Budget Woes Increase: Rebates for Homeowners may be cut
By Robert J. Tartaglia
Gov. Jon Corzine’s plans for restoring New Jersey’s fiscal house took a turn for the worse when it was announced that lower-than-expected revenue collections increased the budget deficit by another $440 million. State Treasurer Bradley Abelow’s report to the Senate and Budget and Appropriations Committee is forcing the administration to look at further cuts and possibly postponing Corzine’s initiative to spare more working-poor residents from paying income taxes.
“Clearly, the job of balancing the fiscal-year budget has become more difficult,” Abelow told the Senate budget panel.
Corzine’s $31 billion budget includes $2.5 billion in program cuts and $1.9 billion in tax increases. The governor’s budget actually contains good news for the business community in that there is no proposed suspension of net operating loss deductions (NOL), no extension of the alternative minimum assessment and no diversion from the State’s Unemployment Insurance Fund. NOLs are particularly helpful to financial institutions that are just starting up because they can deduct the costs over several years.
The only real increase that the business community was concerned with is the 2.5 percent surcharge added to the Corporate Business Tax (CBT), which is slated to raise $60 million. Now that there is an additional deficit, there have been rumblings that the CBT surcharge could increase, and that the sales tax increase in the governor’s budget may be scrapped and other alternatives considered. On top of the budget difficulties, the New Jersey employment picture showed some improvement in April. But while the overall job gains were strong, the underlying lack of new high-paying positions continued and unemployment climbed to 5.1 percent, while the U.S. jobless rate remained unchanged at 4.5 percent, according to a recent report.
The governor has also been talking about convening the Legislature for a “special session” to discuss property taxes. New Jersey residents pay about $6,000 on average, about double the national average. Property taxes have increased an average of 7 percent annually in the most recent years. There are many questions surrounding this approach due to the uncertainty of increased spending in other areas. A Corzine advisory team has recommended trying to limit a special session to financing government services, not spending, and to restrict it to two weeks.
Health Care Tax Passes
Senate Labor Committee
While our great state continues to lag behind the rest of the country – many surrounding states have seen healthy budget surpluses – there continues to be an unfriendly climate toward business with legislation that would tax health benefit plans and restrict the sharing of information for financial institutions.
Senate Bill 477 (Sweeney/Coniglio/Vitale/Buono) will require businesses (“large employers”) with 1,000 or more employees to spend at least $1.65 per hour per employee on health benefits in calendar year 2007; $2.50 during calendar year 2008; $3.30 during calendar year 2009; and that the spending be indexed to the CPI for all urban consumers for this area in subsequent years. “Employee” means, among other things, any person engaged in service for wages, salary or other compensation at a location in the state to an employer on a full or part-time or temporary basis for 13 hours (reduced from 15 hours) or more per week. The definition excludes independent contractors, certain licensed individuals and high school or college students employed on a part-time basis.
The substitute bill also excludes an employee who is age 65 or older receiving health care coverage from Medicare and an employee who voluntarily opts out of coverage through the employer, providing the employer can show proof that the employee is receiving coverage from another source.
Any large employer spending less than the hourly prorated health care expenditure rate required in the bill must pay to the Commissioner of Labor an amount equal to the product of the total number of hours that employees worked that year, multiplied by the difference between the required hourly prorated health care expenditure rate and the actual hourly prorated health care expenditure made by the large employer.
Eliminated from the bill was the requirement that regardless of how much a company spends on its overall health benefits package, it would still have to pay the difference for every employee not getting the required minimum per hour amount of health insurance. A provision was added prohibiting a large employer from deducting any payment made pursuant to this bill from employee’s wages, salaries or other compensation or making any reduction in the compensation rates of its workforce in connection with obtaining the required hourly prorated health care expenditure. The bill contains onerous penalties for violation of the law.
NJBankers testified in opposition to S-477 due to the burdensome and costly provisions in the legislation. Additionally, we testified the bill could have an effect on part-time teller positions and that banks would consider eliminating them altogether. While part-time tellers whose spouses provide insurance would not be affected under the substitute, single working mothers could be.
Financial Privacy Legislation (S-547- Buono) that would prevent the sharing of information to third-party non-affiliates was held in the Senate Commerce Committee on May 8, but did manage to pass the Assembly Consumer Affairs Committee. NJBankers succeeded in having the bill second-referenced to the Assembly Financial Institutions Committee.
NJBankers, along with the New Jersey League of Community Bankers, opposes the bill due to the arduous conditions it would impose on the marketing of financial products by all banks. In particular it would have a negative impact on the smaller community banks, who utilize joint marketing agreements with larger institutions.
We addressed the Senate Commerce Committee and made the correlation of how the bill last year brought about significant changes with regard to identity theft protections. In fact, New Jersey passed the most significant identity theft act in the country and there is no need to go any further and affect the marketing of all financial products to consumers.
The bill was amended to reflect the decision from the 9th Circuit Court in California, which disallowed the state to require disclosure for affiliate sharing. The California law only affects third-party non-affiliate sharing.
Action Banker Council Meets with Codey’s Chief of Staff
The Action Banker Council, NJBankers successful grassroots outreach program, continues to meet with legislators and their top staffers to discuss issues affecting the banking industry. Recently the ABC met with A.J. Sabath, chief of staff for Senate President Richard Codey. The discussion was fruitful in that A.J. discussed potential issues that could confront our industry in the near future. NJBankers thanked him for his time and let him know we are always ready to work together.
Robert J. Tartaglia is vice president and director of government relations for the New Jersey Bankers Association. He can be reached by e-mail at email@example.com.