Four Key Fixes for New Jersey’s Tax Subsidy Programs Highlighted in New National Report

Since the start of the decade, New Jersey has approved over $6.5 billion in tax breaks to corporations in a futile effort to grow the state’s economy, even though this strategy is not proven to pay off for states in the long run. We’ve documented the excesses of these efforts and called for reforms that are getting traction in the State House. Now the nonprofit Pew Charitable Trusts has put out a report, “Reducing Budget Risks,” with solid recommendations for how states can build in more accountability and rein in costs. Among the report’s nine recommendations are four that are particularly applicable to New Jersey.

1. Regularly Forecast Budget Impact

Pew could have been describing New Jersey when it noted that “many states lack a consistent process for forecasting the fiscal impact” of subsidies.

We do have an annual report that lists the expected amount of lost revenue from tax subsidies and other tax credits. In addition, the state Economic Development Authority – which administers these subsidy programs – gives the legislature a projection of subsidies’ annual cost once a year.

But that’s not enough to give the full picture of the financial impact of subsidies that already have been approved by the state. That’s in large part because most of New Jersey’s major subsidies are given out over a 10-year span, and it often takes at least a few years for a corporation to start receiving its credits. So a longer-term approach to projecting budget impact is needed.

Using very limited data and rough math, NJPP estimates that the annual cost of these subsidies could top $1 billion in 2020 and stay at that level for at least a decade. The state should do its own projections, make them public, update them frequently and – crucially – share them with the Treasury and Office of Legislative Services, so analysts there can adjust their estimates accordingly — and there can be informed, honest discussion of whether all of this money is creating good jobs or just diverting resources from other public investments that are better ways to build a strong economy.

2. Limit Annual Spending

“One of the strongest protections against surprise increases in tax incentive costs is an annual limit, or cap, on program costs,” Pew notes. Unfortunately New Jersey has gone in the other direction. In 2013 an existing cap on the total amount of credits that could be approved was eliminated from the state’s largest program, Grow New Jersey. This enabled the explosion in tax breaks awarded – to the tune of $3.7 billion – in 2014 and 2015.

There are many ways a cap could help minimize financial risk to New Jersey. For example, policymakers could limit the dollar amount of subsidies approved by the EDA in any given year, or limit the dollar amount of tax credits that corporations could claim in any given year.

3. Put Subsidies in the State Budget

A big reason why business tax breaks cost so much is that they aren’t part of the state budget. So they don’t get the annual review that budget items get. Instead, legislation is approved establishing a tax credit over the years it costs whatever it costs. When lawmakers require that tax breaks be funded by annual appropriations in the state budget – like most government spending – they “are in control of their costs and have an impetus to reconsider their effectiveness,” Pew notes. Here, too, New Jersey is going the other way. A subsidy program previously paid via the budget was instead made into a less visible tax credit program last year.

Approving a lucrative tax credit program for corporations is an easy choice for policymakers when they don’t have to appropriate any money and can point to their efforts as having done something to help the economy (even if that’s not the case). It needs to be a harder choice.

Pulling all of New Jersey’s subsidy programs into the budget process – even if only by making legislators specify the dollars to be spent on tax credit redemptions each year – would promote debate about what are the best ways to best to foster broad prosperity in New Jersey.

4. Restrict Corporations’ Ability to Redeem More in Credits Than They Owe in Taxes

New Jersey, like many other states, allows subsidy-receiving corporations to sell their tax credits to an entity that owes the state taxes. This enables the sellers to receive far more money in subsidies than they actually owe in taxes, which is overly generous and violates the spirit behind tax breaks.

As Pew notes, some states are considering putting an end to this practice “as a way to keep costs under control.” In New Jersey, even some nonprofit corporations – which are exempt from state corporate taxes to begin with – receive subsidies and boost their own revenues by selling those tax credits to tax-paying businesses. Barring corporations from selling excess tax credits is a common-sense step New Jersey policymakers should take to rein in excessive costs.

Budget Address Lacks Transportation Plan, Doubles Down on Cutting Taxes on Inherited Wealth

Once again, Gov. Christie has given a budget address that fails to lay out a plan to invest in New Jersey’s greatest economic asset – its transportation networks. The governor called the very real Transportation Trust Fund crisis a “politically driven mischaracterization,” but New Jersey’s broken transportation-funding system is not driven by politics, it’s driven by simple mathematics. In July, the state will have no more money to pay for essential capital projects. It’s that simple.

