would get that tax credit for building a new 600,000 square foot headquarters/distribution center in Jersey City, a half-mile from the Jersey City PATH station. Aside from the 175 “new” workers, 316 current Goya workers would move to the new facility from Secaucus. Goya’s current headquarters in Secaucus would be converted to a manufacturing facility and 53 jobs would be moved there from elsewhere in Secaucus, but would not be part of the $80 million subsidy.

Further, Goya is to benefit from the expansion of one of the state’s Urban Enterprise Zones to include the part of Jersey City where Goya plans to relocate, according to the Jersey Journal. Urban Enterprise Zones offer companies a host of tax benefits. The company is also seeking a 20-year property tax abatement for its new headquarters/distribution facility in Jersey City, which would lower the firm’s property tax bills; the Jersey City Council will vote to introduce the measure this week, with final approval to possibly come in the second week of November.

But that all may not be enough to keep Goya in New Jersey, according to EDA documents.

New Jersey is competing with New York state, because Goya is also considering moving North Jersey workers to an 892,943 square foot site in Suffern, New York, in Rockland County. No public information was provided by the EDA about the subsidies that may have been offered by the state of New York to woo Goya.

As A Matter Of Fact...The importance of Social Security

September 22nd, 2011 | Published in NJPP Blog: As a Matter of Fact …

By Mary Forsberg

Social Security is an American mainstay, as much a part of our culture as baseball, hot dogs and apple pie. Established in 1935, it now provides benefits to over 50 million people, about one in every six U. S. citizens. While three-quarters of those receiving benefits are retirees or elderly widow(er)s, 19 percent receive disability insurance payments and 4 percent receive benefits as minor children of parents who have died.

Social Security provides a guaranteed, progressive benefit that keeps with increases in the cost of living. By dollars paid, the U. S. Social Security program is said to be the largest government program in the world. It provides a foundation of retirement protection for nearly every American and its benefits are not means-tested. The near universal participation and the absence of means-testing make Social Security much less expensive (its administrative costs amount to just 0.9 percent of annual benefits) to administer than private retirement annuities.

Debate in Washington about how to reduce the growing federal deficit often turns to reducing social security eligibility and /or benefits. A recent report from Social Security Works and the Strengthen Social Security campaign supports the importance of Social Security to families, communities and state and local economies.

Did you know in New Jersey:

• Social Security provides benefits to more than 1.4 million people.
• Residents receive Social Security benefits totaling nearly $20 million a year
• The median benefit received by a retired worker is about $15,500 a year.
• Social Security is the most important source of income for the 171,400 children living in “grandfamilies,” households headed by a grandparent or other relative.
• Social Security provides valuable disability and life insurance protection for most workers. Nationwide, an estimated 3 of 10 working-aged men and 1 of 4 working-aged women will become severely disabled before reaching retirement age.
• A 30-year-old-worker who earns about $30,000 a year and has a spouse and two young children, receives Social Security insurance protection equal to private disability and life insurance policies worth $465,000 and $476,000 respectively.

Social security has been one of the most important public programs for working family in America since the great depression and clearly provides a measure of security for the elderly, the orphaned and the disabled.

As A Matter Of Fact...Financing the American Dream

August 16th, 2011 | Published in NJPP Blog: As a Matter of Fact …

By Sarah Stecker, Policy Analyst

Last month, in order to facilitate a deal that the state had already cut, Governor Christie signed a bill significantly expanding two programs that provide tax subsidies for developers, the Economic Redevelopment and Growth grant and the Urban Transit Hub Tax Credit.

One section of the bill (S2972/A4161, P.L. 2011, c. 89) changes state law for the benefit of a single developer, the Canadian firm Triple Five Group. The deal made by the state, worth up to $350 million in tax breaks on the company’s more than $1billion investment, enticed Triple Five to resurrect the five-year-old, on-again-off-again eye sore previously known as Xanadu. The developer rebranded the half-finished mega mall as the American Dream at Meadowlands and said that in addition to “high-end” retail the mall would include an indoor ski slope, skating rink and a wave pool. The state estimated that upon completion the project would generate a whopping 35,000 permanent jobs.

The change in the law was required because Triple Five was not eligible for the grant the governor had promised many months earlier. Even though significant parts of the state – up to 80 percent of the municipalities – were eligible to host an ERG project, the area of the Meadowlands where the development was taking place was not covered by the original legislation.

