Business boundaries 101

Either President Obama is totally clueless about business or he understands the economics of hiring and cares only to follow his agenda.  I believe the case is the latter.

A business hires employees because they are needed and the company has the resources to do so.  Each and every employee comes with a cost and the salary is only a part of the equation.  The employee must first earn their pay and by that I mean their work must produce enough to cover their wages at some point after hire.  But the amount each employee needs to bring into the business to cover their own overhead includes a number of other business outlays.

In New Jersey, Workers’ Compensation could be well in excess of $1,000 per year for each employee.  The cost basis for coverage rates factors such as the gross amount of wages, type of business, and injury risks of each position.  Essentially, paying well has a penalty in the form of higher Worker’s Compensation cost.

Employers also pay state and federal taxes on each employee, over and above what is taken out of a worker’s pay.   For an employee earning a gross salary of $25,000, this would amount to about $2,000 yearly.

Other costs of employment include job training, health care, increased bookkeeping, and yearly billings from the state for shortfalls in various state funds.  There are also liabilities and responsibilities associated with each employee.

This year New Jersey employers are facing a larger billing than normal because of a major shortfall in the Unemployment Trust Fund, as high as $1,000 per employee.  The ‘trust fund’ is broke because lawmakers raided $3.6 billion over the last decade and used the money for other projects.  Added conditions contributing to breaking the fund are, the NJ unemployment rate reaching 10.1%, extensions being granted, and the high payments afforded to individuals in NJ.

Adding the costs up, the actual cost of a business hiring a $25,000 employee at this time would likely be $30,000 to $36,000.  It is the consumer that ultimately pays for all the costs of the business, including employees.

The question is would you hire this employee based on the $5,000 tax credit proposal from Obama?  The answer is, only if you were probably going to hire the employee anyway, with or without an offer of a tax credit.  Our economy is abysmal and most businesses are not in any condition to hire, or borrow money to do so.  Companies don’t hire unneeded labor just because a carrot is dangled.  A business that was going to hire will now wait it out for that carrot to be finalized.

There will also be abuses and tracking the legitimacy of claims for credits will be a daunting task for the government, with costs attached to the undertaking.  Details of the jobs bill have not yet been presented, but the information released thus far is not what I see as a solution to the unemployment crisis.

There are many government proposals in Congress that also affect a company’s hiring decisions.  The national health care proposal, card check, and cap and trade add a dimension of uncertainty to business costs and employee responsibilities.  The banking industry bailout even gives unrelated businesses a shaky feeling.  Obama is proposing that there be an extra fee placed on only selected firms, even ones who paid the money back in full or never took any money.

Yet there is no mention of tacking on a fee to industries such as sports and movie industries that also often receive taxpayer money in some manner and certainly have their share of obscene incomes.  Not yet anyway.

What workers are important to Obama?  Numerous times I have heard Obama mention workers in the fields of construction, clean energy, teachers, education workers, police, firefighters, correction officers, and first responders.  What do most of these have in common?  They are either being subsidized (often from multiple sources), supported by taxes and debt, unionized, or a combination of all three.  For the most part, these are not the job creators, but are paid through some channel of taxation.  Most of the jobs on this list, although presumably important for health, safety, and education, raise our taxes.

Targeting who gets tax cuts and credits vs. who is levied and disproportionately taxed divides industries and individuals.  It partitions society, making us all more vulnerable to being conquered.   It creates a political divide, segmenting people and businesses into government evaluation of their importance.

Each time a government credit or exemption to a tax is granted, somewhere else the difference must be supported.

One division evidenced the last year was the growth of government jobs and salaries, while the private sector has essentially trimmed the fat in order to survive. Government is not bound by the limits of capital, as are private industries.  Employees in the private sector were laid off in an effort to keep the company profitable, which also resulted in the stock market gains.

