New Jersey lawmakers are having another go at a proposal to use the state’s COVID-relief funds from the White House to refill its unemployment system, drained during the pandemic, and stave off business tax increases.
Similar proposals gained traction last summer and during the lame duck voting session after the state Department of Labor and Workforce Development revealed that New Jersey businesses would have to pay $252 million starting last October to replenish the state’s unemployment trust fund.
The push comes as Gov. Phil Murphy and Democratic leadership vow to take on New Jersey’s notoriously high cost of living and doing business.
Murphy’s office declined to comment, while the Senate Democrats Office could not be reached for comment.
All told, the state received $6.4 billion under the Biden administration’s American Rescue Plan, for which $700 million in spending was approved by lawmakers in November.
“As our state moves forward from the difficulties of the past few years, we must focus on making New Jersey a more affordable place for residents to start and maintain their small business enterprises,” reads a prepared Feb. 3 statement from the planned sponsor, Assembly Majority Leader Lou Greenwald, D-6th District.
Between March 2020 and September 2021, an estimated 1.6 million New Jerseyans filed for unemployment amid strict business restrictions to get the COVID-19 pandemic under control. Roughly $35 billion in unemployment benefits were paid out during the closures, of which $9 billion came from the state’s coffers, according to estimates from the Assembly Democrats Office.
As part of a law Murphy signed last January, the $252 million tax increase is the first of three; businesses will be socked with a $296.6 million increase later this year and another $336.4 million hike in 2023, the office added.
The proposed Assembly Bill 2152 would cap the tax hike in 2023 at the 2022 levels.
The state unemployment fund borrowed billions of dollars from the federal government to stay in the black – something 19 other states have done during the pandemic, according to a report from Stateline, an initiative of the Pew Charitable Trusts.
A2152 also calls for using some of those funds to repay the debt rather than impose the tax increases on businesses.
“This legislation will provide meaningful relief for employers by keeping tax rates manageable so that they can invest in their businesses, hire more staff, and pay wages and benefits to their employees,” Greenwald continued.
Murphy has largely held off using the funds to that end, despite pressure from business groups, Republican lawmakers and some Democrats.
Other leaders like former Senate President Stephen Sweeney backed away from such proposals, saying there would not be enough federal money to both refill the unemployment fund and promote the state’s recovery.
“If we took every single dollar that we had to offset the unemployment, it wouldn’t have been enough,” he said in November.
“Do you use the dollars to try to improve the economy? Do you use the dollars to fix things that are broken in the state of New Jersey?” Sweeney continued. “It’s a tough position at the end of the day because there’s not enough money.”
Sixteen other states have tapped federal relief funds cover unemployment fund shortfalls, according to data compiled by the National Conference of State Legislatures. The Tax Foundation notes that the ARP sets aside $94.7 billion for that purpose, and the nonprofit admonished states that have not taken that route.
Under the bill, the state Labor Department would prepare a report for lawmakers each year that includes what the state still owes to the federal government, how much money must be put into the unemployment trust fund by March 31 each year to avoid a tax increase, different employer cost estimates based on higher and lower payroll tax rates, and how long it would take for the state to lower those rates.