The governor is holding out his proposed fix on transportation, apparently, until he can secure big tax cuts for New Jersey’s wealthiest families. But trading a gas tax hike for the elimination of the estate tax has absolutely no resemblance to “tax fairness.” In fact, it’s just the opposite, because it increases a broad tax that most affects New Jersey’s low-income and middle-class families while doing away with a narrow tax that affects only 4 percent of New Jersey’s wealthiest estates.

Lastly, the governor doubled down on a misleading “study” that business lobbyists released last week on a mythical “exodus” of people and dollars leaving New Jersey due to taxes, particularly the estate tax.

“Their study concluded that 2 million residents and $18 billion in annual income left our State over the last 10 years,” the governor said. “These facts are not debatable. They come directly from internal revenue service statistics, not from the rantings of some left-wing think tank.”

While we appreciate the shout-out from the state’s chief executive, the facts he cites from the business group’s report are indeed debatable, as they are incomplete and lack context.

Consider these facts:

If New Jersey had really “lost” 2 million residents in a decade, its population would have shrunk by almost a quarter. But that’s not what actually happened. In fact, New Jersey’s population actually grew from 8.7 million in 2005 to 8.9 million in 2014. Those numbers come from the US Census, not the so-called “rantings” the governor warns about.

Why the difference? Turns out the big “2 million” headline is missing essential facts. The data show that 2.1 million New Jerseyans departed over that decade, and 2.0 million “New” New Jerseyans moved in – about 1.4 million from other states and about 600,000 immigrants from abroad. This is a drop of just 86,000 over the decade – not even 100,000, never mind one million. Add babies born who stay in New Jersey and you have the increase noted by the Census.

Meanwhile, during the time the governor and these business lobbyists say New Jersey “lost” $18 billion in income, the amount of total income in the state actually grew by $103 billion. And the amount of income that New Jersey supposedly “loses” in any given year due to outmigration represents less than 1 percent of the amount of income that stays in the state – over the decade cited, the amount was $2.5 trillion. To say that any of this necessitates the elimination of New Jersey’s estate tax is a solution in search of a problem.

2017 Budget Preview: Plenty of Challenges and Many Unanswered Questions

Next week Gov. Christie will release his proposed budget for the next fiscal year, kicking off a season of negotiations before a final document is signed by June 30. But the state budget is more than a laundry list of government spending. It is an official statement of what counts – and doesn’t – in meeting the needs of the people of New Jersey and, hopefully, in investing in the assets that are proven building blocks of a strong economy. There are hints of what priorities will be emphasized by the governor and the Democratic leadership, but many questions remain. Here are a few of the things we will be looking for in the governor’s 2017 budget.

Will New Jersey’s economy be able to offer a boost to next year’s budget?

Although job growth in 2015 was more encouraging than the previous few years, we’re not out of the woods – not even close. New Jersey’s recovery from the depths of the Great Recession continues at a much slower pace than neighboring states and the rest of the country, placing 42nd in job growth since December 2007. The state has recovered just 82% percent of jobs lost since then, far less than our neighbors in NY (286%) and PA (117%), and the US (152%).

Last year, New Jersey added 55,200 jobs. That’s better than recent years but to get back to pre-recession levels and keep up with population growth, we would need to add 120,000 jobs every year for the next three years. In the meantime, the state continues to struggle with the country’s 2nd highest rate of long-term unemployed and a chronic foreclosure crisis that puts a stranglehold on our economic recovery.

So how has this affected state revenue collections so far this year?

So far, so good. The first six months of this year’s budget has seen a growth rate of 3.9 percent, which exceeds the 3.4 percent rate that the Christie administration had projected. Eight of the 14 major revenues, including the income and sales taxes, are growing at rates above those needed to achieve year-end targets. The $11.8 billion collected through December exceeds projections by a modest $56.3 million, which is lower than the $180 million surplus at the 6-month mark last year, but much better than the giant shortfalls we had in the previous 3 years.

Meanwhile, corporation business tax collections through December 2015 are underperforming, at 14.6 percent below the same period last year. This tax will likely continue to erode in coming years as the bills for more of New Jersey’s lavish tax breaks come due.  

