STATE – An increasing number of claims is rapidly draining the fund that bankrolls unemployment benefits in New Jersey, raising the unwelcome prospect that taxpayers will be required to provide a cash infusion.
According to the state Labor Department, businesses pay about $2 billion into the fund each year, but as of the end of November, it only had a balance of $750 million. Last month, New Jersey paid out $169 million in claims, a 23 percent increase compared with the $138 million paid out in November, 2007, according to records maintained by the federal government.
Should the fund’s balance continue to decline, businesses will face an automatic $400 million tax increase next June. A similar hike on businesses was averted this year when the state provided a $260 million emergency cash infusion.
A $400 million tax increase on businesses “would certainly devastate New Jersey’s economy,” said John Rogers, vice president of human resource issues for the New Jersey Business and Industry Association.
It is unlikely that the state – which already projects a $1.2 billion shortfall in the current budget – will be able to find the resources to provide another emergency infusion. Gov. Jon Corzine is looking to incoming President Barack Obama’s administration to subsidize the fund.
At its peak about four year ago, the unemployment claims fund held approximately $3 billion. Lawmakers diverted more than $4 billion from the fund to cover the cost of state aid to hospitals.
“We warned the diversions the Legislature has done to the fund would come home to roost at the worst possible time,” said Rogers. “We’re hemorrhaging money out of a fund that was almost insolvent.”
Lawmakers were considering a resolution to prohibit future diversions from the Unemployment Trust Fund, but the move comes too late to avoid this crisis.
New Jersey’s unemployment rate has surged from 4.2 percent to 6 percent in the past year.
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