Task force recommends phasing in annual employer tax increases over 3 years to help unemployment insurance fund

A task force formed last summer to examine the state’s beleaguered unemployment insurance fund recommends phasing in annual employer tax increases over the next three years.

In addition, the report of the N.J. Unemployment Insurance Task Force, headed by  state Sen. Fred Madden, (D-4) of Camden, recommends achieving long-term fund stability by returning it to a fiscal 2003 tax structure.

The report delivered to the governor’s office states that New Jersey employers will “shoulder the responsibility” to restore fund solvency and repay a federal loan, which will include an unemployment insurance tax rate increase costing an average of $300 per employee.

The report further recommends an annual assessment – beginning this year – to begin payment of interest on the federal borrowing, and that beginning in 2012 there should be an additional .3 percent federal unemployment tax to repay the state’s loan. That assessment would come to approximately $21 per employee, the report states.

The report details the history that led to the fund’s insolvency, pointing out that by 2009, after almost 20 years of underfunding while the state’s jobless rate climbed to approximately 10 percent, the fund could no longer meet its benefit obligations.

“This sustained demand for unemployment benefits drained the fund and drove it into insolvency,” the report states. The state had borrowed $1.75 billion as of April 30, 2010, with projections of an additional $1 billion needed to pay claims over the next two years.

Sen. Joe Pennacchio, (R-26), of Pine Brook, praised the report on Friday, but pointed out a bit of déjà vu:

“What most disturbs me is that only 25 years ago, when the Unemployment Insurance Fund was facing many of the same problems, a similar report was issued that contained many of the same fixes,” he said in a release.

“When the Legislature implements the much needed reforms,  I believe it would be helpful if the state took actions to ensure that the reforms are permanently enacted rather than easily changed during flush economic times.”

Compounding the problem, according to the report by the 12-member commission, is that New Jersey’s benefits are among the nation’s most generous.  And in a two-year period, the state’s jobless rate more than doubled from 4.5 percent in December 2007 to 10 percent in December 2009.

In addition, the report states that the average number of people exhausting 26 weeks of benefits soared from 45 percent to 65 percent.

“The Task Force is sensitive to the struggle that businesses face in this difficult economic time, and recommends managing the tax increase through legislation that phases in an annual single tax column shift over the next three years,” the report states.

The task force also urges a rollback to the tax structure in place in fiscal year 2003.   














Task force recommends  phasing in annual employer tax increases over 3 years to help unemployment insurance fund