Feds Won’t Bail Out NJ Unemployment Fund

TRENTON – New Jersey shouldn’t expect much help from the federal government to bail out the state’s insolvent unemployment insurance fund, according to U.S. Sen. Robert Menendez (D-NJ).

Gov. Chris Christie wants Washington to forgive the state’s $1.2 billion and growing debt, borrowed from the federal government to allow New Jersey to continue paying unemployment claims.


That possibility is looking extremely unlikely. Twenty-seven states have borrowed about $30 billion to pay their unemployment claims, according to Menendez. He said it is “just not possible” to cover all of the costs “in this budget climate,” but added that he would work to extend New Jersey’s payments, or perhaps forgive the interest on the borrowed money, as a more “realistic” way of offering help.

Interest payments of about $180 million on the state’s debt would be due in 2011, according to state Labor Commissioner Hal Wirths, who added “any help would be great.”

“We have our own problems we have to deal with in New Jersey. Many other states have these problems, and from the federal perspective they have to deal with the whole,” Christie said after his meeting Monday with members of New Jersey’s congressional delegation. “Of course they’ll be fighting for New Jersey to get the best deal that we possibly can.”

The governor proposed a plan last week to help shore up the state’s unemployment insurance fund by cutting benefits, but Democratic lawmakers are sharply opposed to the idea.

Senate Majority Leader Barbara Buono (D-Middlesex) said it is “unfortunate” that more federal help isn’t available, but promised that Democrats would work with the governor to find a solution that doesn’t cut worker benefits.

Businesses will face a significant unemployment insurance tax hike if legislators do not modify a state law intended to replenish New Jersey’s depleted unemployment fund. The state’s unemployment rate is currently at 10.1 percent, and many fear the automatic tax hike could cause more job losses.

On July 1, the unemployment tax paid by employers will increase to the highest rate under the law, forcing business owners to pay on average an increase of 52 percent or $400 per employee, according to the governor’s office. The governor’s plan promises to reduce the take hike to 17 percent, an increase of $130 per employee.

Christie proposed reducing the weekly unemployment benefit maximum to $550, down from the current $600. This change would save an estimated $295 million per year, according to the governor. Christie also proposed implementing a one-week waiting period before unemployed workers could begin claiming benefits, saving an anticipated $67 million per year.

The governor wants to implement tougher eligibility standards in cases where workers were dismissed as a result of misconduct, saving an expected $189 million per year. Christie also proposed making extended unemployment benefits contingent on receiving full federal funding of benefit costs, yielding an expected savings of $1.6 billion over the next two years.

The governor’s plan calls for changing the tax law to keep the employer tax from jumping more than one rate per year. Under the current law, employers are now paying the second lowest rate, but will see a jump to the highest rate on July 1.

Christie also supports a constitutional amendment proposal that would prevent the government from using unemployment insurance funds for other purposes.

Christie will need to work with  state legislators to implement any changes to the unemployment system.

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