Monthly Archives: January 2010

WHAT YOUR BUSINESS CAN LEARN FROM GOVERNMENT BUDGET SHORTFALLS

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Avoiding Conflict and Hoping to Be Rescued During Bad Times

As an employer, I’ve been paying into New Jersey’s unemployment insurance trust fund for over 30 years. Plus, my employees have been doing their part. That way, if we hit hard times and I had to do layoffs, my employees would be able to receive unemployment checks until I could bring them back or while they looked for employment elsewhere.  Right?

In the 1990s, when economic conditions were far more favorable than they are today, apparently it was just too easy for the governors and legislators to borrow against the future to pay for budget shortfalls.  As a citizen, I simply do not understand how it was legal for them to dip into the unemployment insurance funds.  But that’s what they did.  They depleted the $4 Billion dollar unemployment fund. The State of New Jersey has been forced to borrow money from the federal government to pay its unemployment claims. In an attempt to help people, Congress has recently extended eligibility for unemployment benefits.  An individual can collect unemployment checks for up to 99 weeks! New Jersey couldn’t afford the previous mandated levels, so…

New Jersey’s “solution” is to create a new tax so employers like me will be required to keep contributing at previous levels PLUS replenish the unemployment insurance fund. That’s the same fund we financed in the first place, and no changes have been instituted to prevent the legislators from dipping into the unemployment fund again!

The same thing happened to New Jersey’s pension fund…only more so.  Year after year, New Jersey’s governors and legislators stole money from “protected” trust funds and chose getting re-elected over restructuring or negotiating with the powerful unions. The total unfunded liability for New Jersey pensions and benefits is now $130 Billion! ($80 Billion pension shortfall and $50 Billion in unfunded postretirement medical and prescription drug benefits.)

New Jersey’s response? The most recent Administration passed more mandates. Who will be expected to pay for it?  Proponents quickly point out that the mandated 6 weeks of paid family leave is funded by the temporary disability fund.  Based on the long term pattern, that fund will also soon be depleted and employers like me will be expected to pay the costs associated with paid family leave and mandated health insurance.  New Jersey employers already pay an average of $10,522 for health insurance per employee, but that isn’t considered when more mandates are being considered.

New Jersey’s employers now also face increased corporate and income taxes … all while the WHITE ELEPHANT IN THE ROOM continues to go unaddressed.

Second in A Series; To be continued…

WHAT YOUR BUSINESS CAN LEARN FROM GOVERNMENT BUDGET SHORTFALLS – Ignoring the Numbers and Borrowing Against the Future During Good Times

Since the time I relocated to New Jersey in 1970, the population of the state has increased 20%.  If you guessed that the number of State employees has increased a comparable 20% across those same 40 years, you would be wrong because it has increased a full 50%. Do the math. That’s 150% more than the rate of population growth.  Even without considering the relative productivity of individual civil servants, that is a HUGE staffing buildup.  And it happened during “the computer age” when we were all promised increased efficiencies from automation.

Reading that comparison, how much would you guess the expenditures grew across that same 40 year period?

This is NOT a trick question.  Think about it.  A 50% increase could be explained by the increased number of people on the State payroll.  Plus, there is inflation to consider.  Even rounding to an average of 5% cost of living/year compounded over 40 years, your guess would be well over 100%. Right?  If you have been reading the newspapers, watching television, hearing the political campaign speeches, or noticing things like new commuter trains, you might guess as much as 200 or 250%!  Right?  That would be a HUGE increase in spending!!!

The reality is…New Jersey’s expenditures have grown an unbelievable 2,350% across that same time frame.

What on earth did all of that money buy?

Maybe New Jersey’s citizens could point to things like the roads. After all, New Jersey is the center of the Northeast Corridor, but much of the transportation money comes from the federal transportation trust fund…and that is underfunded! There are WAY too many NJ bridges in desperate need of repair or replacement!  Without reviewing all of the issues, suffice it to say, commitments have been made for years for money that simply isn’t there.  And the money hasn’t been there for a long, long time.

State employees, legislators, and every teacher in NJ’s public schools and their surviving spouses have been promised lifetime pensions and gold standard health insurance. That sounds nice. And in many cases, the promise of security during their retirement years has been the only lifeline keeping public sector employees working at all. How else can you tolerate the bureaucracy, the inconsistent decisions, and the corruption?

Democrat and Republican Governors and legislators have not been able to (have refused to?) face the HUGE WHITE ELEPHANT in the room and just keep promising lifetime pensions and health insurance when the money simply isn’t there!  $11 billion of the $30 billion budget for 2010 will go toward pension and healthcare contributions.

First in a Series:  To be continued…

Facing that it is Time to Let That One Key Person Go

It seems like we have all been there. There is a long term employee who helped your young business get off the ground.  JANE represents where you have been, the history, and how things used to work.  She seems more focused on the past than on embracing the future.  Welcoming new systems and technology is just “not her thing.” More time is spent complaining about how much work there is to be done than on accomplishing tasks. JANE’s tendency to gossip, create cliques, and stir up dissent is distracting other employees.  She’s become so adept at passing the buck that no one can really figure out what she is doing all day, even though she always seems “busy.”

Deep down, you know it. She’s no longer happy.  You are no longer happy, and your credibility as a leader is being compromised on a daily basis the longer she remains.

Why do so many of us hang on and leave the JANEs of the world in place? Sometimes, it’s because we want to demonstrate appreciation and loyalty. Maybe you couldn’t afford to pay JANE for everything she did in the early years. Sometimes, we invest too much effort in finding a new role for JANE.  Sometimes, we are waiting for “the right time” to initiate the change, but there never really is a great time to act on a long overdue decision. Sometimes, we delay because we can imagine ugly backlash, accusatory comments, and even wrongful firing lawsuits. Sometimes, we see a few days of “the old JANE” and wonder if we have become too harsh.

A few of my clients faced this situation in 2009.  I was very impressed that each tailored their actions to the specific circumstance and didn’t act out of anger. One provided a severance package.  Another helped the long term employee open a small retail business she had been talking about for years. Another extended healthcare coverage and paid for a career counselor. In all three cases, it was as though something just “clicked” in the minds of the executives.  In all three cases, there was what I call the “we both know…” discussion. And in all three cases, the peace of mind and readiness to face the tough decision started with a renewed sense of optimism and vision about where their businesses are now headed.  Their commitment to their companies trumped their loyalty to JANE(s). Each knew that leaving JANE in place would simply send the wrong message to everyone.

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