The final grant amount to Triple Five depends on an analysis by the Economic Development Authority of the American Dream proposal. ERG grants can total up to 20 percent of a developer’s investment and can be paid out for up to 20 years as a portion of the tax revenues attributed to the project.

Another section of the bill amends state law requiring residential developers to produce affordable housing units in addition to market-rate units as a condition of receiving Urban Transit Hub Tax Credits. The change means developers will no longer have to put aside 20 percent of the residential housing they build for low and moderate income people. The law was meant to provide developers an incentive at the same time it would address the dire lack of decent, affordable housing in many areas of New Jersey. Municipalities now will make the decision about how much low-income housing – if any – will be included in a project.

The law also now allows developers to use any unused credits to reduce the developers’ taxes for up to 20 years from when the credit was given. At the same time, the new law increases the tax credit available to 35 percent, up from 20 percent, if a residential developer builds any housing in one of nine mass transit-accessible cities designated under the Hub law.

The change to the Urban Transit Hub Tax Credit illustrates the good that public subsidies could do (incentivize transit-oriented development) versus the risk of corporations abusing these tax breaks.

For instance, the Urban Transit Hub Tax Credit is available to corporations as well as residential developers. Campbell Soup, located ¾ of a mile from the Walter Rand Transit Center in Camden, received a $41.2 million credit in February of this year to renovate its headquarters, including more than $6 million to furnish the refurbished office space. In its application for the credit, Campbell’s officials said they would bring 95 workers to the city as a condition of the award. Four months after the grant was awarded and made public, Campbell’s announced it would lay off 130 of the 1,200 workers at its headquarters in Camden.

The layoffs are unlikely to jeopardize Campbell’s state subsidy because the Urban Transit Hub Tax Credit is aimed primarily at supporting capital investment. To qualify, companies must invest more than $50 million in capital improvements and employ at least 250 full-time workers. Campbell’s is complying with the law, but the state’s taxpayers might rightly raise the question of why they are subsidizing the company’s newly renovated headquarters even as Campbell’s increases the state’s unemployment rate.

New Jersey is providing hundreds of millions of dollars in tax subsidies to corporations, developers and businesses in the hopes of stimulating the state economy and creating private sector jobs. But there is a policy trade-off and it is evident in this single piece of legislation. The Administration, abetted by leaders in the Legislature, is choosing corporations over individuals: high end retail over low-income housing; renovating corporate suites over rebuilding public schools. That is short-sighted. The long-term policies of a prosperous state must address the needs of its citizens, not just its corporations.

The state Economic Development Authority expects to approve rules implementing the new legislation at its September Board meeting.

As A Matter Of Fact...Tax Them And They Leave? Apparently NOT

August 4th, 2011 | Published in NJPP Blog: As a Matter of Fact …

By Mary E. Forsberg

In 2008, 16,000 New Jersey taxpayers earned $1 million or more. That’s more than in any year before or since 2001 with only one exception – the boom year 2006. In that year, 18,400 New Jersey taxpayers earned more than $1 million. In the following year, only 15,900 taxpayers earned more than $1 million but their average income was $3.5 million, the highest average in any year to date. The numbers tell many stories. Did 2,400 high income people leave New Jersey between 2006 and 2008? Or was their income simply subject to the vagaries of Wall Street and the economy?

Anecdotes abound: So-and-so has a house in New Jersey and one in Florida and decided to call Florida his residence to avoid paying any state income tax (Florida has none). No one knows how often this happens.

Some things, however, are known.

According to data compiled over more than 20 years by the Internal Revenue Service, the average household income of those who move to New Jersey from other states is higher than that of households leaving New Jersey for other states.

Three states (New York, Pennsylvania and Florida) consistently account for the highest number of households moving into and out of New Jersey from elsewhere in the United States.

IRS data analyzed by NJPP in 2003 found no correlation between tax increases or cuts and movement into or out of New Jersey. It was not uncommon for the number of people coming to New Jersey the year after an income tax increase to exceed the number leaving or for the number leaving the year after a tax cut to exceed the number coming in. Further, in most years it was the case that both the number coming and leaving rose and fell in tandem.