Banks fear that businesses seeking loans will default and are reluctant to extend the credit, rightfully so.  Businesses are constrained by their own capital and the influx of customers with money who desire their services.  No amount of government credits will cause a business to hire, unless the demand and the capital exist.  They will not be looking to hire unless they would be anyway.  Companies must live within their means to survive, a concept that does not apply to the federal government because they do not have the same restrictive boundaries.  They can always print more money or increase taxes.

How about cutting the size and imposition of government and using the money to lower taxes for everyone?  Let’s distribute the tax cuts, not redistribute the wealth.

“It is not the employer who pays the wages. Employers only handle the money. It is the customer who pays the wages.” - Henry Ford

New Jersey budget-Taking ownership

On Monday the NJ Assembly Budget Committee met for about four hours to discuss the condition of the state budget.  This is the beginning of the road for the current administration to gather information and identify ways to balance the state budget.  The meeting began with discussion of the poor performance of revenue income (taxes) and the related structural deficit.  A major portion of the time was dedicated to interaction and input with seven mayors from around the state.

David Rosen, head budget analyst for the Office of Legislative Services (OLS) described sales tax collections as suffering an “unprecedented decline”. Close to ½ of shortfall in expected budget revenue is from the sharp decline in sales tax revenue.  The year-to-date collections are down 6%, down 17% against 2 years ago.  Sales tax for Dec. ’09 is not reported until Jan. 20 and totals will not be calculated for about a week.

The sales tax decline is indicative of the difficult time businesses are experiencing.  Their sales and services are down and as a result many have closed their doors, others have found ways to cut costs.  Unfortunate cost cutting consequences are an increase in private sector unemployment and decreased sales tax, business taxes, and employee taxes paid to fund governments.  NJ’s unemployment rate is now 10.1%.  This major increase in the unemployed and decrease in tax collections has not only put a beating on balancing the state budget, but has also depleted the Unemployment Trust Fund.  All indications point to a ‘shortfall bill’ that will be sent out to all NJ businesses with employees.  It could be as high as $1,000 per employee,  for replenishment of the ‘trust’ fund.

Rosen continues, “Most of the other major revenue sources are also down again significantly against last year.”  “And, last year was lousy”.  “Overall in 2009 we lost 12% of the revenue base that we had the year before”. “One out of every eight tax dollars disappeared”.  He adds that mostly due to stock market performance the state income tax is the only tax that is not out of line with expectations.  April will be a critical month when taxes are due and the actual amounts are filed on the annual tax returns.

A recent analysis done by Governor Christie estimates a $1.33 billion shortfall, for the fiscal year that ends June 30th.  According to Rosen the structural budget deficit for the fiscal year 2010-2011 could be as high as $10 billion.

Rosen described, in simple terms, a structural deficit.

“The structural deficit is a more theoretical concept. It’s the answer to the question if we funded everything that we are supposed to fund, by law. If we were to continue the existing programs, it would only have the revenues that are available from current sources, what’s the gap.”

Now that we have sold the house by overspending, New Jersey is beyond broke.  Over the next few months the new administration and budget committees will be scouring the budget for ways to cut spending and hopefully implement changes that will make our state government smaller and more efficient and financially friendly to businesses and residents.

This will be a daunting task as Rosen explains where most of the state money is used.

“The bulk of the state budget leaves Trenton in the form of checks that go to principally to school districts, municipalities, Medicaid payments, homestead rebates, support for institutions of higher education. Fully ¾ of the state budget goes out to those kinds of places”.

Because of the extreme decline in state revenues, Rosen estimates that it will take until 2014 to recover, if better times return.  I’m not sure if he bases this assumption on only the revenues or if any consideration of implementing cuts and other measures are included.

Once Governor Christie’s administration agrees to the FY2010-2011 budget, his administration owns the state’s fiscal issues.  Until then, the mess is owned by the ghosts of past governors, judges, and legislators.

A follow up post will be on the testimony from the mayors.

