February 25, 2011

Dear NJGCA Member:

Here's what you'll find in this edition of the NJGCA Road Warrior, and thank you for reading:

EXECUTIVE DIRECTOR'S MESSAGE: GREETINGS & SAL-UTATIONS!
•Money Matters, Budget Battles and why it's important to YOU!

NEWS AROUND THE STATE
•Consultant: Let Urban Enterprise Zones, filmmaker subsidy end
•State pension system will go broke in 9 years without reforms
•Garden State residents: Highest taxed citizens in America for 2009
•Governor unveils budget plan, calls for continued cuts and tax breaks

A SPECIAL MESSAGE FROM BELLOMO FUELS
•Serving New Jersey since 1910 -- 100 years of supplying gasoline retailers like YOU!

TRAINING CLASS SCHEDULE
•Initial Emission Repair Technician Certification Class, March 3rd to April 21 - SIGN UP TODAY!

POLITICAL PARTICIPATON: THE NJGCA PAC
•Participate in the NJGCA PAC today and help us keep our Agenda rolling in Trenton!

THE MEMBER TOOL BOX
•On the NJGCA Homepage
•Know your Territory Manager!

 EXECUTIVE DIRECTOR'S MESSAGE: GREETINGS & SAL-UTATIONS! 

MONEY MATTERS, BUDGET BATTLES AND WHY IT’S IMPORTANT TO YOU!

There isn’t a single small business owner reading this message that doesn’t have a ‘budget problem’ one way or another.  Not a one.  Each one of you has a list of business needs, wants, and necessities that must be continually weighed against your books.  In doing so, you make an evaluation on how and where to spend your funds, and anticipate making a profit.  But that doesn’t always happen, does it?  Some years are leaner than others, and you must often make adjustments and sacrifices on the fly to keep your establishment running.  What’s more, even as you continually think outside the box to keep your employees working and your books in the black, you are often running your shop with enormous stress and anxiety.

Compare your financial and business struggles to what’s going on in Trenton at the moment.  On Tuesday, Governor Christie unveiled the initial details on his 2011-2012 budget.  Formally known as the FY2012 Budget, the Governor laid out his plan to spend $29.4 billion on the next budget cycle, which begins on July 1st.

Why is this a big deal?  For one thing, Christie is essentially holding the line in spending for the second year in a row.  That has never – AND I DO MEAN NEVER – happened before in the State of New Jersey.  Despite whichever party was in control, budgets routinely increase year after year.  Sometimes this has been due to labor contracts or over spending on pet projects or bad tax policies, but ultimately the reasons don’t matter…the bottom line does.   What is a VERY big deal here is the Governor isn’t going to raise taxes to cover any ‘shortfalls’ projected in the budget.  That’s because, while Christie faced a $10.7 Billion dollar deficit last year, he faces an equally absurd $10.5 deficit this year.  How the bean-counters determine this number is by essentially figuring out how much money you’d be short this year, if you funded all your obligations from the year before.

However, the first thing that the Governor did when he took the podium on Tuesday was tell lawmakers that the typical accounting method will be thrown out the window.  Instead, Christie wants to utilize zero-based budgeting to determine the FY2012 budget.  What that means is that the Governor will stop appropriating money based on how much was spent last year, and have each department justify what essential programs it needs to continue functioning this year.

Put another way, the Governor is proposing that the State of New Jersey does WHAT YOU DO on a daily basis – that is, to separate the expenses that are ‘vital and critical’ in running your business from what is ‘nice to do, but ultimately unneeded’ to keep your doors open.  That may sound like a very simple thing to pragmatic business people like you and I, but it’s a whole new way of thinking to the bureaucrats and politicos down in the State House.  The real merit of this approach is it will make every department evaluate, then re-evaluate, what needs to get done and rationalize what they spend.  Taken in total, that could mean a huge savings for taxpayers. 

Still, new accounting approaches are only a piece of what was announced this week.  The Governor also wants to address specific problem areas that need attention and they include:

-Raising the Estate Tax Exemption: While commonly referred to as the ‘Death Tax’ by most, the Governor wants to raise the exemption in the current law from $675,000 to $1 million.  That means the next generation can inherit your estate without paying a huge chunk in taxes to Trenton.

