Why does one state have a clean, organized, service-oriented approach to its business community, while its neighbor gives businesses the runaround and imposes lots of regulations and taxes? Whether the answer is politics, money problems, or ineffective bureaucracy, New Jersey appears to be the loser and Pennsylvania the winner when it comes to business climate, according to Tom Bracken, president and CEO of Sun Bancorp and Sun National Bank and chair of the New Jersey Chamber of Commerce, and Jim Leonard, vice president of government relations at the New Jersey Chamber of Commerce.
Leonard and Bracken are be part of a panel on “Why Businesses Are Leaving New Jersey” on Wednesday, November 1, at 7:30 a.m., at Fairleigh-Dickinson’s Lenfel Hall. Cost: $20. For information, call 973-539-3882.
Through his customers Bracken gets a bird’s-eye view of New Jersey’s business climate. Even though his bank has been able to expand its loan portfolio during difficult economic times, he says, “our customers are always complaining about issues they have with DEP (the Department of Environmental Protection), getting permits to expand their facilities, the increasing tax burden leveled on business, and the lack of ability to talk to anybody in the state government to help resolve these issues. Every time they try to get a resolution, they go in a circle.”
Leonard amplifies on the frustrating business climate in New Jersey. “Businesses need predictability,” he says. If they want to expand by constructing an extra building or rehabilitating an existing facility, they are “going into a black hole” in terms of how long it will take to get a permit, what the DEP will require, and what the local board of adjustment or planning board will rule — and when. Numerous regulations, which change frequently, leave businesses unable to plan or to know for certain what the future will hold.
In terms of regulation, Bracken specifically cites environmental laws. “There is a heavy bias toward the environmental side without understanding the economic impact of some of the things done,” he says. He votes for balancing environmental concern with the need to maintain a vibrant, growing economy, “because that helps everyone.”
Leonard contrasts the business environment in Pennsylvania with that of New Jersey. Pennsylvania businesses face an entirely different and much more accommodating set of state regulations and officials. If a business wants to add a new building, the permits are worked out, with a guarantee that a shovel will be in the ground in a specified number of days. Pennsylvania is able to expedite the building process, he says, by designating certain sites for pre-approved development.
When Lenox, the china company that had been operating from Trenton for decades, was considering a move to Pennsylvania, says Leonard, New Jersey couldn’t give the company a definitive answer on incentives or when the building could be built. He says that Pennsylvania, on the other hand, said, “Here’s your incentive package, here’s the timing,” and they had one project manager who either had all the answers or was empowered to get them from other state departments on Lenox’s behalf.
Beyond time-wasting governmental red tape, Leonard says that businesses are leaving New Jersey because of the state’s high cost of living, which affects the salaries that must be offered by employers, and the high cost of obtaining health insurance.
Bracken attributes the state’s unfavorable business climate to prior administrations that have increased business taxes, increased the regulatory burden for getting projects done, and not provided adequate incentives for companies to stay or locate in New Jersey. He notes that the American Institute of Certified Public Accountants has moved to North Carolina specifically to avoid New Jersey’s high taxes, and that Johnson & Johnson is closing a major facility and moving it to Latin America.
During McGreevey’s tenure, adds Leonard, the legislature was more interested in taking money out of business community by taxes “than growing the economy to make New Jersey a good place to do business. There was a bull’s eye on the employer community.”
Under McGreevey, for example, the business employment incentive program, which gives businesses a rebate of a percentage of payroll taxes they pay on new jobs they create, was eliminated “under the guise of a budget-saving measure,” says Leonard. (The incentive has since been re-instated.) By creating jobs, the program raised money for the state, and the rebate poured a percentage of the money back into the business. “We’re not opposed to the business community paying its fair share,” says Leonard. “We oppose policies that make it difficult to do business in New Jersey and essentially invite businesses to leave.”
Leonard says that New Jersey is losing good-paying jobs in major industries to other states. In 1990 New Jersey had 17 percent of the pharmaceutical jobs in the nation, but that is no longer true. “We’re now down to under 10 percent, while everyone else is growin,” he says.
Yet, for all that, the state is still doing fairly well economically. Bracken believes that things will improve with policy changes on the part of the government. “The real issue,” he says, “is that we could be doing very well if the approach to business were to change.”
In December the State Chamber of Commerce issued a report by a consultant who had interviewed companies that had left the state: “New Jersey in Transition: Growing the Economy in a Corzine Administration” (available at www.njchamber. com). The primary reason companies cited for leaving, says Leonard, is the absence of “one-stop shopping.”
The Corzine administration is taking the recommendations of the report seriously, says Leonard.
Bracken is hopeful that the Corzine administration will be effective. “They have taken the time to understand the feelings of the business community and are addressing the problems,” he says. “They understand that growth in the state and resolution to its fiscal problems will be related to growing the economy, which means that business has to be engaged.”
Corzine’s administration recently released “An Economic Growth Strategy for the State of New Jersey,” also available on the state chamber’s website. The strategy highlights six priority areas, says Leonard, talking about “everything from marketing the state properly to having the government be the lead spokesperson in attracting businesses to paying attention to companies in the state and helping them to expand.”
The document also talks about developing a world-class workforce by providing necessary skills and education to students and jobseekers; investing strategically in infrastructure, particularly in cities, to promote sustainable growth while protecting the environment; nurturing the development of new technologies; encouraging entrepreneurship and the growth of small, minority-owned and women-owned businesses; and enhancing the global competitiveness of New Jersey businesses.
Leonard is optimistic about the future, both because a comprehensive plan is in place to grow the economy, and because the government will be tracking components of the plan and specifying people responsible for implementation. He adds that Senator Vitale and the governor are working on a plan to reduce the costs of health insurance, which should be announced in the next couple of weeks. Also, a joint committee of the legislature is meeting about a plan to address the property tax burden and is charged with having concrete recommendations by November 15.
Leonard grew up in Skaneateles, New York, and graduated from the State University of New York at Geneseo. Although he comes from a family of educators — his dad was a college professor and his mom a first grade teacher — he says he has always been a proponent of business.
“I noticed that business people took time to run their businesses, but not necessarily to advocate for changes in the laws,” he says. He found himself functioning as an “amplifier of voice,” first as executive director and senior manager of legislative and political affairs for the eastern regional office of the U.S. Chamber of Commerce, then as regional political director for the American Medical Association, and since 1995 as chief lobbyist for the New Jersey Chamber.
Bracken graduated from Bucknell in 1969 with a degree in political science and needed a job, so he took one in banking. “I thought it would be a great place to investigate all kinds of businesses, and figure out what I wanted to do,” he says.
Leonard believes there is little disagreement that to fix the structural deficit in the economy — where more money is spent each year than comes in — will take a policy that “grows jobs and grows the economy. The challenge will be trying to repair several years worth of damage,” says Leonard, “and it will take some time.”