The Bay State looks good in red.

By Marlowe, Guest Blogger

A much-anticipated special election in Massachusetts has become a referendum echoing the voice of voter’s displeasure with their current representation, or lack of same in Washington. More importantly this election has national repercussions. US Senator Elect Scott Brown represents the 41st Republican vote breaking the barrier of the 60 votes that would be needed for Democrats to have the majority control on passing bills.  In order to pass on health care and every other issue the Democrats in Congress would need to rush them through, before Brown is seated, or distort the use of a maneuver called reconciliation.  Either of these would probably mean political suicide for Democrats in November.

Citizens across the country watched this campaign gain steam steadily since September of ‘09 as Scott Brown, slowly at first, then with ever-increasing speed, gained momentum as his message got out. Massachusetts voters realized that he had conservative principles, and that he was their way of sending a message to Washington. The majority of voters were tired of the way business was being conducted and they didn’t feel properly acknowledged or that their representatives were even listening.  The voters have been watching the reports on closed-door Democrat debates, bargains with lobbyists, and special deals exempting unions from the Cadillac tax on health care.

Coakley took Christmas week off from the campaign, perhaps confident that she was sure to win in a low-turnout special election, and avoided debates and speeches.

Brown’s momentum increased and donations started to flow in, as much as  $1.5 million in one 24 hour period as Scott continued to travel the state in his “200,000 mile pickup truck”, meeting future constituents and getting his message heard. By now it was December 30, and the freight train was going downhill.

Martha Coakley had by now lost the 30-point lead she enjoyed early in the campaign.  The Senate’s passage of the health care bill seemed to seal her fate, and at this point Brown was almost neck-and-neck with the Democrat. The DNC and other DEM organizations seemed to take the seat for granted, and did not engage in the process until the week before the election.

The voters of Massachusetts noticed, and increasingly the rest of the Nation, and by the time the Democratic establishment went into action Brown was ahead by 2 or 3 points. The train had gained more speed, and Bay Staters realized they could win this election and send a message, Their message, the first of 2010, said that they were not happy with Health Care, The Economy, and the arrogance of the White House and Congress.

If anyone was in doubt about the White House and Congress being out of step with the people and under estimating their anger it was totally apparent when Barack Obama himself appeared Sunday in a last ditch attempt to salvage the campaign, and rally the voters.  The Voters of Massachusetts were not impressed or fooled, and Scott Brown’s lead increased.

By Election Day Tuesday, the White House, as people were still voting, was blaming Coakley for the eminent loss, not the political environment in the state. They had thrown her under the bus just as they had done in Virginia much earlier with Creigh Deeds in the Governor’s race.

Health care passage may be in real jeopardy if the Dems don’t try to pull some tricks, and Cap and Trade is probably done.

The people have spoken, and will most certainly speak even more loudly in November as other Senators and Congressman must surely be worried about their jobs, and may not want to continue to Walk the Plank for their party knowing the consequences.

A single seat in the Senate has never been more critical than right now, and hopefully we will gain more Republican seats in November as awareness spreads in our great nation.

The Bay State has spoken, and it looks good in red.

Americans for Prosperity 213th Legislative Scorecard

Americans for Prosperity (AFP) announces the release of their Legislative Scorecard for the 2008-2009 session.  They analyzed bills and recorded the votes on over 50 of the bills that are viewed as raising taxes, adding to debt, and increasing regulations.

Both the grading overview and the bill details can be viewed at this linked post.

This is valuable information for us to review and pass on to others.

For a long time we have needed to have such a scoring as a guide to how our NJ Assembly and NJ Senate place their votes.

Here is the information from AFP.