A new report from the Center on Budget and Policy Priorities, “Tax Flight is a Myth: Higher State Taxes Bring More Revenue, Not More Migration,” provides an up-to-date rigorous examination of the unproven claims that tax hikes drive large numbers of households – particularly the most affluent – to other states. It concludes the following:

• Migration is not common. Just 1.7 percent of U.S. residents per year moved from one state to another between 2001 and 2010.
• The migration that is occurring is more likely to be driven by cheaper housing than by lower taxes. The difference between housing costs in two different states is often many times greater than the difference in taxes.

• Recent research shows income tax increases cause little or no interstate migration. New Jersey is used as an example in two different studies examined in the report. The first, conducted by Stanford University sociologists, estimated the migration effect of New Jersey’s 2004 tax increase on filers with incomes exceeding $500,000. The authors found that net out-migration did increase for those in that income group but it also increased for those with lower incomes – and by virtually the same amount. The second report which was commissioned by the New Jersey Chamber of Commerce found that most of the people included in the study who were moving from New Jersey had less than $500,000 a year in taxable income so would not have been subject to New Jersey’s highest 8.97 percent marginal tax rate. Despite this, the governor continues to claim this study as evidence of a tax-migration effect.

• Low taxes can prevent a state from maintaining the kind of high-quality public services that people value, such as good schools, mass transit, cultural facilities and recreational opportunities.

Policymakers need honest and accurate information about the implications of tax increases and tax cuts in order to address the challenging fiscal and economic circumstances that most states continue to face. State policy makers should not let false claims about taxes and migration shape their decisions.

As A Matter Of Fact...1 in 6 New Jerseyans hit By Governor’s vetoes

From July 11th, 2011 | Published in NJPP Blog: As a Matter of Fact …

By Raymond J. Castro, Senior Policy Analyst

One in six New Jerseyans will be adversely affected by line-item vetoes of two critical programs in the budget Governor Christie signed last week.

Today, the state Senate is expected to vote on restoring funding for those programs – the state Earned Income Tax Credit and NJ Family Care. Doing so, however, will require bipartisan support in order to achieve two-thirds majority.

The governor’s vetoes represented unprecedented cutbacks in state services and will affect more than 1.5 million residents, mostly low-income working families with children. Without these supports many parents will be unable to continue to work in low and moderate wage jobs that support their children in a state with one of the highest costs of living in the nation.

Last week the Legislature passed a state budget that fully funded these program. However the governor in New Jersey has considerably more power than governors in many states and has the discretion to delete any funds proposed for specific programs – or any “line item” in the budget. The only way that those funds can be restored is for the Legislature to vote to overturn each veto with a two-thirds vote.

When voting on each line-item, it will be important that legislators know what the impact is on people in their districts. New Jersey Policy Perspective has created an analysis to show the number of people, county by county, who will be affected by these two line item vetos, which were among dozens of vetoes by the governor.

Budgets reflect a state’s priorities. The public does not always know where individual legislators stand on those priorities because the budget is usually voted on in its entirety. That will all change today, and we hope that each lawmaker, regardless of party, recognizes just how devastating these cuts can be to wide numbers of New Jerseyans.

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As A Matter Of Fact...Budget vetoes: The scorpion and the frog

July 6th, 2011 | Published in NJPP Blog: As a Matter of Fact …

By Mary E. Forsberg, Research Director

A scorpion and a frog meet on the bank of a stream and the scorpion asks the frog to carry him across on its back. The frog asks, “How do I know you won’t sting me?” The scorpion says, “Because if I do, I will die too.”

The frog is satisfied, and they set out, but in midstream, the scorpion stings the frog. The frog feels the onset of paralysis and starts to sink, knowing they both will drown, but has just enough time to gasp “Why?”

Replies the scorpion: “It’s my nature…”

This parable has many variations: the scorpion and turtle; the snake and dog; the viper and farmer. What each variation has in common is a bad actor, a character who can’t play fair, even if it means he might perish.

Those who are reading the press these days may recognize certain similarities with the current state of politics in New Jersey. And the Democratic leadership surely is croaking now.

It wasn’t a surprise that the governor wielded his ax against the Millionaires’ tax and women’s health programs. He did it before. He said he would do it again and he did it.

What was surprising, though, were the other cuts that had nothing to do with policy and everything to do with the very nature of his leadership. The cuts are unprecedented and go beyond any reasonable policy and fiscal considerations.

