Main Street Matters

New York is one of the worst; New Jersey is also poor; Virginia remains among the best; Massachusetts and Maryland are looking better and better; Connecticut is holding steady, while Pennsylvania has some catching up to do.

That’s a summary of how small employers view the business climate in these states, according to a recent survey by the small business lobbying group, the National Federation of Independent Business. The survey asked about conditions over the past three months.

In state after state, insurance costs emerge as one of the biggest concerns of owners of small businesses, according to NFIB’s Small Business Conditions reports on 26 states.

NFIB president and CEO Jack Faris said the group hopes the regular reports will become “an influential tool for business and opinion leaders who understand that the success of Main Street is directly tied to the success of their communities and their state.”

For complete survey questions and results, visit www.nfib.com. The following represent excerpts on results from six states surveyed: New York, New Jersey, Connecticut, Pennsylvania, Maryland, Massachusetts and Virginia.

NEW YORK: Highs and lows

The highest costs of doing business in America are found in New York, according to the report titled New York Small Business Conditions.

“Small companies have one problem. It’s that they cannot compete when paying the highest costs of doing business in the nation,” said Mark Alesse, state director of the National Federation of Independent Business.

New York’s business climate has fallen to the worst in the Northeast, according to the report.

“Our economy can’t get out of first gear because we have the highest overall costs of doing business in the nation. These hurt small businesses more than they do big businesses, but both are impacted negatively. Costs include income taxes and corporate taxes, health insurance, workers’ comp insurance, liability insurance–if you can get it–property taxes, energy and wages. All are too high and make us uncompetitive,” Alesse said.

Just a net 12 percent (positive minus negative) of businesses indicated that profits were good in New York, and a net 22 percent of those respondents characterized sales as good–both were the lowest in the region. Overall, 56 percent of small employers reported that in the last three months their purchasing prices rose, while only 16 percent reported that they had increased their prices. However, a majority (56 percent) said increased sales prospects led them to conclude the outlook over the next three months was good.

Small-business hiring has been slow, but 22 percent said they had one or more job openings. Over the same three-month period, 45 percent of New York’s small business owners made capital expenditures. Some 47 percent reported spending on technology upgrades, and 42 percent were making expenditures for employee training.

Asked to pick their most important business problem, 16 percent of New York’s small-business owners chose insurance, followed by 15 percent who chose taxes, while 14 percent identified competition from big business.

Only a net 3 percent (percent supportive minus percent not supportive) of New York’s small employers believed the statewide business climate was “supportive,” as compared with Connecticut (14 percent), Massachusetts (13 percent) and Pennsylvania (23 percent).

“The Wall Street Journal said that New York is now ‘one of the worst places in the country to run a business,’ and they were looking at the high costs of doing business,” Alesse said, adding that people “with the know-how to create jobs and wealth are voting with their feet for a better economy. New York needs to be a state that provides protection for the economic ambitions of its citizens.”

NFIB has set its legislative agenda. Most of all, small business wants New York to enact a fiscally responsible budget. Other issues the NFIB is working on include health insurance costs, workers’ compensation and income tax reform.

“And last, but not least,” Alesse said, “we need to fix our broken tort laws. Today, builders and contractors are losing frivolous lawsuits for worksite injuries even if they were caused by a worker’s own negligence. In terms of reputation for business-friendliness, this is the state’s biggest black-eye.”

MASSACHUSETTS: Getting better

The overall business climate in Massachusetts is improving, according to the inaugural Massachusetts Small Business Conditions report.

“While there are still plenty of problems facing small firms today–from the high cost of health insurance to soaring unemployment insurance rates–the overall outlook of small business owners is good,” said Bill Vernon, NFIB/Massachusetts state director.

A net 33 percent (positive minus negative) of the state’s small employers believed business conditions in their market area are good. They also saw those conditions remaining stable. A net 62 percent characterized the outlook for business over the next three months as good, citing sales prospects as the primary reason for their view.

Small business hiring in the Commonwealth has been slow with 19 percent noting they had “one or more” current job openings. Over the same three-month period, 42 percent of small business owners made capital expenditures. While 41 percent reported spending on technology upgrades, the number of owners making expenditures for employee training was 37 percent.

Of those surveyed in Massachusetts a net 18 percent indicated that profits were good and a net 35 percent characterized sales as good. Overall, a net 48 percent of small employers reported that over the last three months their purchasing prices rose while a net 17 percent reported they had increased selling prices.

The Bay State’s small business owners ranked insurance and competition from big business as the most serious problems they face.

“As we see from the finding, the cost of insurance continues to be the dominant problem facing small firms today. Lawmakers have to get a handle on health insurance costs and other payroll costs if we are ever going to grow jobs in Massachusetts,” Vernon concluded.

PENNSYLVANIA: Lagging behind

Pennsylvania’s overall small business conditions lag behind its neighbors and the country, according to the Pennsylvania Small Business Conditions report.The report noted that Pennsylvania firms are experiencing higher employee benefit cost pressures–due in large part to rising health insurance premiums–than their counterparts across the nation.

“Higher taxes combined with rapidly rising health insurance premiums and higher employee benefit costs are making it increasingly difficult for small businesses to compete–not only for customers, but also for workers,” said NFIB State Director Kevin Shivers.

Insurance was the most frequently cited small business problem. Thirty-six percent of business owners indicated that health insurance premiums were the most rapidly rising; with one-in-five reporting these insurance cost increases caused them to terminate or postpone planned business investment. “Under-investment results in lower productivity and fewer new jobs,” commented Shivers.

