New tax hike for businesses? NJ unemployment fund may need help

JOHN REITMEYER, BUDGET REPORTER | SEPTEMBER 15, 2020

NJ Spotlight News

Department of Labor and Workforce Development Commissioner Robert Asaro-Angelo testifies before Senate committee Tuesday, Sept. 15, 2020.

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Employers across the state could be facing a tax hike next year to make sure the fund that pays out unemployment benefits in New Jersey remains solvent.

A final review of the numbers is still months away, but Department of Labor and Workforce Development Commissioner Robert Asaro-Angelo told lawmakers Tuesday an increase in the assessment the state requires employers contribute toward unemployment benefits is likely looming without federal intervention.

“We are hopeful that there’s going to be (federal) relief for trust funds,” Asaro-Angelo said during a Senate Budget and Appropriations Committee hearing in Trenton.

“We hope there’s direct funding to support our trust funds because that will ease the burden on employers in New Jersey, and across the country,” he said.

Without federal help, an increase in the employer assessment would be required in July when many New Jersey businesses could still be facing challenges due to the ongoing coronavirus pandemic.

“That could be a very hefty and significant hit to all the employers,” said Sen. Steve Oroho (R-Sussex).

New Jersey has been hit hard by the coronavirus pandemic and job losses that were triggered by the economic restrictions put in place to help slow the rate of new infections.

More than 1.5 million residents have filed for unemployment benefits since mid-March, and nearly $15 billion in state and federal assistance has been paid out to those who have lost their jobs, according to the latest data from Asaro-Angelo’s department.

Unemployment fund exhausted

The surge in claims for unemployment benefits has exhausted a trust fund New Jersey has operated for decades to fund jobless benefits. Like many states, amid the pandemic New Jersey has had to turn to the federal government for no-interest loans to ensure funding for unemployment benefits remains available.

The unemployment trust fund is supported by money collected through payroll taxes levied on both employers and employees in New Jersey. The unemployment fund operates separately from the state budget and its revenues are constitutionally dedicated to funding unemployment benefits.

Only the assessments on employees are fixed. To determine the assessment on employers, a review of the fund is conducted each year in March. A column of rates is used to help analyze whether the employer rate should be adjusted upward or downward, depending on the health of the fund; changes, if required, go into effect automatically on July 1.

Before the pandemic, a booming economy had helped to ease the burden on the state’s unemployment system and on New Jersey businesses via their trust-fund contributions.

But the trend quickly reversed amid the pandemic, Asaro-Angelo told lawmakers on Tuesday as he also addressed questions about some of the problems his department has faced with this year’s record-setting volume of benefits claims.

Pinning hopes on federal aid

The commissioner pointed to the role the federal government could play by coming to the aid of businesses now facing a tax hike since New Jersey is not the only state facing concerns about funding unemployment benefits.

“I don’t want to get ahead ourselves, but I think if there’s no federal relief, anybody who’s looking at the numbers will know that we’re going to be in the far opposite column of where we are right now,” Asaro-Angelo said.

Oroho said any change in the employer assessment next year would come when many businesses could also be paying higher corporate taxes under a $32.4 billion state budget plan put forward by Gov. Phil Murphy late last month.

To help increase year-over-year spending despite revenue losses triggered by the pandemic, Murphy, a Democrat, has proposed about $1 billion in tax hikes, including an extension of a temporary top-end corporate-business tax rate that was supposed to begin phasing out this year. Lawmakers and Murphy have until Oct. 1 to strike a deal on the budget and the governor’s tax proposals.

“Just for my colleagues to understand, as you go through this budget and you take a look at the kind of tax increases that have been submitted by the governor, this is something that could be coming right on the heels of the corporate business-tax (hike) as well,” Oroho said as he discussed the employer assessment with the commissioner.

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