Who are the Taxpayer Heroes and Zeros:
AFPs Legislative Scorecard reveals their true identities

AFPs 2008-2009 Legislative Scorecard is proud to unveil its Final Legislative Scorecard  for the 2008-2009 Legislative Session [bill detail]. AFP is the only organization in New Jersey to provide voters with a way of measuring the performance of their representatives in Trenton. While some legislators claim to be conservative, our Legislative Scorecard doesn”t lie. Our Scorecard lets you know who is “talking the talk” and who is “walking the walk”.

The AFP Scorecard focuses on over 50 bills introduced during the two year assembly session that affect taxes and businesses in the most overtaxed state in America. It is our contention that the bills scored will either lead to higher taxes, increased government regulations, or add to the states mountain of debt.

Heroes of the Taxpayer- The following legislators earned the title “Heroes of the Taxpayer,” achieving the coveted “A” rating (90% or above):
“A” Rated Assembly Members
Alison Littell McHose (R- 24)
Gary Chiusano (R- 24)
Michael Carroll (R- 25)
Jay Webber (R- 26)
Richard Merkt (R- 25)
David Russo (R- 40)

“A” Rated Senators
Michael Doherty (R- 23)*
Andrew Ciesla (R-10)
Joseph Pennacchio (R-26)

*Mr. Doherty moved from the Assembly to the Senate November 7th, bringing his extraordinary record with him.

Which Republican Lawmakers Let Taxpayers Down the Most? - Disappointingly, Senate Minority Leader Tom Kean, Jr. (R-21) earned a “D” grade with a score of 69%. And Sean Kean (R-11) and Bill Baroni (R-14) were the GOPs lowest-rated senators, each receiving failing “F” grades with scores of 58% and 55%, respectively.
In the Assembly, Budget Committee Chairman Joe Malone (R-30) came in last amongst his fellow Republican Assemblymen with a poor 58%.
Democrat Disdain for the Plight of New Jersey Taxpayers- Every Democrat legislator received a failing “F” grade on our Scorecard — the majority of which scored below 20%. Two Democrat Senators, John Girgenti, (D-35) and Brian Stack, (D-33) tied for the lowest “F” rating at 2%.

Other enemies of the taxpayer included Assembly Democrats Joan Voss (D-38), Valerie Vainieri Huttle (D-37), Ruben Ramos (D-33), Sheila Oliver (D-34), and Thomas Giblin (D-34), all of whom scored 2%.

Taxpayers Zeros- Two Democrat Assembly members managed to receive a triple “F” score, with a disappointing rating of ZERO.
Cleopatra Tucker (D-28)
Joan Quigley (D-32)

US Congressional Candidate Florida-LTC West

http://allenwestforcongress.com/

Under government control, prepare to be controlled

There are some interesting comments in this CNBC video interview with Rep. Scott Garrett (R-NJ) and Rep. Paul Kanjorski (D-PA).

As consumers we have a choice to avoid doing business with the institutions who pay excessive bonuses. This would send a message more powerful than any government controls, and it is a free market concept.

Note the following on the below video:

The timing game change on the bank bailouts,  “We’re moving that up now”.  (If they can change the rules on the banks, they can change them on any of us, including health care.)

Selective targeting of certain institutions. (More government selection & control over business.)

Small and mid-size business loans to increase employment.  (Good way to expedite a business meltdown.)

The special deal that unions may get on the health care taxation. (Who will make up the difference?)

Get the health care bill through and get it done then make corrections. (Doesn’t this just make one warm & comfy?)

Lame-duck madness

True to form the New Jersey Legislature reviewed almost three hundred pieces of legislation on the last day of the lame-duck session, January 12th.  They did not finish until after 11 PM.  The end result was the approval of most of the bills before them. 

The bills approved by the Legislature will now be put before Governor Jon Corzine for his review.  If Corzine is to sign them into law, it must be done before Governor-elect Chris Christie begins his four-year term on January 19^th. 

Of these hundreds of bills, but a few have been widely reported. 

S565 expands the scope of chiropractors and places more requirements on their practice.

S2905 will require large chain restaurants and franchises to include calorie counts on their menus.

