GOVERNOR CORZINE ANNOUNCES PLAN FOR UNEMPLOYMENT INSURANCE TRUST FUND

Trenton - Governor Jon S. Corzine today announced an initiative to prevent an automatic tax increase on New Jersey employers caused by the depleted balances in the Unemployment Insurance Trust Fund.

The UI Fund, which pays weekly benefits to workers who have been separated from employment through no fault of their own, is funded by payroll taxes on employers and workers. Under state law, the fund is automatically replenished by triggering an increase in employer taxes when the fund falls below a minimum reserve level, calculated as the fund balance on March 31st each year.  According to current projections, the fund balance (including revenues payable on April 30 which are due for wages paid in the first quarter of the year), would be expected to fall below the trigger, which would automatically impose a $350 million increase in employer payroll taxes for the fiscal year beginning July 1, 2008.

"We are now seeing the result of 14 years of Unemployment Trust Fund raids and fiscal mismanagement," said Governor Corzine.  "We should avoid imposing a $350 million tax increase on employers during this national recession.  I am asking for the Legislature’s help to address this problem now to prevent this tax increase, so that businesses will have a stable and certain tax environment for economic growth in New Jersey."

The Unemployment Insurance Trust Fund was designed to be forward-funded, building up surpluses during strong economic times.  However, for more than 14 years in budgets prior to Governor Corzine's first budget in FY 2007, a total of $4.7 billion was prevented from being deposited into the UI Fund, through annual diversions to help balance the state budget.  These diversions have left the UI Fund artificially depleted at a time when it should have been fully funded in order to handle the growing number of claims for Unemployment Insurance benefits during a national economic downturn. 

"These diversions represent an unsound fiscal policy which is why I have never used that tactic in balancing the past three years of state budgets from my administration," Corzine added.

There are two components to the solution proposed today by the Governor.

1. Temporarily change the date on which the fund balance calculation is made from March 31, 2008 to June 30, 2008 for this year only; and
   
2. Augment the Fund's balance by transferring $260 million from the State's FY 2008 budget surplus to the UI Fund no later than June 30, 2008.
   

Increasing the fund balance through the use of $260 million of budget surplus monies before the date by which the next year’s employer tax contributions are determined will provide the fund with sufficient monies to stave off a $350 million employer tax increase either on July 1, 2008 or on July 1, 2009. 

 "This strategy will protect both our vulnerable unemployed population as they struggle during these difficult economic times, as well as our state's business community which is vital to restoring our state's economy to fiscal health," said Governor Corzine.  

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Photos from Governor Corzine's public events are available in the
Governor's Newsroom section on the State of New Jersey web page.