All of that is to say, we are doing a little bit better, but it’s not a drastic improvement in revenues.  

Will this small bit of good news help fund our most pressing obligations?

The short answer: No, not with the two elephants sitting in the budget-writing room. Between the broken Transportation Trust Fund and the failure to address underfunded pension payments, the overdue bills are just too massive to be covered by the modest bump in tax revenue. And never mind any step to honor universal promises to relieve property taxes.

Come June 30, the Transportation Trust Fund – the state’s sole source for modernizing and expanding highways, bridges and public transit – runs dry. Recent administrations have kept the Fund functioning by shifting money from the general budget, re-directing over $3 billion committed to the cancelled Hudson rail tunnel, and significantly increasing overall debt to the point that every dime of dedicated taxes is now going to pay debt service. If substantial new revenues are not identified soon, projects to upgrade the state’s roads, bridges and public transit will be cancelled July 1 and New Jersey could face the loss of more than $1.6 billion annually in matching federal dollars.

The bottom line is that new, big revenues must be enacted. A gas tax hike is the most obvious choice for a revenue source. Gov. Christie at first said “everything” was on the table, before later ruling out a gas tax hike while campaigning in New Hampshire. The question is whether his pledge to Republican primary voters will be honored at the expense of New Jersey’s greatest asset: its location. How he plans to fund transportation projects for the next five years may be spelled out in next week’s budget address.

The other massive obligation, of course, are the unfunded pension funds for teachers and state workers. Backed by state laws, Supreme Court rulings and legal opinions, the state ultimately will have to pay the bill and the cost goes up exponentially every year the state fails to act.

To stop the hemorrhaging, Senate President Sweeney has introduced legislation to put a constitutional amendment on the ballot to require the state to make pension payments on a regular schedule. The proposed amendment requires Gov. Christie to make 50 percent of the actuarially required pension payment in his final budget year — an increase in these year’s $1.3 billion payment to $2.4 billion payment. If the amendment is passed and the pension payment schedule followed, full funding of the pension fund could be reached in 2022. However, the amendment offers no source for the dramatically increased funding that it would require.

If not approved, Gov. Christie is on track to have under-funded the pension fund by a projected $23.7 billion by the time his term ends in January 2018 and the pension funds for public employees could go bankrupt as early as 2024. The teachers’ pension could run dry in 2027.

Despite this gruesome trajectory, Christie at his most recent appearance before the legislature blasted the constitutional amendment payment solution by asking which tax hike legislators were willing to pursue to fund the scheduled payments. The fiery speech meant to impress his national audience signaled that this year’s pension payment may be short-changed yet again.

And while efforts to rein in pension costs have gotten most of the attention this past year, the unfunded liability for retiree health care costs is actually much larger because nothing has been set aside to fund them. The state now faces $65 billion in unfunded health benefit liabilities for both current and retired employees, with the bill for retirees rising noticeably each year.

Will there be a push for more tax cuts?

Despite claims of tight revenues, Gov. Christie announced his intention to eliminate New Jersey’s estate tax entirely and immediately, an essential source of revenue that brings in about $300 million annually. He claims this tax on inherited wealth is an undue burden on the middle class. But truthfully, eliminating the tax would deliver the greatest benefit to only New Jersey’s most well-off households while seriously threatening resources needed for public colleges, safe communities and health care.

Not only are we facing another budget cycle without any guaranteed commitments toward major obligations, we are facing an entirely unnecessary revenue loss that reduces our chances of investing in the building blocks that matter in a state economy: transportation, public schools and colleges and opportunity for striving families. This tax cut would come on top of $2.3 billion in business tax cuts that are now fully phased in and costing New Jersey an estimated $660 million each year moving forward, and at least $3.6 billion that have been lost thanks to the de facto income tax cut the state’s wealthiest households received when the so-called “millionaires’ tax” expired in 2010.  

One bright spot in this troubling storyline should be mentioned to help ease the pain. The Earned Income Tax Credit is stronger than ever providing a much-needed boost to the pocketbooks of over a half a million poor working New Jersey families. Last year’s increase to the state EITC to 30 percent (after a decrease to 20 percent in 2010) has also boosted the tax credit’s economic impact, generating approximately $120 million in new tax credits.

What programs are vulnerable to another year of cuts or flat-funding?

