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Confidence Ebbs as Massachusetts Employers Face Fitful Recovery

Posted by Andre Mayer on Dec 7, 2010 10:44:00 AM

Confidence among Massachusetts employers dipped in November after a record surge the previous month as companies continued to wrestle with what one analyst calls a “fitful” economic recovery.

Business ConfidenceThe Associated Industries of Massachusetts Business Confidence Index lost 3.2 points, but remained in positive territory at 52.1. The Index had posted a record 7.7-point increase in October after slumping throughout the third quarter.

Employers remain more confident about the Massachusetts economy than the national – no surprise since the commonwealth’s unemployment rate rests more than a full percentage point lower than the national rate of 9.8 percent.

“(October and November) together tell a clearer story than they do separately,” said Raymond G. Torto, Global Chief Economist at CB Richard Ellis Group, Inc. and Chair of AIM's Board of Economic Advisors (BEA). “The Index has moved back to the positive range, above 50 on its 100-point scale, where it was in late spring before a third-quarter slump. A third straight reading above 50 in December would give us our strongest quarter since the end of 2007, and some further upward movement would be reassuring.”

Employers are frustrated by the slow pace of economic growth.

"The recession may be over according to economists’ definition, but the unemployment rate is lagging way behind other indicators and banks unwillingness to lend is stifling the economy," one employer wrote in response to the survey.

The November retreat left the Business Confidence Index 6.3 points higher than it was at the beginning of 2010. Readings of 50 points and above indicate that employers have a generally optimistic view of the economy, while readings below 50 points indicate a bearish outlook.

All of the specific confidence measures that go into the overall Business Confidence Index declined in November.  The Current Index of conditions prevailing at the time of the survey was off 2.6 points at 50.6, while the Future Index of expected conditions six months ahead dropped 3.5 to 53.5.

The Massachusetts Index of business conditions prevailing within the commonwealth fell 2.6 points to 47.5, remaining above the U.S. Index of national conditions, which lost 5.8 (after a 12.3-point gain in October) to 43.0. On the year the state indicator was up 9.0, its national counterpart up 6.3.

Survey respondents have rated the state’s economic climate better than the nation’s through this downturn and recovery and they expect Massachusetts conditions to turn slightly positive before mid-2011, ahead of national conditions.

The Company Index, which measures survey respondents’ overall confidence in the situations of their own operations, was down 2.6 points in November to 56.3. The Sales Index shed 2.4 to 56.5, and the Employment Index was off 1.2 points to 52.5. Confidence was sharply lower in November among manufacturers (-5.7 to 53.2) and in the state outside Greater Boston (-7.3 to 49.4), compared to moderate declines among non-manufacturing employers (-1.7 to 50.7) and within the metropolitan area (-0.2 to 54.2).

“The November results suggest that October’s leap in business confidence, though perhaps exaggerated, was no mere aberration,” said Richard C. Lord, AIM’s President and CEO, a BEA member. “The overall message remains positive, and the continuing favorable assessment of conditions in Massachusetts relative to the nation is very good news, particularly in comparison to our experience coming out of past downturns.”

But in absolute terms the Bay State’s economic picture is far from rosy, Lord noted.

“Only 4 percent of respondents to a special question agreed with economists that the recession is over, and 26 percent said ‘maybe’; while most (55 percent) chose ‘not yet, although conditions seem to be improving’ and 15 percent said ‘recovery is not in sight,’” he said.

Topics: Employers, Associated Industries of Massachusetts, AIM, AIM Business Confidence Index, Massachusetts economy, Massachusetts employers

Regional Differences Color Employer Concerns in Massachusetts

Posted by Brian Gilmore on Dec 1, 2010 9:53:00 AM

Associated Industries of Massachusetts met with employers at five locations throughout the commonwealth in October to gain input on a public policy agenda for the 2011-2012 legislative session.

Employer issuesThe discussions identified many common concerns, such as the high cost of health insurance and the expected unemployment insurance tax rate hike. But there are also issues of particular concern to employers in each region.

In the Berkshires, the high cost of electricity and proposed state regulations to prohibit the use of certain chemicals generated the most attention during the 90-minute AIM session.

