Assembly lawmakers are moving ahead with a measure extending the state’s multi-billion-dollar corporate tax break program to buy time for the state Legislature and Governor’s office to hash out a new set of incentives, despite vows from Gov. Phil Murphy to veto the proposal.
Grow New Jersey and the Economic Redevelopment and Growth gap financing program both expire on July 1. Murphy wants to let them lapse and replace them with a set of five new incentives capped at $400 million a year.
“A straight extension of this legislation will be putting politics above good government, plain and simple,” reads a statement from Darryl Isherwood, a spokesperson for the governor’s office. “If an extension of the current program is passed without the necessary reforms, the governor will have no choice but to veto it.”
Senate President Stephen Sweeney, D-3rd District – a recurrent political opponent of the governor and a main proponent of the incentive program – has dangled the possibility of overriding Murphy’s veto of the Grow NJ extension.
Lawmakers meanwhile are considering another measure that would not cap the number of incentives awarded under the Grow NJ incentive program but rather, reign in the bonuses that could be given to businesses.
Murphy has ramped up his scrutiny of Grow NJ in recent months, including a task force which has investigated how companies with strong ties to South Jersey political powerbroker George Norcross either crafted the program to benefit themselves or provided false information about plans to leave the state so they could win more tax breaks.
Sweeney has been seen as one of Norcross’s biggest allies in the state Legislature.
The task force was scheduled to release its findings on Monday but delayed the publication at the request of a judge after Norcross and several businesses being scrutinized by the task force filed legal challenges against the task force.
“Given the findings first of the state comptroller and later the task force on EDA’s tax incentives, it is clear that these programs not only have not had the desired effect, but there also is evidence that suggests some companies may have gamed the system to increase their incentive awards,” Isherwood said.
“Further evidence suggests some companies were not truthful on their applications, omitting potentially disqualifying information. These issues should not be allowed to continue,” he added.
Assembly Bill 5343 was approved by a unanimous vote at the Assembly Commerce and Economic Development Committee on Thursday and is scheduled to be considered at the Assembly Appropriations Committee later this afternoon.
It would extend Grow NJ for an additional seven months while lawmakers and the Murphy administration set out a new round of incentives.
We put ourselves in this situation … We have put our backs against the wall. We should have vetted through the governor’s proposals.
– Assemblyman Roy Freeman
Assemblyman Rob Karabinchak, D-18th District – the committee chair – assured that there would be more public hearings as lawmakers flesh out the incentives.
Assembly Bill 4730, which was only discussed at the Thursday meeting, would reign in the kinds of bonuses that businesses could receive for projects and jobs located in geographic areas targeted as places in the state which need more economic development, such as Garden State Growth Zones, Urban Transit Hubs and distressed municipalities.
The measure would add other bonuses, for example allowing the business to count contractors to be counted as full-time workers if they work no less than 35 hours a week. That was a point of heavy criticism from several groups worried that the provision would allow employers to undermine worker’s rights.
A4730 also creates a $500 annual bonus for projects created by small businesses, along with a 50 percent cut for tax incentive fees associated with the project.
The governor’s office maintained that the state Legislature had ample time to figure out what the new incentives be – pointing to Murphy, during his 2019 budget address in March 2018, saying the incentives would sunset in just over a year, and his presentation the so-called “State of Innovation” incentives last October.
But lawmakers at the Thursday committee acknowledged they had waited too long to figure out a new set of incentives.
“We put ourselves in this situation… We have put our backs against the wall. We should have vetted through the governor’s proposals,” Assemblyman Roy Freeman, D-16th District and a sponsor of both bills, said before casting his vote.
“What we probably should have been doing over the last six months hasn’t really begun yet,” added Assemblyman Nicholas Chiaravalloti, D-31st District.
Several business officials testified that the state needs to extend Grow NJ to provide some type of stopgap measure and that New Jersey cannot afford to go without any incentives.
“A state that lets its economic growth incentives lapse signals that it is ‘out of business’,” Mike Egenton, vice president of government relations at the New Jersey Chamber of Commerce.
“Most policymakers, including members of the Legislature and the Governor, agree that tax incentives are an important and effective tool in New Jersey’s overall economic development toolkit,” added Andrew Musicke, vice president of the New Jersey Business and Industry Association.
“Simply put, tax incentives ‘level the playing field’ and keep New Jersey competitive with our surrounding states,” he added.