Since it’s bordering on the impossible that the economy will explode upward in the next six months to greatly affect the next budget, it is likely that programs like K-12 and higher education support and safety net programs will not receive funding that they are entitled to or that would ease the burden on New Jersey families.

Education

High-quality education does more to strengthen a state’s overall prosperity than any other economic asset. Yet, New Jersey’s investment in K-12 and higher education has decreased considerably over the past two decades and that trend is unlikely to be reversed.

Last year’s budget represented the seventh straight year the state failed to follow the school funding formula and provide districts with the aid to which they are legally entitled. The School Funding Reform Act (SFRA), which is considered a national model of state public school finance, has been cumulatively underfunded by over $7 billion. State Education Commissioner David Hespe recently acknowledged that state aid has stalled, but that the SFRA formula is likely to run at some level next year addressing the widest disparities among school districts. It remains to be seen if New Jersey’s high-quality pre-K program that targets at-risk 3 and 4 year olds across the state will be extended to more districts..

The situation is dire for college students as well. New Jersey is spending 22 percent less per student on higher education than they did in 2008, after adjusting for inflation. These cuts have driven up tuition and student fees over 14 percent since before the Recession, making it harder for New Jersey families to afford college and for the state to foster its well-educated workforce. With that the student debts borne by college graduates has steadily climbed. We will be looking closely at the budget to see whether this trend can begin to reverse course.

Cash Assistance for the Poor

For the past few years, the state has decided not to extend the so-called “Heat and Eat” program, which made it easier for New Jerseyans to receive a higher level of SNAP benefits even if they had difficulty documenting their energy costs. A disproportionate number of these households include the elderly and disabled. Maintaining the Heat and Eat program should have been an easy decision for New Jersey given the federal funds that could probably have covered the modest increased cost for a benefit that is 100 percent federally funded. We will be looking to see if the necessary funding will be included in the budget to reverse course on this unnecessary burden to New Jerseyans struggling to get by.

Another program that could help alleviate poverty in the state would be to restore cuts in TANF (Temporary Assistance To Needy Families), also known as Work First New Jersey – a crucial anti-poverty program that helps the poorest of the poor. This benefit hasn’t been increased in New Jersey in 29 years. In order for children to live in a decent and healthy environment, the TANF benefit needs to be at least $2,636 – seven times higher than the current TANF benefit for a family of three. The erosion of TANF benefits is one of the main reasons why there are 140,000 children living in extreme poverty in New Jersey. Ignoring the urgent need to restore TANF benefit is not only an immoral act, it’s a poor investment. Child poverty costs New Jersey an estimated $13 billion each year – so we can either pay now to support these children, or pay much more when they are older.

Property Tax Relief

New Jersey’s property taxes, which fund schools, local services and county programs like parks, snow removal and libraries, continue to rise. The average bill in New Jersey is now $8,353 – up $200 from last year. That is a 2.4 percent increase – the second year in a row that the average property tax bill has defied the 2 percent cap implemented by Gov. Christie and the legislature in 2011. Income tax revenues already provide over $14 billion of relief to property owners in the form of school, municipal and county aid but it’s not enough to help relieve homeowner’s property taxes. Help from the general budget is likely not an option either given the tight state finances.

In fact, funds the state collects on behalf of municipal governments from taxes on utility company equipment – which are technically supposed to be distributed back to municipalities – have been diverted for years to help plug budget holes. More than $980 million is expected to be collected by the state from the energy taxes during the current fiscal year, about $192.3 million of which will be directed into the general fund, according the League of Municipalities. This money grab has been going on since 2010 despite legislative attempts to remedy it.

Recent legislation is again calling for the gradual restoration of $331 million in cuts to energy tax receipts and Consolidated Municipal Property Tax Relief Aid, but with one caveat: that the money be used exclusively for property tax relief. It remains to be seen how – or if – the Christie administration plans to offset rising tax rates that continue to burden New Jersey property owners.

NJPP Mourns Passing of Former Trustee Herb Greenberg

New Jersey Policy Perspective joins many across New Jersey and beyond in mourning the loss of former NJPP board member Herb Greenberg, who passed away on Jan. 19 after a long fight with cancer.

Herb was the founder and CEO of Caliper Corporation, a global talent management consulting firm. After losing his eyesight as a child, he earned advanced degrees with high honors from both City College of New York and New York University, and became a lifelong advocate for progressive causes and disabled and disadvantaged people.