Discussions in the Pioneer Valley focused on the high cost of living and its impact on retaining the thousands of students who attend local colleges. Employers are also concerned about securing an educated workforce, lack of appreciation for manufacturing and the need for municipal finance reform.

Employers from the North Shore and the Merrimack Valley expressed concern about the disconnect between Beacon Hill policies and issues such as economic growth, the lack of skilled/technical workers and the need for a strategic state economic development plan. There was general agreement that most lawmakers "just don’t get it" – they want jobs but won’t approve reforms to make investments in Massachusetts attractive.

At the South Coast session, employers discussed the need to communicate the importance of making the Massachusetts economy competitive in order to retain jobs and confront competition from foreign markets. Economic competitiveness and the impact of health insurance increases running more than 20 percent generated a hearty discussion.

Unsustainable growth in state and local spending, an unfriendly state business environment, the need for a transparent state budget and the impact of health insurance rate hikes were the focus of the central Massachusetts session. Several employers expressed resentment about the lack of accountability for the manner in which Massachusetts conducts its business.

The take-away from the sessions is that employers believe that the Bay State’s economic future depends upon adoption of a favorable business climate across all industries. The alternative, as one lawmaker said earlier this year, is an "invented here, made elsewhere" economy that provides opportunities for doctoral-level engineers and scientist, but leaves other citizens out in the cold.

Employers believe that if progress can be achieved in lessening the cost of doing business, the commonwealth will be well positioned to achieve economic growth and create jobs by capitalizing on its existing strengths.  

Comments recorded at the regional sessions will be folded into the development of AIM’s 2011-2012 Public Policy Agenda that will be presented to the AIM Board of Directors for approval in January.

Topics: Employers, Associated Industries of Massachusetts, AIM, Health Care Costs, Energy, Health Insurance

Massachusetts Employer Confidence Surges in October

Posted by Andre Mayer on Nov 9, 2010 8:51:00 AM

Confidence among Massachusetts employers surged during October to its highest level since before the recession as business owners rediscovered the bullish economic outlook they exhibited during the first six months of 2010.

Business confidence indexThe Associated Industries of Massachusetts Business Confidence Index shot up 7.7 points to 55.3, its highest level since August 2008. The jump represents the largest single one-month increase in the 19-year history of the index.

“The October result in effect returns us, after a three-month gap, to the upward trend of the first half of the year, and is based to a considerable extent on a less negative, and probably more realistic, assessment of prevailing conditions in the national economy,” said Raymond G. Torto, Global Chief Economist at CB Richard Ellis Group, Inc. and Chair of AIM's Board of Economic Advisors (BEA). 

“Massachusetts employers remain predominantly positive about conditions for their own operations, and they now expect significant improvement in the business climate generally over the next six months,” Torto said. “Even in that timeframe, however, they foresee conditions approaching neutral, rather than rapid expansion.” 

Employer confidence rose steadily from February to June before a summer slump based upon the sluggish pace of the economic recovery. The index has risen 12 points from its level of October 2009, and 13.9 over two years. It reached its historic low at 33.3 in February 2009, and its all-time high of 68.5 on two occasions in 1997-98.

A reading above 50 represents an optimistic outlook on the part of employers.

The U.S. Index of national conditions led October’s rise with a gain of 12.2 points to 48.7, while the Massachusetts Index of conditions within the commonwealth added 7.7 to 49.4.

Richard C. Lord, President and CEO of AIM, noted that political trends can be a factor in employers’ assessments of economic prospects.

 “Forty-five percent of respondents expect that the results of the pending federal election will affect the business climate for the better, compared to 12 percent who foresaw adverse effects,” he said.

Lord remains hopeful that the strong showing of confidence in October signal economic recovery.

 “We have never had a monthly jump quite like this before, but the largest previous gains came in 1992 and 2003-4, as we moved from limping recovery to more robust growth,” he pointed out.

 “And the Index is back to 55 sooner this time around than it was in the last cycle, 20 months after bottoming out as compared to 23 months in 2001-2003. As the success of the recovery is heavily dependent upon restoration of economic confidence among businesses and consumers, this looks like progress.” 
 

