New Jersey’s economy is in trouble – high taxes, crumbling infrastructure and low wage jobs helped drive more than 227,000 people out of the state last year, according to the latest Census data.
Those are some of the major economic problems that Opportunity NJ, a nonprofit coalition comprised of state business and government leaders, aims to help fix in the coming years. Those problems and others were discussed at the group’s inaugural Affordability Summit on Sept. 18.
Michele Siekerka, CEO of the New Jersey Business and Industry Association and one of the speakers of the conference, said that ONJ will draft a white paper to present to the new state governor and General Assembly in January that will recommend ways to make the state affordable. The paper will focus on four areas: tax reform, workforce development, infrastructure and deregulation of businesses.
Siekerka lamented the fact that businesses such as Mercedes Benz and General Mills fled the state in recent years due mostly to high corporate taxes.
“When you hear people say that it’s only anecdotal that people are leaving here because of the taxes, give me a break,” she said. “When I talk to our business leaders, all of you say that it’s the high taxes, the high cost of living and the high cost of doing business that are driving you out.”
Different groups leave the state for different reasons, she added. The reason millennials (generally speaking, young adults born after 1990) are leaving is because of the housing market and property taxes.
Jim Hughes, director of the Rutgers University Regional Report of Economic, Demographic and Real Estate studies, cited Census data in pointing out that 47 percent of millennials in New Jersey are still living with their parents – the highest rate among all states in the country. The national average is 34 percent.
“Many millennials still face difficulty in the housing market,” Hughes said. “In outer counties such as Hunterdon and Sussex, that figure is 55 percent. If we extrapolate this trend, our state will just have two types of adults in the near future: the not-yet-wedded adults, and the nearly dead adults.”
Steve Van Kulken, senior partner at management consultant firm McKinsey & Co. and one of the conference speakers, believes the state would be wise to follow the old adage that in order to make money, you have to spend money.
According to his company’s research, the state could gain $150 billion in GDP growth and 250,000 new jobs over the next decade if it invested heavily in six distinct areas: nurturing young businesses, being creative with an infrastructure for the future, addressing workforce imbalances, tailoring incentives for growth, focusing on high-growth industries and investing in the best new disruptive technologies.
Business incubation facilities have sprung up in the state over the past year sponsored by the Philadelphia 76ers, Hackensack Meridian Health, and the state’s Economic Development Authority. Despite this, Van Kulken said that New Jersey lags behind other states in offering these types of spaces. He cited data from the company’s economic report in July, “Reseeding the Garden State’s Economic Growth.”
“Incubating spaces provide office space, mentorship, funding and guidance,” Van Kulken said. “We have 15 of them. New York has 179, and Pennsylvania has 42. We cannot grow our jobs without this kind of infrastructure and these kinds of incubators.”
As expected, taxes were a big topic of conversation during the conference. In several recent surveys, New Jersey is ranked at or near the bottom in many tax categories, including property taxes.
One of the conference speakers, Tom Byrne, chairman of the State Investment Council and managing director of Princeton-based investment advisory Byrne Asset Management, suggested that the state could significantly lower property taxes by reorganizing its various police departments, increase the average class size of public schools, and reforming its pension plans.
“We have 56 percent more police officers per capita than the average state,” Byrne said, citing research sponsored by the Investment Council. “And the fact is, they’re not in the cities where arguably one would say they are more needed; they’re in the suburbs.”
“If we don’t do something soon, we will see a gradual decline in our standard of living, a decline in our public services, and a decline in the quality of public schools. That could risk the state’s reputation as being a state as a great place to raise kids,” Byrne said.
Transportation infrastructure was also a big issue in terms of whether companies choose to stay in the state, or move, Van Kulken said.
According to McKinsey’s research, Van Kulken claimed that clogged highways and overworked transit systems are one of the biggest reasons why companies either move out of the state or choose not to move in.
“We’re spending money to maintain old infrastructure. We have to focus on future-oriented infrastructure, we have to optimize capital spending, spend more money on transportation in the most heavily used corridors. So this doesn’t mean spending more money, it just means prioritizing where we spend money. We need to rebalance traffic flows.”
Hughes agreed, adding, “New Jersey has lagged in making critical infrastructure investments, and the economic consequences will be profound.”