Without benefits reform, Murphy economic goals unachievable: Reinhart
New Jersey Gov. Phil Murphy recently revealed his economic development master plan with a 2025 horizon. He is focused on attracting fast-growing and high-paying industries and entrepreneurs in those industries, on small business and women and minority-run businesses.
The specific goals include adding 400,000 jobs, 4 percent wage growth, a 40,000 increase in women and minorities in the STEM Science, Technology, Engineering and Mathematics) fields, $625 million in new venture capital investment, increasing employment of women and minorities by 42,000, and reducing the poverty rate from 27 percent closer to the state average of 10 percent. Murphy says these goals are ambitious and achievable.
But unless the 800-pound gorilla of the huge pension and health care deficit of $115 billion (that’s $16,772 per resident) is addressed, these goals will not be achieved. There is no disputing that there has been serious out-migration from New Jersey to other states. Data from IRS tax returns show that New Jersey has experienced a loss of more than $70 billion from 2007 to 2016.
Fortunately, New Jersey has a real opportunity to take a bold leadership position ahead of the other states who are also burdened by their employee benefits deficit. The Economic and Fiscal Policy Working Group formed by Senate President Stephen Sweeney in its August 2018 report lays out a path to progress to restore New Jersey’s fiscal health.
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Often, these tax and other fiscal issues are written about from the impact they have on individual taxpayers who vote. But often overlooked is the business community, which also pays a large portion of the tax and fee revenue to the state, county and local governments but doesn’t have a vote on Election Day. This is where Murphy’s recently announced solution to the economic development puzzle is missing a major piece.
A business, whether a start-up innovator or a long-standing company, looks for the best place to locate its business. “Location” used to be mainly a question of proximity to transportation, markets, workforce availability, resources and the like. But today with a much more mobile workforce enabled by technology, some of those factors are not as important.
A location analysis now includes a comparison of the fiscal health of the potential cities and states. A state with a large need for additional revenues to fund government, especially funds just to pay obligations to retired government employees like New Jersey, has trouble competing with more fiscally sound states without such debt loads. There is no doubt that New Jersey has an excellent location absent the drag from the pension and health benefits $115 billion deficit.
This is where the ambitious goals of Murphy and the recommendations of the Fiscal Policy Reform task force can come together to give New Jersey a competitive advantage.
If, as the press speculates and despite his protestations, Murphy does someday have his eye on higher national office, being seen as the governor who reversed New Jersey’s fiscal death spiral would be a major boon to his national credentials. It’s past time for the governor and Legislature to set aside partisan and other differences and move New Jersey ahead of the other states and become the state where businesses recognize we have turned the corner and are well on our way to fiscal health.
Peter Reinhart is director of the Kislak Real Estate Institute at Monmouth University, chair of New Jersey Future and a member of the Economic and Fiscal Policy Working Group.