Topics: Employers, Associated Industries of Massachusetts, AIM, AIM Business Confidence Index, Economy

President May Reconsider Burdensome 1099 Rules in Health Reform

Posted by Eileen McAnneny on Nov 4, 2010 4:38:00 PM

President Barack Obama provided some welcome news to employers yesterday when he signaled a willingness to reconsider a provision of the health reform law that will require businesses to file 1099 tax forms for every vendor that sells them more than $600 worth of goods and services.

Health reformThe provision, due to take effect in 2013, will require more than 30 million U.S. companies that currently only have to tell the IRS the value of services they purchase from vendors to also report the value of goods and merchandise they purchase. Lawmakers added the 1099 reporting footnote to the federal health reform bill to raise an estimated $17.1 billion.

“You know, for example, I know one of the things that’s come up is that the 1099 provision in the health care bill appears to be too burdensome for small businesses.  It just involves too much paperwork, too much filing,” President Obama said in his press conference the morning after mid-term elections.

“It’s probably counterproductive. It was designed to make sure that revenue was raised to help pay for some of the other provisions, but if it ends up just being so much trouble that small businesses find it difficult to manage, that's something that we should take a look at.”

The president made his comments as Republicans emboldened by a new majority in the House of Representatives suggested they might attempt to repeal portions of the reform or cut off financing.

AIM wrote about the 1099 issue in September and has supported changing the provision. The Senate in September rejected an amendment by Republican Michael Johanns of Nebraska to scrap the new 1099 rules. Senators also rejected a White House-backed alternative that would have increased the 1099 threshold to $5,000 and exempted businesses with fewer than 25 workers.

Senator Scott Brown voted in favor of the Johanns amendment and against the Democratic alternative, while Senator John Kerry voted against the Johanns amendment and in favor of the alternative.

AIM believes the 1099 provision would saddle employers with significant administrative and accounting expense at a time when many are already struggling with the soft economy. Implementation of federal health care reform will be a long and difficult road without the support of our nation’s small businesses.  Imposition of the 1099 requirement on small businesses in 2013 could derail support for the majority of the reform bill effective in 2014.

Congress should rethink this ill-advised provision as it undermines both the promise of savings for small businesses from health care reform and runs counter to efforts by the Obama administration and Congressional leaders to help small businesses.

Topics: Employers, Associated Industries of Massachusetts, Health Care Reform, AIM, Health Care Costs

Limited Networks Give Employers a Tool to Control Health Costs

Posted by Eileen McAnneny on Oct 26, 2010 2:13:00 PM

Employers seeking to control health-insurance premiums (and that’s just about all of them) have a new tool at their disposal as they negotiate plan renewals for 2011.

Limited networksThe health cost control law signed by Governor Deval Patrick in August requires Massachusetts health plans to offer at least one limited or tiered network product that is at least 12 percent less expensive than a comparable full-network offering.  That means employers and their workers can reduce costs and preserve benefits by doing business with community hospitals and other facilities that deliver verifiably cost-effective health care.

The requirement takes effect on January 1.

Health plans are still awaiting final regulations on limited network products from the Massachusetts Division of Insurance. But several carriers already have such plans on the market and others have them well along on the drawing board, so it’s a good time to begin the conversation with your health-plan representative.

“Limited networks give employers the opportunity to control health care expenses that have in some cases been rising as much as 20 percent to 40 percent per year,” said Richard C. Lord, President and Chief Executive Officer of AIM.

“These networks also allow both employers and their workers to find excellent medical care, not just expensive medical care.”

The limited network provision was part of a cost-control bill intended to provide relief to rate-shocked employers while policymakers, health care providers and business representatives hammer out long-term solutions to the problem. The law also limits the ability of subscribers to jump on and off health plans repeatedly; prohibits anti-competitive contracts between providers and insurers; and establishes a pilot program on bundled payments, creating building blocks on the way to payment reform. 

The idea behind limited networks is simple – find quality medical care at reasonable prices. That means avoiding high-cost providers for procedures that can be performed just as well in lower-cost, community settings.

