N.J. may outlaw raids on state benefit funds

By Angela Delli Santi
Associated Press
December 1, 2009

TRENTON – Taxes paid by New Jersey businesses to fund unemployment, disability, and family leave could no longer be diverted to other programs if voters approve a prohibition on such raids.

Voters could be asked as soon as November to approve a constitutional amendment banning future raids.

About $4.8 billion has been diverted from the Unemployment Insurance (UI) Fund since 1992, mostly to pay for charity health care. Gov. Corzine, a former Wall Street chief executive, is the first governor in nearly two decades not to try to divert money from employee-benefit programs to help meet the rising costs of indigent health care or balance the budget.

John Burzichelli, a South Jersey Democrat who is cosponsoring the measure in the Assembly, said a constitutional amendment constraining government raids – even for worthy programs – would be responsible fiscal policy and would lessen the chances that an eleventh-hour tax increase would be imposed on businesses to beef up a fund that has been raided.

“From an employer’s standpoint, the amount they’ll be required to pay in unemployment taxes will be known,” Burzichelli said. “This helps make New Jersey a little more competitive in the job world.”

The state’s 250,000 businesses were assessed an additional payroll tax of $90 per employee on July 1 after the balance in the once-robust unemployment fund dwindled to a level that triggers an automatic tax hike.

“Despite the tremendous severity of the unemployment problem, had we had that $4.7 billion in the fund, we would have had more than enough to pay all the claims,” said Philip Kirschner, president of the New Jersey Business and Industry Association, an employer group. “Employers are paying for the lack of fiscal discipline of administrations of both parties.”

Govs. James J. Florio, Christie Whitman, and Jim McGreevey each diverted more than $1 billion from the unemployment fund after receiving legislative approval. In March, New Jersey turned to federal aid for help paying its rising unemployment claims.

New Jersey, one of 25 states borrowing from Washington to meet its unemployment obligation, owed $800 million as of Nov. 25, the U.S. Department of Labor reports. The loan is interest-free through next December.

The Assembly Labor Committee yesterday approved the resolution asking voters to consider the ban on using money paid into the unemployment, disability, or family-leave funds for anything other than the intended purpose.

The resolution heads to the Appropriations Committee on Thursday. The Senate unanimously approved a similar version last year.

A Senate cosponsor, Tom Kean Jr., said the resolution should be sent to voters in the next election.

“Continuing deficits caused by raids on the unemployment fund will lead either to more borrowing or calls for job-killing tax increases on employers,” Kean said.

The proposal enjoys bipartisan support and could be approved before the end of the year.

It does not require the signature of the governor, but must pass both houses of the Legislature by a three-fifths majority to be placed on the ballot.