Tired of waiting for help in the form of a federal economic-stimulus package, several states have passed or are considering bills designed to jump-start their stalling industries, but restaurateurs say they are uncertain whether such measures actually would help them.
Lawmakers in New Jersey, Ohio and Florida have enacted economic packages in their states, while California’s governor, Arnold Schwarzenegger, so far has not won legislators’ votes on two proposals that he said would prop up the business community while reducing the state’s $11.2 billion budget deficit. In addition, Oregon, Washington state and Wisconsin are expected to consider their own stimulus packages in January, according to the website
In New Jersey, Gov. Jon Corzine, a Democrat, signed legislation Nov. 25 that would pump $50 million into businesses over a two-year period. Jason Butkowski, a spokesman for New Jersey Senate Democrats, said the Main Street Business Assistance Program bill, in addition to freeing up money for business loans and guarantees, would give companies, including restaurants, $3,000 grants for each job they create and sales tax reimbursements on capital purchases of $5,000 or more. It also would repeal a tax provision that allows the state to tax businesses on income earned elsewhere if that other state doesn’t already tax the income. Butkowski added that the New Jersey Economic Development Authority would be responsible for administering the funds.
“This program will provide loans and guarantees for small and midsized businesses to protect them from the worst of the national economic crisis,” he said. “So many restaurants are considered small and midsized businesses, they could apply for the additional funds in order to expand their businesses and offset some of the economic pain that is going around.”
Passage of the bill comes amid reports that New Jersey currently is facing an operating deficit of $1.2 billion, which Butkowski said is expected to increase during the next fiscal year.
But Deborah Dowdell, president of the New Jersey Restaurant Association, while pleased with the passage of a stimulus package in her state, said she is somewhat skeptical of how the bill would actually help the majority of members in her organization.
“We are thrilled as an organization that the governor and the legislature are enacting some pro-business measures,” she said. “On the other hand, the reality is very little of what [passed] will touch the small businesses that operate as restaurants.”
For example, she said, “a $3,000 grant for hiring and retaining employees for a whole year [won’t help when] most restaurants are not hiring. They’re shaving hours, not hiring additional people, which typically they would during this period.”
Dowdell further indicated that the paperwork involved with applying for the aid would be complicated and time consuming.
She said her group “initially supported a 50-percent sales tax holiday—anything that would stimulate spending from Black Friday to the end of year.”
“That’s really what we were calling for,” Dowdell said. “How do you offset the losses we’re clearly going to face with holiday sales through the first quarter of the year? Not much of anything that passed is going to affect small businesses on Main Street. The intention was there, but I don’t think much of it will impact them in the short term.”
Despite the recent pledge by Michigan Gov. Jennifer Granholm, a Democrat, to release approximately $150 million to local banks who would in turn loan that money to area businesses and residents, Andy Deloney, a spokesman for the Michigan Restaurant Association, said the plan is less than substantial.
“We’re looking at a big-time deficit next year, so the state is in no position to give out money right now,” he said. “The governor [said she was going] to free up some pot of money, and that’s great, but it’s not any stimulus package by any means. There’s a lot more we could do. Hopefully, by the end of the year, we will have legislation that will relieve business taxes. A lot of folks, including restaurant owners, are paying a lot more in taxes. That’s one of the things we’re trying to make happen.”
Deloney said the state also places a 22-percent surcharge on the business tax.
“Let’s say the liability is $100,000,” he said, “and there is the 22-percent surcharge. Now the total liability is $122,000. This serves no purpose but to take more money out of business owners’ pockets and give it to the government. The governor is saying she can’t provide relief for businesses in the state, but we hope legislation will be signed to reduce the tax.”
In California, Schwarzenegger called for an emergency session of the legislature Nov. 25 in which lawmakers were to vote on a $1.6 billion stimulus package that included provisions allowing for more flexible work schedules that could reduce the strain on the state’s unemployment insurance fund, and a clarification of the state’s meal and rest period laws, which he claimed would reduce the amount of litigation and costs related to fighting meal break-related lawsuits. Lawmakers, however, failed to pass the legislation, and the governor has vowed to bring them back again before the year is over to vote once more.
“We have drastic problems that require drastic and immediate action,” Schwarzenegger said in a statement. “We must stop the bleeding right now.”
Jot Condie, president and chief executive of the California Restaurant Association, echoed that sentiment.
“Unfortunately, the state isn’t in any position to afford any loans,” Condie said. “It’s in a deficit state right now. But in dealing with meal, rest period and overtime issues, those are components that are most valuable to the industry. [Clarifying] meal and rest periods would help significantly. The main reasons [operators are] being sued are the gray areas involved. So it would help restaurateurs know where they stand and ease the rules when employees want to take a break.”