S3071 allows deputy attorneys general in the NJ Department of Law & Public Safety to unionize.

A4360 will require more comprehensive reporting on the state annual debt report.

A4345 delays state Department of Environmental Protection official’s power to restrict certain new developments until April 2011.

A4347 extends the expiration date of local building & environmental permits to December 31, 2012.

A4293 would pay prevailing wage on certain construction that uses Board of Public Utilities financial assistance.

A4268 extends prevailing wages to out-sourced bids from any public entity for maintenance work that cannot be preformed in-house if the cost would be more than $50,000.

S119 “New Jersey Compassionate Use Medical Marijuana Act.”

The greater mass of bills have not been widely reported in the news.  No doubt that with the enormous number of bills which have passed through the NJ Legislative process there will be more than one that will affect us in our daily lives.  One can look up these last day lame-duck bills on the Legislative site by searching the legislative session as 2008-2009 and 1/11/2010 as the last date of action.

With this in mind I can’t help but believe that that the continual bombardment of new legislation inflicts a certain paranoia that strips us of Liberty & Prosperity.  As we move through our day it becomes increasingly worrisome for individuals and businesses to keep track of.  What new laws or regulations are imposed, what former freedoms are infringed upon, what will be the cost? 

Soon a government agent will be needed to follow each of us for a month to point out if either as an individual or a business owner we are in compliance.  But, alas money is needed in fines, fees, taxes, and registrations to support and expand the bureaucracy.  For the most part, I believe the complexities and number of bills enacted have this as an end to their means.

“Men fight for freedom, then they begin to accumulate laws to take it away from themselves.”  ~Author Unknown

Yesterday the 214th NJ Legislature was sworn in, beginning a new cycle.  Most of the faces will remain the same.

NJ lame duck damage

In the last two days of the NJ Legislative and Committee lame duck sessions there are many decisions and votes occurring that will further add our state’s fiscal calamity.  In this press release, NJ Senator Oroho exposes one example.

Oroho Outraged That Corzine Was Allowed to Boost Deficit by $121 Mln

Senator Steve Oroho, Republican member of the Senate Budget and Appropriations Committee, said he was outraged that the Joint Budget Oversight Committee approved Governor Corzine’s last-minute deal to give $121 million to just five, chronically mismanaged cities.

“The governor is spending $121 million the state just doesn’t have, and he is spending it on cities that have demonstrated year after frustrating year that they can’t be trusted with taxpayers’ money,” Oroho said. “Governor Corzine has provided zero evidence that this is the best way to spend these precious dollars during the worst economic downturn in 80 years.”

Today, the Joint Budget Oversight Committee transferred $44 million into the ‘Special Municipal Aid’ account. The administration said New Jersey had “surplus” funds to expand aid to Jersey City, Paterson, Bridgeton, Camden, and Union City.

“Corzine is arguing that we have $44 million in surplus at the same time we have a $1 billion plus deficit this year and a projected $10 billion deficit next year,” Oroho said. “It’s incredible that this governor can expand the huge mess he’s leaving for the man that the majority of voters selected to replace him.”

Jersey City is embroiled in a corruption scandal that has led to indictments, Oroho pointed out. Audits have found mismanagement in some of the other cities. Rather than spend only what is necessary, these cities are using state aid to provide services and pay to government employees that other cities in New Jersey have been forced to reduce or eliminate, Oroho said.

“In a recession, people are willing to sacrifice for the greater good,” Oroho said. “They aren’t willing to do without in their own communities so that mismanagement can continue unabated in a handful of cities with outsized political clout.”

Trash these lame duck bills

The election and the holidays are behind us and the members of the New Jersey Legislature today repopulate the halls of Trenton.  Now we face the realities of the passing of the gavel from Governor Corzine to Governor Elect Chris Christie.  Free from political consequences it is a time when the outgoing Corzine can sign some dangerous and unpopular ‘lame duck’ bills.  Also, many of our New Jersey Legislators have no immediate fear of reelection as the voters decided in November who would ‘represent’ them.

