New Jersey wouldn’t be able to use any of its $6.4 billion in federal COVID-relief to offset a $250 million unemployment tax hike until at least next year, state officials said on Aug. 18.
Funds could be used in future budget years, said one administration official.
But the timing at which the money came into New Jersey from the White House played out in such a way that it couldn’t prevent any of those tax hikes for the current fiscal year, as was first reported by NorthJersey.com.
New Jersey employers were told on Aug. 13 – just hours before the start of the weekend – that they’ll have to pay more than $250 million starting Oct. 1 to replenish the state’s unemployment trust fund after it was depleted during the COVID-19 pandemic and ensuing record-high unemployment.
It’s the first of three tax hikes spread out over three years, rather than a single increase that could cost employers roughly $1 billion.
Since then, two South Jersey Democratic state senators and North Jersey lawmaker Assemblyman Jamal Holley, D-20th District, said they support taking some of the federal funds from the Biden administration to replenish the unemployment trust fund rather than pass the cost onto businesses.
Until news of the tax hike was handed down by the state Labor and Workforce Development Department, the proposal was almost exclusively backed by GOP lawmakers and business lobbying groups.
But Darryl Isherwood, a spokesperson for Gov. Phil Murphy’s office, said that the rates for employers were set into law when Murphy approved the bill in January to space out the unemployment contributions, “making any contribution of federal funds irrelevant in the current fiscal year.”
On top of that, because the American Rescue Plan was signed in March and the funds were not given out to the states until May, that money ultimately missed the March 31 deadline for impacting this year’s unemployment tax rates, Isherwood added.
The Republican proposal dates back to April 8, a month before states got the money, but just over a week past the March 31 cut-off date.
State officials have pointed to the hundreds of millions of dollars in grants and low-interest loans meant to stave off the financial pain from the increased costs and revenue losses that the pandemic triggered.
Murphy, who is away in Italy, is allowed to use $200 million of ARP money at his own discretion, with caps of $10 million per spending item. Anything else would need legislative approval and the sign-off from Assembly Speaker Craig Coughlin, D-19th District, and Senate President Stephen Sweeney, D-3rd District, the gatekeepers in their respective chambers.
Representatives for both of them said that alternatives to the tax increase were being looked at, including the use of federal ARP money.
Business groups and Republicans, though, have widely panned the increase, saying that the state needs to find a way to take that pressure off employers as they recover from the COVID-19 pandemic.
“It is a small saving grace that employers get to pay this added tax over three years, instead of paying all at once. But at the end of the day, this is a large tax not on income, profits or assets, but on actual jobs as employers desperately look to recover employees,” reads an email from Bob Considine, a spokesperson for the New Jersey Business & Industry Association.
Sen. Declan O’Scanlon, R-13th District, said lawmakers need to reconvene to pass a bill that would stave off the “completely avoidable” tax increase by using federal funds.
“The state is sitting on a huge pile of federal money and Murphy should use that to bolster the [unemployment insurance] Fund,” O’Scanlon said in an Aug. 18 statement. “Finally, we are seeing some Democrat legislators warming up to the idea.”
O’Scanlon could not immediately be reached by phone for comment.