On behalf of our member companies that provide approximately 1 million jobs in our state and make NJBIA the largest statewide business association in the nation, thank you for considering our perspective on the best use for the federal American Rescue Plan Act (ARPA) funds here in New Jersey.
As we testified at the August public hearing, ARPA funding provides a potentially transformative opportunity to address lingering problems in New Jersey while improving our state budget situation and stimulating the economy as we recover from the devastation wrought by the pandemic. For our taxpayers and business community, it is critical that we do not waste this special opportunity.
While our unemployment rate has rebounded, businesses and the economy are still faced with new challenges that did not exist just a year ago when we provided similar testimony to your office and the Legislature. At this point in time, New Jersey’s job market is strong, but we have lost over 40,000 people in our workforce creating severe staffing challenges. Our businesses and consumers are also faced with the highest inflation in over 40 years. Not to mention fuel costs have gone up substantially and our businesses are facing unprecedented supply chain challenges.
Our recommendations on how to effectively utilize ARPA funds remain as they were one year ago when the state was provided in excess of over $6 billion. But now with just over $1 billion left to make critical changes to right-size our state government and prepare our economy for the future, they are even more urgent.
At this point in time, we have seen more than $5 billion of ARPA funds allocated toward projects and programs, but only $419 million have been spent, according to the Governor’s Disaster Recovery Office. We firmly believe these necessary dollars have been and are still needed in the economy as soon as possible. We believe there should be a thoughtful, multi-year plan for this money, but what is allocated per that plan should be spent quickly to help the people and businesses that need it.
We are also very concerned that despite the allocation of nearly $5 billion in ARPA funds, there have been very limited structural improvements made to the state beyond the continuation of a full pension payment. This is particularly troubling as spending in the state has increased by over 40% in the past 5 years and funding sources will not remain. We are deeply concerned this will cause unnecessary tax increases that could be avoidable, especially as New Jersey has the highest corporate and property taxes in the nation.
For example, there was a missed opportunity for structural reform by stopping unnecessary budget diversions from out of state agencies into the general fund in the recent FY23 state budget and finding a permanent funding source for NJ Transit. In fact, $38 million of licensing dollars was removed from the Division of Consumer Affairs to cover general fund expenditures. Additionally, the Societal Benefits Charge is still being used to cover the costs of NJ Transit.
If these funds are NOT needed in the departments they are intended to support, which we believe they are, then it would be appropriate to reduce the cost to those paying them, the licensees, and the business community.
NJBIA recommends five guiding principles for how this money is spent: 1) Transparent Coordination & Collaboration, 2) No Permanent & Recurring Use, 3) A Multi-Year Approach, 4) Debt Reduction, and 5) Economic Stimulus. These five priorities are also very similar to those supported by the New Jersey Business Coalition in a recent letter sent to you and sent last year to the Joint Budget Oversight Committee, which oversaw the spending of these federal dollars.
1) Transparent Coordination & Collaboration – In addition to the more than $6 billion received by the State through the American Rescue Plan, New Jersey’s counties, municipalities, school districts, government agencies, and higher education institutions received billions of dollars in direct assistance. While we called for a coordinated plan to be developed to ensure the most effective expenditure of these funds and to maximize this special opportunity, one has never materialized. NJBIA continues to recommend a comprehensive pandemic rescue and recovery plan for the state.
2) No Permanent & Recurring Use – One-time infrastructure and economic stimulus spending is needed as new programs will only stress future budgets after this federal money is gone.
3) A Multi-Year Approach – We also stressed that federal funds must not be depleted in one year and the state should take a multi-year approach through 2024, as the federal government allows to ensure the best use. While we appreciate the cautious approach thus far, we worry that with over $1 billion left in federal funds, our state will quickly run out of federal dollars to support the increased spending in the budget. This may not allow a smooth landing for our state budget without needing future tax increases when we already have the highest corporate taxes in the nation, highest property taxes in the nation, and among the highest personal income tax rates in the nation.
4) Debt Reduction – NJBIA appreciates the $3.7 billion put aside in the FY22 state budget and $5.2 Billion in FY23 for debt defeasance and prevention. We request that our federal funds be used to address additional current and future liabilities, as that is critical to avoid a fiscal cliff when this money has been used up. This could include repaying the Unemployment Insurance (UI) debt as more than 36 other states have done with their federal funds or paying for infrastructure needs to avoid future debt.