The new legislative term begins on January 12.  Any bills in the works would need to clear the legislature before then to reach Governor Corzine for signature, or they expire.

There are a number of bills that have been lingering in the NJ Assembly and NJ Senate and now there is a giant push to get them passed.  Four of the bills concern prevailing wages and are quickly moving through the legislature.  The residents and businesses in NJ will be hit with increased costs if these bills pass.  Whether it is the form of increased property taxes, utility rates, purchasing power, or other taxation; it will cost us more.

A-4293/S-3028 has passed in the Assembly.  It would require that prevailing wage be paid on select construction projects that receive Board of Public Utilities (BPU) financial assistance.

A-4268/S-3095 also passed in the Assembly, unfortunately with the help of two District 2 Republican votes.  Assemblymen Amodeo and Polistina crossed the party line from all other Republicans by voting for this bill.  The bill would extend prevailing wages to out-sourced bids from any public entity for maintenance work valued at more than $50,000 that cannot be preformed in-house.  The successful bidder would need to pay the prevailing rate to all of the workers hired by the contractor.  The dollar amount dictates that these jobs would be for larger projects such as sewer pipes, plumbing, heat or air conditioning systems, and other major repairs and maintenance.

S-2850/A-4151 requires that contracted and subcontracted workers employed at any public entity shall be paid prevailing wage.  This includes food service employees and an array of cleaning and building maintenance workers.  The commissioner would have authority to withhold 25% or up to $100,000 from the contracted employer if a request for records employee information is not satisfied.   This is very bad for business because the onus of innocence is placed on the employer while the money is held by the state.

The state fiscal analysis lists the cost to the state as “indeterminate” and the local cost (translation, property taxes) as “indeterminate, potentially significant”.

The best data gathered in the analysis exampled school food service workers.  School district food service employment data provided to the state by Rutgers University “indicates that school boards could experience an increase of $34.2 million in food service costs”.  According to the fiscal analysis, school food service workers average five hours a day and now earn $9.75 hourly.  Instituting prevailing wage would increase their compensation, which includes two to four weeks of vacation and at least eleven paid holidays, bringing the prevailing wage for their part time job to $15.50 an hour.

S-3096/A-4291 applies to those who receive a loan from the New Jersey Housing and Mortgage Finance Agency (NJ-HMFA) either directly from the agency or indirectly from an institutional lender.   It would apply to new construction, improvements or rehabilitation of buildings containing five or more for-sale units.  Each worker employed on the job would be paid not less than the prevailing wage rate.

The New Jersey Department of Labor & Workforce Development would determine prevailing wage rates for the above bills.

”The Prevailing Wage Rate Determinations list the wage and fringe benefit rates based on collective bargaining agreements [unions] established for a particular craft or trade on the locality in which the public work is performed. In New Jersey, rates vary by county and statewide and by the type of work performed.”

The prospects for fiscal recovery in NJ will look even grimmer it these bills pass.  Even those who would appear to benefit will be hit in the form of increased costs, essentially wiping out any differential wage increases.  Other residents, taxpayers, and businesses will be bearing the brunt of the burden.  Businesses will be even less able and willing to compete in NJ and more desiring to jump ship to another state where it is less difficult to compete and business costs are less.

It is hard to believe that with NJ facing an $8 billion-$10 billion budget shortage, horrid business climate, and the highest property taxes in the country that the Legislature didn’t put these bills where they belong, in the trash.

But we know how symbiotic the relationship is between unions and Democrats, and the occasional pirate Republican.  Since the prevailing wages are linked to unions and they in turn endorse mostly Democrats there is a continuous cycle of indebtedness.

We need to defeat these bills.  Here is the index to look up the contact information for your legislator by municipality.

Merry Christmas