The study found that a net 29 percent of the state’s small employers believed business conditions in their market area were good, which lagged behind neighboring states, including Maryland, New Jersey and Ohio. Of the 26 states included in the survey, business owners in 22 states had a more favorable view of business conditions in their markets than Pennsylvania businesses. Only a net 15 percent of Pennsylvania businesses believed conditions were improving.

Still, the study found small business owners are optimistic. A net 63 percent forecast good business conditions for the next three months citing sales prospects as the primary reason for their view. However, even these hopeful expectations are below the average of the 26 states surveyed, including Maryland and Ohio.

NEW JERSEY: Down but not out
The New Jersey Small Business Conditions report found that this state’s overall business climate is not viewed favorably. Only a net 15 percent (positive minus negative) of small business owners surveyed reported viewing the Garden State’s business climate as “supportive” of small business.

“There are still plenty of problems facing small firms today–from the high cost of health insurance to soaring unemployment insurance rates–which give business owners pause today. But they do believe that the conditions may improve down the road,” said John Holub, NFIB/New Jersey state director.

Small business hiring in New Jersey has been slow, with 23 percent noting they had “one or more” current job openings. Over the same three-month period, 41 percent of small business owners made capital expenditures: 41 percent upgraded their technology, while 37 percent spent money on employee training.

Of those surveyed in New Jersey, a net 16 percent indicated that profits were good and a net 29 percent characterized sales as good. Overall, a net 47 percent of small employers reported that over the last three months their purchasing prices rose while a net 12 percent reported they had increased selling prices.

However, a net 54 percent see the outlook for business as good over the next three months, primarily due to sales prospects.

New Jersey small business owners ranked insurance and competition from big business as their most serious problems.

CONNECTICUT: Good and steady

Connecticut’s overall business climate has remained stable, according to NFIB’s Connecticut Small Business Conditions report.

“While there are still plenty of problems facing small firms today–from the high cost of health insurance to soaring unemployment insurance rates and mandated business costs–the overall outlook of small business owners is good,” said Armando Paolino, NFIB/Connecticut state director.

A net 14 percent of the state’s small employers believed the business environment was “supportive.” However, a net 33 percent reported business conditions in their market area as good. They also saw those conditions improving. A net 67 percent characterized the outlook for business over the next three months as good, citing sales prospects as the primary reason for their view.

Small business hiring has been steady in the last three months, as 22 percent had “one or more” job openings. Over the same three-months, 43 percent of small-business owners made capital expenditures. While 47 percent spent money on technology upgrades, 45 percent made expenditures for employee training.

Of those surveyed in Connecticut, a net 18 percent indicated that profits were good and a net 40 percent characterized sales as good. Overall, a net 60 percent of small employers reported that over the last three months their purchasing prices rose while a net 22 percent reported they had increased selling prices.

Asked to rank their most important business problems, Connecticut’s small-business owners ranked insurance and competition from big business at the top.

MARYLAND: Feeling good
Maryland’s overall business conditions are good and improving, according to the Maryland Small Business Conditions by NFIB.

“Maryland’s small-business community appears to be getting its feet under them and they’re feeling optimistic and good. However, rising health care costs remains a major concern,” said Ellen Valentino, NFIB/Maryland director.

A net 65 percent of the state’s small employers believed business conditions in their area are good. Maryland’s small-business owners topped the region compared to Pennsylvania’s 29 percent and Virginia’s 53 percent. A net 77 percent characterized the outlook for business over the next three months as good, citing sales prospects as the primary reason for their view.

Small business hiring has been steady in the last three months, with 23 percent reporting “one or more” current openings. Over the same three-months, 44 percent of small businesses made capital expenditures, with 49 percent buying technology and 44 percent, employee training.

Of those surveyed in Maryland a net 46 percent indicated that profits were good and a net 58 percent characterized sales as good.

NFIB members have consistently said that rising health care costs are their number one concern. Over the past year, 35 percent have reported an increase in employee health care costs. “Maryland’s lawmakers have to take notice and act accordingly. The increase in health care costs to the small business community cannot continue,” warned Valentino.

“As we see from the findings of the study, clearly the small business community feels good and appears to be moving through some difficult times,” she noted.

VIRGINIA: Still very friendly
Virginia’s overall business climate is supportive of small business, especially when compared to some of its neighboring states, according to the Virginia Small Business Conditions report.

A net 35 percent of respondents indicated Virginia is “supportive” of small business. Comparatively, Maryland and Tennessee registered a net 31 percent in each state, while North Carolina reported a nearly identical net 36 percent. In Virginia, more than 50 percent said government officials, bankers, media outlets and community organizations are supportive or highly supportive of small business while only 15 percent disagreed.

“Virginia is a relatively business-friendly state,” NFIB/Virginia State Director Gordon Dixon said. “However, this study also shows that small businesses remain concerned about several challenges, including access to affordable health insurance.”

Dixon said 35 percent of respondents indicated employee health premiums are rising more rapidly than any other insurance cost. Rising workers’ compensation premiums (12 percent), the second biggest concern, lagged significantly.

A net 53 percent of the state’s small employers indicated business conditions in their market area are good, which trailed Maryland (net 65 percent) but surpassed North Carolina (net 38 percent) and Tennessee (net 47 percent). A net 24 percent saw those conditions improving, which compared to a net 25 percent in Maryland, net 27 percent in North Carolina and net 21 percent in Tennessee. A net 71 percent characterized the outlook for business over the next three months as good, citing sales prospects (43 percent) and greater productivity (12 percent) as primary reasons for their view.

A net 31 percent indicated that profits were good, and a net 46 percent of those same respondents characterized sales as good. Overall, a net 42 percent reported that over the last three months their purchasing prices rose, while a net 14 percent said they had increased selling prices.