The Legislature

The budgets of the Executive office, the Legislature and the Judiciary have always been sacrosanct; a “gentleman’s agreement” has traditionally given each responsibility for its own budget and spending.

No governor before has chopped 41 percent from the Legislature’s staff salary accounts, but that’s exactly what the governor did. And he did it with a dose of venom, saying:

“The budget as adopted by the Legislature relied upon exaggerated revenue estimates, flawed assumptions concerning fund balances and ignored the harsh reality of its spending decisions. This reduction, among many others enumerated herein necessitated reductions of known surpluses, imprudent spending and other excesses.”

People who have noticed this salary cut haven’t made much of it. But the fact is, it has the potential to shift the balance of power in the legislative branch. Here’s how that works.

The salary accounts that the governor cut will not affect the salaries of legislators or those of their district office staff. The ones cut supported the Democratic and Republican legislative committee aides and the people who run the partisan staff offices in Trenton. Money for those salaries is appropriated to the Senate and Assembly in a lump sum and is divided based on which party is in the majority – the majority party (currently the Democrats) gets more of the money, has a bigger staff and has the larger suite of offices.

Unless the Legislature overrides this veto with a 2/3 vote (which would require the support of both parties), the staff of those offices will be significantly reduced. How these cuts are shared will be up to the majority Democrats in the Senate and Assembly. And as Assembly Speaker Oliver, a Democrat, was quoted as saying, “I’m certainly not going to shoot myself in the foot.”

Whether the governor understands this or not, a greatly reduced Republican partisan staff in Trenton is certainly a possible outcome of this line item veto.

Higher Education

Students and institutions of higher education felt the sting of the governor’s veto, which cut full-time and part-time Tuition Aid Grants (TAG) below even his own budget recommendation in March. He reduced the Democrats’ appropriation by $48.5 million, even though the amount in the Democrat’s budget was only $21.3 million more than his budget recommended.

In another unusual veto, the governor reduced the number of state-funded positions at each college by nearly 1,200 positions overall. This veto is an easy one to overlook and understanding it isn’t straightforward. What it means, however, is that the governor is reducing the state’s obligation to pay fringe benefits costs for these positions and is transferring those costs to the colleges – all without prior consultation and at the last minute. It is a backhanded way of again reducing the state’s responsibility for its higher education system. For Rutgers University and the Agricultural Experiment Station, this represents a 6 percent loss; for the other colleges, a 5 percent loss.

The veto message was again venomous. He blames the Legislature for this cost shift, saying:

“The Legislature’s failure to appropriately fund health benefit costs for all state employees necessitated a reduction in the state’s support of employee fringe benefits at all public institutions of higher education.”

Legal Services to the Poor


If you are poor in New Jersey and have a legal problem, save it until next year – maybe. Like the TAG scholarship, legal services will be significantly less than even what the governor proposed in his March budget.

His veto eliminated all state funding ($600,000) for the legal clinics at Seton Hall University Law School, Rutgers Newark Law School and Rutgers Camden Law School. In March he budgeted each of them for $200,000 apiece.

He also apparently took umbrage at the additional $5 million included by the Democrats in their budget for Legal Services of New Jersey, which provides legal services to poor people in civil matters. He cut that budget by $10 million – leaving Legal Services of New Jersey with a smaller budget than he recommended in March.

Cleaning up New Jersey

The Governor’s veto cut $18.8 million or 16 percent of the amount he recommended in March for Department of Environmental Protection programs that safeguard and preserve the state’s environment – for remediation of hazardous waste, underground storage tanks, monitoring water, and dealing with diesel pollution. Funding for these programs comes from a 4 percent constitutional dedication of corporate business tax (CBT) revenues. The effort by the governor and some in the Legislature to ensure that New Jersey is “open for business” by doing away with regulations and reducing corporate taxes means less money is available to protect New Jersey’s environment.

The moral of the budget

No one expected the governor to move away from his ideological position on funding health care for women or to abdicate his protection of the wealthiest in the state from the Millionaire’s tax, which would have added an additional 1.78 percent to their income tax bills this year.

But the veto message this year went beyond negotiation and fair play. There are consequences to every action. The scorpion’s sting meant death to both the scorpion and the frog. The consequences of this veto message are a less prosperous state and an increase in the chasm that separates the state’s wealthy from everyone else.

For a complete list of the governor’s line item vetoes, see the chart