newjerseynewsroom.com

State Democrats not going along with Governor

BY TOM HESTER SR.

NEWJERSEYNEWSROOM.COM

UPDATED

Citing the state government's fiscal emergency, Gov. Chris Christie Thursday unveiled proposals to reduce benefits for future unemployed New Jerseyans and the amount of money employers must contribute to the jobless fund.

Christie said part of his action is to "stave off a devastating tax hike for New Jersey employers" that could increase an automatic payroll increase of as much as $683 per employee. The state Unemployment Insurance Trust Fund is presently insolvent.

The governor said the proposal would give small businesses some flexibility and provide critical relief during these tough economic times. The plan would, among other things, phase in manageable payroll increases designed to limit the impact on employers.

It would require a one-week waiting period before benefits can be claimed, as is done in 40 other states. Christie said this would not shorten the benefits eligibility period and would result in $67 million in annual savings.

It would also require employees dismissed for "misconduct" to obtain other employment for a prescribed period of time before qualifying for unemployment benefits. This would save an estimated $189 million annually.

Christie would make the "extended benefit" provision dependent on the continuation of 100 percent federal funding of benefit costs. He said this is a provision that has been adopted in 21 other states, including three neighboring states and would result in $1.6 billion in savings.

Under the existing law, borrowing from the federal government for the unemployment insurance fund would continue until 2015. Under Christie's proposal, borrowing would cease in 2013, and shorten by two years — 2015 vs. 2017 — the anticipated pay back of the federal funds.

Senate President Stephen M. Sweeney (D-Gloucester) said he would not consider any legislation to decrease benefits to New Jersey's unemployed.

"This idea is a total nonstarter that will not even find its way through the Senate doors,'' he said. "The dead of winter is no time to leave New Jersey's unemployed out in the cold. This is not a plan to trim costs, it is a hit on families who right now depend on their unemployment checks to make ends meet.''

Sweeney said he would be willing to work with the state's Congressional delegation to seek federal assistance to shore up the Unemployment Trust Fund. He said he is also open to sitting with Christie to investigate other options.

Assembly Speaker Sheila Y. Oliver (D-Essex) and Majority Leader Joseph Cryan (D-Union) issued a statement calling Christie's plan ill advised.

"It is insensitive and unsound and raises serious concerns about whether Governor Christie understands the plight of the working-class and poor in this state,'' they said. "We are open to considering serious alternatives and fixes, but any plan that saddles unemployed workers with the weight of fixing the unemployment fund is immoral and sends the wrong message to hard-working New Jerseyans.''

Assembly Republican Leader Alex DeCroce(R-Morris) said, "Governor Christie's reform plan for the unemployment insurance fund addresses an issue that cannot be avoided any longer. Once again, the governor is demonstrating that he will not shy away from dealing with difficult challenges. His proposals will actually protect jobs in the long run. He has put forth a solution to a public policy that has been put on the back burner far too long, and his action continues to show that he keeps promises that he makes.''

The unemployment insurance fund ran out of cash in March 2009, forcing New Jersey to borrow $1.2 billion from the federal government to pay unemployment claims. By law, business payroll withholding for unemployment insurance automatically increases once the fund goes below a certain level. On July 1, employers would have experienced an average per-employee hike of $400 — a 52 percent increase — while some employers would see an increase of up to $683. Christie's plan would reduce the rate, allowing for a 17 percent rise of $130 per employee.

"This is the wrong time, under the wrong economic conditions, to impose such an onerous and undeserved tax hike on New Jersey businesses," Christie said. "If we want to grow payrolls and improve our economy, we cannot ask businesses to shoulder the full brunt of the irresponsible budgeting policies that bankrupted the unemployment compensation fund in the first place.''

Christie said he supports the proposed amendment (SCR-60) to the state Constitution to end the practice of taking dedicated funds such as unemployment compensation to pay for other needs.

The Compensation Fund, became insolvent when nearly $4.6 billion of employer and employee contributions were previously diverted for other purposes.

Sweeney said of the plan to reduce benefits, "This is money that pays the monthly heating bill, puts food on the table or gets the gas in the car to go job-hunting.''

Sweeney noted that New Jersey is one of only three states — along with Pennsylvania and Alaska — where employees contribute to the Unemployment Trust Fund, and decreasing benefits would penalize workers who paid in to the system while employed.

Sweeney also is skeptic of a to phase-in a scheduled unemployment tax increase. He said he fears such a plan would prevent the unemployment fund from being able to meet its obligations — essentially having the same effect as a trust fund raid — while not insulating businesses from eventually having to pay the full increase.

"While I understand the concerns of business, we cannot paper over the fact that this increase is inescapable," Sweeney said. "Whether the pain is felt immediately or takes two years — the fund still must be able to meet the needs of the unemployed. Keeping money from going into the trust fund is every bit as wrong as raiding it."

Sweeney also noted that neither plan would have any impact on the state budget, since the unemployment insurance fund is a self-sustained trust fund.

Oliver and Cryan said the Legislature has to be involved in to fix the jobless fund and help employers.

"On a practical side, the plan risks our ability to receive federal unemployment benefit funding help and threatens the future solvency of the unemployment fund. It is, quite simply, an even worse fiscal disaster in the making,'' they said. "Nobody wants to see a tax increase on businesses, but Democrats have worked hard in recent years to provide our businesses with an array of tax breaks and incentives and postponed and eased many unemployment tax increases. Governor Christie himself said just a few weeks ago that we cannot continue to run an unemployment fund based on debt, yet that is exactly what he is now proposing. It's becoming more and more clear that under Governor Christie, the rich will be getting richer while the working-class and the poor continue to struggle."