Limited networks are particularly promising for Massachusetts because of the gaping rate disparity among doctors and hospitals within commonwealth.  The attorney general's office issued a report this year concluding that the primary driver of health costs is the variation in rates that certain hospitals and physician groups are able to charge relative to their peers.  The report states:

"Price variations are not correlated to (1) quality of care, (2) the sickness or complexity of the populations being served, (3) the extent to which a provider is responsible for a large portion of patients on Medicare or Medicaid, or (4) whether a provider is an academic teaching or medical facility. Moreover, (5) price variations are not adequately explained by differences in hospital costs of delivering similar services at similar facilities . . . Price variations are correlated to market leverage as measured by the relative market position of the hospital or provider group compared with other hospitals or provider groups within a geographic region or within a group of academic medical centers." 

Pat Hughes, President and CEO of Fallon Community Health Plan in Worcester, wrote recently in the Boston Business Journal that the key for employers is to find the right limited network. Hughes said employers should look for a few important ingredients:

  • A full spectrum of providers, including acute care hospitals, primary care physicians, specialists and other services;
  • Multispecialty group practices that use electronic medical records;
  • Community hospitals that have demonstrated through objective clinical data the capacity to deliver high-quality care and good outcomes at reasonable costs;
  • A mechanism that allows patients to visit a doctor or hospital outside the network for a second opinion or a procedure that is not available within the network.

Employers must become part of the solution to rising health care costs by taking proactive steps like purchasing a limited/tiered network product.  As the purchasers of health insurance, they hold huge potential to change the marketplace and need to start flexing a little muscle.

Topics: Employers, AIM, Health Care Costs, Health Care

Massachusetts Outlines Hurricane Preparation Steps for Business

Posted by Christopher Geehern on Sep 2, 2010 2:22:00 PM

The Massachusetts Emergency Management Agency (MEMA) today issued a list of steps employers should take to prepare for possible damage from Hurricane Earl:

  • Review your property insurance with your insurance agent.
  • Take photographs or make a video of your business establishment, both inside and outside.
  • Determine and establish a written Hurricane Preparedness Plan for your business and its contents. Coordinate this plan with local and state officials.  Specify the conditions under which the plan will be implemented.
  • Test your plan, reviewing it annually. Establish an employee-training program on your Hurricane Plan.
  • Make plans for protection of your computer files, including an off-site back-up system to secure and safely store data.
  • Protect corporate records, keeping duplicates at an alternate location.
  • Well in advance, acquire emergency protective equipment and supplies. Heavy plastic sheeting, duct tape, sandbags, emergency generator, chain saw and large pieces of plywood will help protect your property.
  • Bring in display racks and other objects, such as trashcans that might cause damage if airborne.  Remove outdoor signs, especially those that swing or are portable.
  • Move merchandise, equipment or furniture away from windows or skylights. Elevate boxes or equipment, if possible.
  • Turn off electricity and disconnect all electrical appliances and equipment (except for refrigeration equipment), in case there is a power outage.  An ensuing power surge could be damaging to connected equipment.
  • Inform all employees on when and how you will notify them to report back to work.
  • Develop an employee identification system, such as picture ID badges. This may help employees gain access to the area after a hurricane.
  • If possible, make arrangements to pay employees in cash.  It may be several days before banking institutions are operational.

Topics: Emergency preparedness, Employers, Associated Industries of Massachusetts, AIM

Health Costs, Taxes Top List of Massachusetts Employer Concerns

Posted by John Regan on Aug 27, 2010 11:16:00 AM

Health insurance costs, taxes, electric rates and unemployment insurance top the concerns of Massachusetts employers in early returns from AIM’s 2010 Employer Issues Survey.

AIM Employer Issue SurveyOne hundred fifty-six of the 162 employers who responded during the first days of the survey expressed “great concern” or “moderate concern” about the soaring cost of providing health insurance to their workers. One hundred thirty-four companies were concerned about state taxes while another 125 employers were greatly or moderately worried about paying the highest electric rates in the nation.

Other concerns include workers compensation insurance costs, the quality of public education and the availability of qualified workers.

AIM conducts the Issues Survey every two years to identify the employer priorities that will make up its public policy agenda.

“The battles we wage in Boston and Washington reflect the priorities of our employer members, who are seldom shy about telling us which issues most affect their ability to grow, prosper and create jobs,” said Richard C. Lord, President and CEO of AIM.