Herb served on NJPP’s board from 2004 to 2011. He was instrumental in the fight to secure Family Leave Insurance for all New Jersey workers, as he knew how much it would benefit both his business and his employees.

“Herb left a proud legacy of professional and personal success in expanding opportunity for those in need, including through his commitment to New Jersey Policy Perspective,” said NJPP president Gordon MacInnes.

In lieu of flowers or food, Herb’s family requests that donations be made to Learning Ally, Helen Keller International, or SAVE, a Friend to Homeless Animals.

New Website Launched to Keep an Eye on Bogus Business Rankings

Screen Shot 2016-01-15 at 10.28.56 AM

An important new website in the debate over how best to grow strong state economies was launched this week. “Grading the States” will offer ongoing critiques of several prominent business climate studies.

These reports carry a lot of weight in Trenton, where they’ve been used time and again to advance a radical agenda that threatens our ability to invest in crucial assets, by insinuating that New Jersey’s economic woes are easily explained by high tax rates. That’s why NJPP consulted on this project’s development, and that’s definitely why this website should be immediately bookmarked and frequently consulted by all of the Garden State’s leaders who care about growing the economy and creating broadly shared prosperity.

Of particular note are the excellent overviews of why business climate rankings seldom make sense, and a section outlining the real path to state prosperity.

The press release from our friends at the Iowa Policy Project, which will manage the site, is below.

New website keeps eye on bogus business rankings
Iowa Policy Project launches ‘Grading the States’ — gradingstates.org

IOWA CITY, Iowa (January 14, 2016) — The veil is off state business climate rankings that purport — inaccurately — to identify policies that promote state economic growth.

The nonpartisan Iowa Policy Project (IPP) today launched “Grading the States,” a website that will offer ongoing critiques by IPP Research Director Peter Fisher of several prominent business climate studies.

“Grading the States” may be viewed at www.gradingstates.org.

Fisher, an economist and emeritus professor at the University of Iowa, is the author of Grading Places: What do the Business Climate Rankings Really Tell Us? published by the Economic Policy Institute in 2005, with a second edition by Good Jobs First in 2013.

The new website builds on this work and will allow continual updating as new rankings, and new research, become available. “Too often, we see public officials relying on these rankings and the policy prescriptions they promote, when in fact the rankings have no predictive value for economic growth,” said Fisher.

“This online resource will present the real story behind four prominent business climate reports — and at the same time show how states can promote long-term growth and prosperity that is broadly shared.”

“Across the years, we have continued to find profound problems in the way these business climate rankings are constructed,” Fisher said.

“The measures that underlie the rankings often align with the ideology of the organization promoting the ranking, rather than research showing what may be important predictors of state economic success. The various measures, sometimes numbering over 100, are cobbled together into an index number that has no real meaning. As a result, we see wide disparity in the way various states are ranked. Most states can find a high ranking to brag about, and an alternative low one they can use to argue for drastic changes in state policy.

While useful state rankings do exist, Fisher said, the four most prominent “business climate” rankings are best simply ignored.

“Their conclusions are at best meaningless,” Fisher said. “At worst, they actually lead states to adopt policies harmful to their long term growth.”

The new website includes reviews of the Small Business and Entrepreneurship Council’s Small Business Policy Index; the Tax Foundation’s State Business Tax Climate Index; the American Legislative Exchange Council’s Rich States, Poor States; and the Beacon Hill Institute’s State Competitiveness Report.

“Grading the States” was created in collaboration with the Center on Budget and Policy Priorities. The site will be managed by the Iowa Policy Project.

Jun Choi Elected Chair of New Jersey Policy Perspective

Jun Choi NJPPFormer Edison Mayor Jun Choi was unanimously elected to serve as Chair of the New Jersey Policy Perspective board last month.

Choi succeeds acting Chair Rona Parker, who stepped in after the death of former Chair Kathleen Crotty this summer. Choi, who joined NJPP’s Board in 2013, becomes the sixth Chair since the policy organization’s founding in 1997.

“Jun will continue the tradition of leadership and commitment that Kathy – and her predecessors Jerry Stockman, Susie Wilson, Tim Carden and Bruce Rosen – brought to NJPP as it works to advance progressive state polices that benefit the people of New Jersey,” said Parker.