5) Economic Stimulus – Federal funds should be spent to maximize return on investment and economic growth to generate more tax revenues without increasing taxes. NJBIA believes the state should focus on the following pro-growth spending, which would provide both immediate and long-term support to our economy:
- Unemployment Insurance (UI) Replenishment – Repaying the federal UI debt and covering some of the UI liability employers will face in coming years will provide them direct relief, freeing up money that can be used to rehire, increase wages, and invest in their operations. Otherwise, employers will have to divert substantial resources to cover the UI benefits that were necessary for workers who were laid off due to state-mandated COVID-19 restrictions on businesses. We were very disappointed that bi-partisan, bi-cameral legislation to address this issue was not passed in the Senate for your consideration. Despite the apparent opposition to using federal funds to replenish the UI fund, we urge that this is a tax on JOBS and, if not for a government-mandated shutdown, our business community would not be incurring this added cost.
- Further Small Business Grants – The NJEDA has done an outstanding job supporting small businesses during the pandemic, but it still needs more resources to reach more businesses, rather than just the smallest. NJEDA has helped tens of thousands of small businesses in response to the COVID-19 pandemic, and though this assistance has been extremely impactful, it still represents just a fraction of the more than 900,000 small businesses in our state. Businesses lost a third of their revenue when the state forced many of these businesses to close or scale down their operations for over a year, and we need to do as much as possible to help them survive and recover. NJBIA is appreciative of providing the NJEDA as much funding as it has, but we urge that it continues by expanding on the size of the awards and size of employers eligible where appropriate.
- Addressing the Hiring Crisis – Businesses across the state are struggling to bring back the workforce they need to operate at full capacity. This has impacted New Jersey’s economic recovery and needs to be addressed immediately. Businesses are offering signing bonuses or higher wages to bring workers back, however, not all can afford to do this after COVID-19 revenue losses. Additional funds or tax incentives should be provided to help more businesses increase wages and/or provide signing bonuses to incentivize individuals to return to work. Funding for an educational campaign to promote the return to work and the limits of UI benefits could also make a big difference. NJBIA requests state action to help employers get people back to work as quickly as possible, and one-time payments with this federal cash can make a big difference with this hopefully one-time problem.
- Pro-Growth Spending – Spending on infrastructure, workforce development and innovation spurs economic growth and should be prioritized over other uses of ARP funding.
- Infrastructure –The budget’s infrastructure investments are a great start, especially on offshore wind, the billions for capital construction in the Debt Defeasance & Prevention Funds and the $300 million for water infrastructure. However, further investment in infrastructure, just as the federal rules call for, will stimulate the economy. More investment in transportation, higher education facilities, school buildings, clean water, energy, and telecommunications would create jobs and support a pro-growth environment. There are always going to be more worthy infrastructure projects, but it may be worth assessing the infrastructure discussions currently happening in Washington, D.C. to ensure that we are optimizing the use of both these current and probable future funds. This is also an opportunity for the state to make the necessary upgrades to the computer systems in our state departments, including DOL, MVC, and the Division of Consumer Affairs. We all witnessed firsthand the critical need to enhance the state’s technology to serve all New Jersey residents.
- Workforce Development – The business community appreciates the workforce development funding increases in the FY22 and FY23 state budgets, especially the county college training program – NJ Pathways to Career Opportunities. However, we were disappointed that with the historic number of displaced workers throughout the pandemic, there was no centralized, strategic initiative to provide further training opportunities to prepare workers for the economic opportunities which will emerge in the post-pandemic economy. Moving forward, these investments can support Workforce Investment Boards, training grants, private career schools, county vocational-technical schools, workforce programs at four-year colleges, and further support for county colleges.
- Innovation – NJBIA also appreciates the increase in investments in New Jersey’s innovation ecosystem in the FY22 and FY23 budgets, which will help make our state a destination that attracts further talent, research, development, STEM investments, and high-paying jobs. However, more is always needed in the quest to have New Jersey reclaim its stature as the Innovation State. Innovation infrastructure such as broadband, college laboratories, and other research and development infrastructure would enable this.
NJBIA believes that using these federal funds with these guiding principles will simultaneously improve our economy and set our state finances and state budget up on a smooth path that can avoid the need for future tax increases in our already high-tax state. We look forward to working with the Murphy administration on this important work to make sure we properly take advantage of this historic opportunity. Thank you again for considering the perspective of the business community!