AIM invites member employers who have not yet completed the survey to do so as a way to ensure that the association concentrates on the issues that matter to the employer community. Participants may complete the survey anonymously or provide contact information for follow-up purposes. 

TAKE THE ISSUES SURVEY

Asked to name the one issue that keeps them up at night, employers alternated between economic problems such as lack of access to credit and the construction slump, to broader concerns such as government encroachment on the ability of entrepreneurs to create new businesses and jobs.

 “We need sound economic growth policies that will assist the private sector, not the public sector, in starting new businesses and growing existing businesses,” one employer said.

Federal issues are also on employer radar screens. Survey participants expressed concern about proposed cap-and-trade climate change legislation, off-balance accounting for Social Security liabilities and expansion of the federal bureaucracy in conjunction with health care and financial services reform.

Employer comments about rising health insurance premiums underscore the fact the issue has emotional as well as financial consequences:

“Premium increases absolutely affect our company, but my biggest concern is for our employees,” wrote one employer.

“Year after year we offer them plan choices with reduced coverages/high deductibles/high co-pays with an expectation of reduced premiums, yet the opposite happens. The cost of health insurance is out of control. As an HR person I'm upset by this and I think I have a better understanding of the entire process. I can't even imagine how our employees feel.”

Which issues matter most to you?

Topics: AIM Employer Issues Survey, Employers, Associated Industries of Massachusetts, AIM, Health Care Costs, Taxes

Massachusetts Wins $250 Million to Improve Public Schools

Posted by Andre Mayer on Aug 24, 2010 3:27:00 PM

Massachusetts is a winner in the second phase of the federal Race to the Top (RTTT) competitive grant program for school improvement.

Race to the TopThe commonwealth stands to receive $250 million, half for participating school districts and half for statewide initiatives. The money will support reform efforts in four areas: standards and assessments; statewide data systems; effective educators; and turning around low-performing schools. These priorities are consonant with those of AIM in its ongoing advocacy for education reform.

The timing of the announcement from the U.S. Department of Education was something of a surprise, as most observers had not expected a decision until after Labor Day.

Massachusetts gained the top score among 19 state applicants, 10 of which won grants. Other winners in this round were the District of Columbia, Florida, Georgia, Hawaii, Maryland, New York, North Carolina, Ohio, and Rhode Island.  Each winner will receive between $75 million and $700 million, based on population.

Delaware and Tennessee received grants in the first round of competition.

The award of federal money and the high evaluation score reflect the success of education reform in Massachusetts, new steps taken to strengthen our competitive posture, and the efforts of those who prepared the state’s RTTT submission, effectively revised to address weaknesses identified in the first round.

Governor Deval Patrick, who traveled to Washington to make the case for funding, together with Secretary of Education Paul Reville, Education Commissioner Mitchell Chester, and all of those who put together the application deserve congratulations for its success.

AIM worked with the Massachusetts Business Alliance for Education to ensure that Massachusetts submitted a competitive application embodying the priorities of the employer community:

  • We advocated for legislative enactment of a bill raising the charter school cap and facilitating state intervention in low-performing schools;
  • We also advocated for adoption of the Common Core standards by the Board of Elementary and Secondary Education;
  • We hosted meetings of business leaders with Commissioner Chester; and
  • We urged member employers to work in their local communities for district approval of the RTTT memorandum of understanding.

“The most important part of this win is not the money, welcome as that surely is,” said Richard C. Lord, AIM’s President and CEO. 

“Rather, it is the demonstrated commitment to ongoing improvement of our schools, and the willingness to take controversial positive steps, that made our victory possible. AIM will continue its activity in the field of education to ensure that our commonwealth and our students enjoy the full benefits of this unique opportunity.”

Topics: Employers, Associated Industries of Massachusetts, AIM, Education, Race to the Top

AIM to Represent Employers on Economic Development Commissions

Posted by Brian Gilmore on Aug 20, 2010 8:40:00 AM

The economic development law signed by Governor Deval Patrick on August 5 provides AIM and its member employers with an opportunity to shape policy on a number of new oversight boards and commissions.