“NJPP is blessed to have Jun lead its Board,” said Gordon MacInnes, President of NJPP. “He brings a combination of great judgment, personal warmth and commitment to sensible progressive goals.”

Jun brings a broad range of experience in public policy, business and politics to his new role. As mayor of Edison, New Jersey’s fifth largest municipality, Jun tackled the big issues including economic development, fiscal reform, education, public safety and environmental protection. During his tenure, Edison received several honors including the “Best Place to Raise Kids” in New Jersey, according to BusinessWeek magazine.

Prior to his elected role, Jun was an advocate for public education and served as the executive director of a statewide Task Force that developed the NJ Standards Measurement and Resource for Teaching (NJ SMART) program for the Department of Education. He previously served on the Bill Bradley for President campaign.

Jun is currently a Director at Cushman & Wakefield. Prior to entering public service, he worked as a management consultant advising Fortune 500 companies on business and technology strategy. Jun earned an engineering degree from the Massachusetts Institute of Technology and a master’s in public policy from Columbia University.

“I’m honored and humbled by the support of Gordon, Rona and our fellow Trustees. NJPP has a nearly 20-year track record of effective advocacy for middle and lower income families based on sound policy and a strong analytic foundation,” Jun said. “I hope to continue that proud tradition while helping grow the organization for even greater impact.”

New Jersey’s Decision to Allow Time Limits on SNAP Will Cause Severe Hunger

The Christie administration has decided not to apply for a waiver that would have prevented the loss of SNAP (formerly know as the food stamp program) for many New Jerseyans living in high unemployment areas of the state because of their inability to secure full time employment. In effect, the poor are being punished for being poor.

On News Year Eve, the Christie administration announced that they could no longer continue the statewide waiver exempting about 11,000 “Able Bodied Adults without Dependents” (or ABAWDs in bureaucratic lingo) from what they said were work requirements. If a person doesn’t meet certain requirements for just three months they will now lose access to nutritional benefits for three years – an overly harsh penalty that will increase severe hunger in New Jersey.

In reality, this provision is not a work requirement but a time limit. Individuals who are looking for work or who work part-time (less than 20 hours a week) will still lose their SNAP. In addition, there is no requirement that jobs be available or even that the state provide training to avoid termination of SNAP. Work requirements in other public programs have always counted job search as a work activity and took into account the availability of jobs or training.

The state had a waiver for the last six years because of its high unemployment rate, and emphasized that the termination was a federal requirement and beyond New Jersey’s control. But that is only part of the story. What officials did not say is that New Jersey could still have received local waivers for areas with high unemployment – which applies to most of the state.

The state’s decision not to apply for local waivers is wrong and will harm many struggling New Jerseyans:

Submitting a waiver for areas of the state with high unemployment would avoid the SNAP time limit for most of these adults. Fifteen counties and five cities (see list below) would be eligible for a federal waiver, helping about 80 percent of the 11,000 folks who may lose benefits, or about 9,000 New Jerseyans.

The individuals subject to the SNAP time limit are the poorest of the poor. Nationally, the average income for individuals subject to the three-month time limit is 19 percent of the federal poverty level, or only $2,200 a year. About 40 percent are women, almost a third are 40 years old, and only half have a school degree or GED. Unfortunately many of them simply are not able to compete for scarce jobs in the open market.

The state will likely lose millions in federal SNAP funds. These 11,000 New Jersey residents receive about $21 million annually in SNAP, which is completely paid for by the federal government and generates $36 million in economic activity. Any substantial reduction in this amount as a result of these individuals losing SNAP will result in lost federal funds and harm local economies across the state.

The three-month time limit could result in many New Jerseyans being incorrectly kicked off SNAP. New Jersey officials will need to carefully monitor an individual’s work, training, and receipt of benefits over three year periods to determine if that person is still eligible for SNAP. In addition, the state must determine if these individuals are eligible for exceptions such as being pregnant, or having a disability or mental illness. New Jersey is well known for its poor administration of SNAP, which recently resulted in a threat from the federal government to withhold federal funds, so the prognosis for the state fully implementing these requirements is poor. It’s not hard to see an end result where many New Jerseyans are wrongly deemed ineligible and then fall through the cracks and become unable to retain this crucial food assistance.

SNAP waiver