New Jersey Unemployment Insurance Task Force Submits First Report to Governor Chris Christie Recommendations focus on Structural Reforms to Promote Long-Term Stability and Solvency
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“Compounded by years of diversions and a national economic recession, we recognized early on the urgent need to structurally reform our current unemployment insurance program—one that thousands of displaced workers depend upon. We took action to prevent a massive tax increase on small businesses and implement needed initial reforms, but we must continue looking at solutions to bring long-term solvency to the system,” said Governor Christie. “I thank the task force for its work thus far in accomplishing these goals and look forward to reviewing the report as we move to continue reforming this broken system.”
The 12-member UI Task Force was established under P.L. 2010, c. 37 and initially convened in October 2010 to assess the State’s current unemployment insurance program and recommend changes that will provide an equitable tax formula for employers as the UI fund returns to solvency, while balancing the impact of any changes in revenue collection and benefit payments with the interests of workers, employers and the overall growth of the State’s economy.
The same law that established the UI Task Force also implemented immediate reforms to the UI law to shield New Jersey employers from a significant automatic wage tax increase and called for the implementation of stricter employee misconduct rules to expand disqualification criteria for certain employees terminated for cause.
A severe economic recession, past revenue diversions from the UI Trust Fund, sustained levels of high unemployment and generous benefit payments, forced New Jersey to borrow money from the Federal Unemployment Account to pay benefits. New Jersey currently owes $1.6 billion and is one of 32 states with outstanding loans from the federal government. To date, the amount borrowed nationally equals more than $42 billion.
The Task Force report includes the following recommendations:
The changes to New Jersey’s Unemployment Insurance System recommended in the initial report of the Task Force were made with consideration for the condition of the State’s economy, possible federal repercussions from benefit formula modifications and potential impact on workers.1.Phase In Annual Employer Tax Increases Over Next Three Years— To help shield employers from the harsh economic impact of a scheduled tax increase that will shift the current tax liability from tax column C to column E+10 effective July 1, 2011, the Task Force recommends the passage of legislation that limits the tax column shift to one column each year. For the upcoming FY 2012, the single column shift is expected to reduce an employers’ tax liability from $300 to $130 per employee on average, a savings of approximately $300 million.
2. Achieve Long-Term Fiscal Stability by Returning UI Fund Tax Bands to FY 2003 Tax Structure—To achieve long-term stability of the UI Trust Fund when solvency is realized and eliminate volatile short-term tax changes that have complicated business planning for New Jersey employers, the Task Force recommends a rollback to the tax structure that was in place in FY 2003.
“One of the biggest challenges facing New Jersey is its insolvent unemployment insurance trust fund. This report offers additional options to stabilize the fund while easing the potential tax burden on the state’s employers during these extraordinarily difficult economic times,” said Harold J. Wirths, Commissioner of the New Jersey Department of Labor and Workforce Development.
The 12-member bipartisan UI Task Force includes representatives from business, labor, and elected officials and will reconvene over the next two years to continue its work.
The full first report of the UI Task Force is available at http://lwd.dol.state.nj.us/labor/forms_pdfs/lwdhome/press/2011/UITaskForceReport2011.pdf
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