The law designates AIM to participate in the following:

  • One of up to 12 seats on an Economic Development Council to be established during the first year of each new gubernatorial administration to formulate an economic development policy for the commonwealth;
  • One of 11 seats on the Massachusetts Marketing Partnership to oversee and coordinate marketing efforts on behalf of the commonwealth;
  • One of 19 seats on a commission to study the feasibility of establishing a bank to be owned by the commonwealth for infrastructure investment purposes; and
  • One of 15 seats on a commission to develop an index of creative and innovative education in the commonwealth’s public schools.

AIM looks forward to representing employers on these commissions to ensure that the economic development bill strengthens the Massachusetts business economy.

Members with expertise in any of these subjects who wish to serve as a resource should contact John Regan, Executive Vice President of Government Affairs at AIM (jregan@aimnet.org). The association frequently relies upon employers with experience in specific subject areas to provide ideas and suggestions.

The economic development law limits the scope of the state’s corporate tax “combined reporting” requirement by including the so-called “water’s edge” provision; provides for an automatic sunset requirement on state regulations and requires proposed new regulations to include a business impact statement; and mandates a study to determine the extent to which regulatory initiatives contribute to high energy costs.

Other provisions supported by AIM include a 3 percent capital gains tax rate for individual investors in start-up companies, providing most industries with the ability to extend a net operating loss (NOL) carry forward from five to 20 years, clarification of  “claw back” provisions for projects certified under the state’s economic development incentive program; automatic extension of permits granted for economic development projects that were stalled due to lack of financing;  and reorganization of the maze of state and quasi-public organizations that deliver economic development services to employers.

Two provisions that AIM supported were not included. One would have required the commonwealth to review and eliminate agencies and regulations that have outlived their usefulness, and a second would have repealed the ban on gifts to health care providers from pharmaceutical and medical device companies.

But the law overall is a positive acknowledgment by the governor and the Legislature of the need to create short-term and long-term incentives that will help businesses to grow and put Massachusetts citizens back to work.

Topics: Employers, Associated Industries of Massachusetts, AIM, Economic Development, Deval Patrick

Shareholder Protection Act Protects Unions, Silences Employers

Posted by Brian Gilmore on Aug 11, 2010 10:21:00 AM

The U.S. House Financial Services Committee approved a bill on August 5 that will restrict the ability of employers to participate in the political process while placing no such restrictions on large labor unions.

Shareholder Protection ActCommittee members approved H.R. 4790 – the Shareholder Protection Act - by a vote of 35 to 28. Supporters introduced the legislation in response to a U.S. Supreme Court ruling earlier this year that tossed out the decades-old ban on direct corporate and union campaign spending. An earlier labor-backed attempt to re-impose the ban on corporate speech through a measure called the Disclose Act failed in the Senate after leaders there were unable to break a filibuster.

The House bill would require shareholders of corporations to vote on the total political expenditures the corporation would make in the upcoming fiscal year. All corporations would have to include in their bylaws language requiring a majority vote of approval of political expenditures in excess of $50,000.

Moreover, there is also some concern that the bill includes under the definition of political expenditures “dues or other payments to trade associations.” That provision could make dues to associations that engage in political activity subject to shareholder votes. 

The House bill targets corporate political speech only and does not apply to unions, which would remain free to spend money on political advertising without seeking approval from dues-paying members. 

Representative Michael Capuano (D-MA) is sponsor of the bill. It is co-sponsored by several Massachusetts lawmakers, including Representatives Barney Frank, James McGovern and John Olver.

The Shareholder Protection Act isn’t really designed to protect shareholder. Corporate managers are already legally required to act in the shareholders’ best interest. By singling out political speech – and only political speech – for more burdensome treatment, the proposed law attempts to do indirectly what the U.S. Supreme Court said Congress may not do directly: abridge corporations’ political speech rights. The measure clearly violates the First Amendment to the U.S. Constitution.

The bill could be considered by the full House in September before moving to the Senate, where its prospects remain unclear.

Why not contact Representative Capuano or your U.S. Representative to oppose attempts to give unions a political voice while silencing employers?

Topics: Shareholder Protection Act, Employers, Associated Industries of Massachusetts, AIM, U.S. House of Representatives

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