-Small Business Income Tax Offset: This would allow small businesses to use their losses to offsets profits in other lines of business or use net-operating loss carry-forwards.

-Sales Tax Exempt for Business Software: This would eliminate the sales tax on installation and support of electronically delivered business software.  That means you won’t have to pay any sales taxes to your consultant or vendor when purchasing/installing accounting and payroll computer software.

-Pension System Payment: If the Democratic Leadership in the Assembly and State Senate go along with the Governor’s proposal by mid-March, the Governor will make a $506 million payment to the pension system.  Why is this significant?  Well, first because there hasn’t been a payment into the system since 2009.  More importantly, however, is that the pension and benefit system is roughly $54 billion in the red.  Can you say fiscal mismanagement?

-S Corporation Taxes: The Governor wants to reduce the minimum tax paid by S Corporations by 25%.  As many small businesses are filed as S Corporations, this would make New Jersey more competitive with our neighbors in the region and prevent them from leaving for other states.

-Doubling of Property Tax Credit: You remember those tax rebates you used to get in the mail?  Well rather than pay someone to tabulate and print checks (which cost more money) the Governor wants to implement a property tax credit for homeowners.  However, to make this tax credit a reality, the Legislature will have to adopt his plan quickly and make that $506 million payment to the state’s pension system (See above).
 
-Hike in Education Spending: The savings realized from other cuts will help restore $250 million in education spending in the FY2012 Budget.  This will indirectly help offset a rise in local property taxes, but the Legislature still has to pass the remainder of the Governor’s ‘Tool-kit’ to fully tackle the rising cost of education.

-Medicaid Mismanagement: The State administers a Medicaid system from the federal government – and it has been a huge burden on taxpayers.  In order to spend public dollars more efficiently and save hundreds of millions in the process, the Governor wants to move people who currently use Medicaid to managed-care plans, which are used by many welfare recipients and are considerably more cost efficient. 

The reforms listed above will certainly be welcomed news for the small business community.  However, while all of this sounds good, it is all overshadowed by a single, important fact: taxes will not be raised and that helps your customers!

Beginning at the end of the month, the Legislature will stop pretty much all deliberations on non-budget-related business and focus solely on meeting the June 31st budget deadline.  Between now and then, there will be plenty of hand-wringing and shouting, but that’s pretty normal.  What isn’t normal is that some leaders in Trenton are finally waking up to the fact that business cannot continue as usual.  Just as you have to improvise and adapt to keep your business running, Trenton has to do the same. 

Thanks for listening - See you next week!

Regards,

Sal Risalvato
Executive Director

NEWS AROUND THE STATE

2/24/2011:
Consultant: Let Urban Enterprise Zones, filmmaker subsidy end
A report released earlier this week calls for the realignment of the state’s various economic development programs.  Among the suggestions is the expiration of the 28-year old Urban Enterprise Zones (UEZs), which routes local sales tax dollars into urban business districts and is expensive to operate.  The report also criticizes the New Jersey Film and Media Tax Credit Program, a $15 million program that aims to attract filmmakers to the Garden State, but hasn’t produced solid results.

2/24/2011:
State pension system will go broke in 9 years without reforms
Speaking at a town hall meeting in southern New Jersey, Governor Christie stated that the state’s public employee pension and healthcare system will be completely bankrupt by 2020.  Citing the need to overhaul the current program, the Governor is urging the Legislature to immediately take up the necessary changes before the system deteriorates further.

2/24/2011:
Garden State residents: Highest taxed citizens in America for 2009
The Tax Foundation, an economic-policy think tank based in Washington, D.C., released a report on Wednesday illustrating that New Jersey residents shoulder a higher tax burden in the nation.  The findings show that residents gave 12.2% of their income to state and local taxes and was the third consecutive year in a row that New Jersey was saddled with the worst showing in America.

2/22/2011:
Governor unveils budget plan, calls for continued cuts and tax breaks
Citing the need to maintain the line on taxes and not put additional burdens on state residents, Governor Christie unveiled his $29.4 billion budget plan for the 2011-2012 fiscal year.  Among the budget highlights, the governor is seeking tax cuts for small business owners; a spending increase for transportation, higher education and charity care; and holding municipal aide steady without raising any additional taxes.

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