When will the unemployment trust fund be replenished?

Matthew Fazelpoor//October 10, 2022//

When will the unemployment trust fund be replenished?

Matthew Fazelpoor//October 10, 2022//

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“On the first day of fall, I sent in a note to the front office saying, ‘We were asked to wait until the fall. Fall is upon us. Let’s have a discussion,’” said Michele Siekerka, president and CEO of the New Jersey Business & Industry Association. “And we have not been invited to a discussion as of yet.”

Siekerka was referring to an issue scratched at the last moments of the Fiscal Year 2023 state budget process: the replenishment of the Unemployment Insurance Trust Fund. It is a problem businesses face in the aftermath of the pandemic, during which the fund was drained to accommodate the widespread unemployment claims of that unprecedented period.

Senate Bill 733, sponsored by state Sens. Vin Gopal, D-11th District, and Fred Madden, D-4th District, would have provided credits to offset some of the tax hikes employers have faced, but the measure was pulled during the budget voting frenzy in late June. The Assembly unanimously passed a version of the bill earlier that month.

Michele Siekerka, president and CEO of the New Jersey Business & Industry Association

Siekerka noted that it wasn’t until the 11th hour and 59th minute when the measure was pulled and that there are still questions about what exactly happened — and if or when there will be a resolution.

Madden publicly said that he was called by Murphy Chief of Staff George Helmy at the last moment and agreed to pull the bill over concerns by the administration, which were not disclosed.

Murphy signed a bill last year to phase in the tax increases needed to replenish the fund so that businesses did not get whacked all at once. A roughly $300 million tax hike – the second of two phased-in increases – took effect July 1, which left businesses that were hoping for a resolution holding the bag.

Siekerka said that the issue is a complex one and not particularly sexy. But she stressed that a resolution would be a huge boost to the business community. “What is difficult to understand is while we’re very thankful for all the grant programs, and truly it’s wonderful. A shot in the arm is great to any business because every dollar counts,” said Siekerka. “The idea of replenishing, at least some portion, of the Unemployment Insurance Trust Fund is a holistic, wholesale way of providing relief to the business community that is sustainable.”

She pointed out that unemployment insurance ratings have to do with experience level, so companies that are stable have the lowest turnover rates, thus their unemployment tax rate will be the lowest. Those are typically the largest companies. And even for them, if things stay the same, they face a substantial increase. She stressed that the businesses that are deemed to have an unstable workforce, simply because they have seasonal workers, are getting hit hard.

“Our seasonal workers and our smallest businesses, like hospitality, restaurants, Main Street, et cetera, those hardest hit from COVID, are going to experience a significant increase per employee per year,” Siekerka explained. “For them, they’re going to go from paying something like $2,100 per employee to $2,800 per employee. That’s a lot of money per employee per year.”

She added that the business owners didn’t choose to terminate their workforce. “They were told to send everybody home,” she said. “And we were closed the earliest and stayed closed the longest.”

Business groups have been pushing for the use of American Rescue Plan (ARP) money to offset the increases, something that 37 states have done to replenish their funds. New Jersey has approximately $1 billion in ARP money left. Siekerka also pointed out that the prior bill was already a compromise – and only applicable to businesses with 1,000 employees or less – leaving out the state’s biggest corporations so that those who needed it the most would be covered.

She said resolving the issue would be a good way for the governor to extend an olive branch to New Jersey businesses still reeling from COVID and its aftermath, especially since the governor insists that there are no new taxes in the most recent state budget.

“Well, the business community is experiencing three years of tax increases. And it’s exactly what it is,” said Siekerka. “It’s a tax increase. So, we have to get the narrative straight. The governor can show the business community that he’s got their backs in a wholesale manner.”

Tom Bracken, president and CEO of the New Jersey Chamber of Commerce

That sentiment is echoed by Tom Bracken, president and CEO of the New Jersey Chamber of Commerce, who said the issue is at the top of the list of many businesses caught in a battle for survival.

“The business of the UI Fund, which can be done with the stroke of a pen, by the way, that would have a huge financial and psychological impact on the business community,” Bracken told NJBIZ. “That, to me, would be something that would go a long way to start to right the ship here.”

Murphy emphasizes that he wants to get the most bang for his buck. “How do you say that to the face of the business community, that investing in New Jersey businesses is not getting bang for the buck?” Siekerka asked.

Bracken said he was also told the issue would be revisited this fall when the Legislature comes back into session. “We’re not going to take our foot off the gas on this,” said Bracken. “We’re going to keep putting pressure and laying facts on the administration until they really get the picture.”

Siekerka said the business community did not create the hit to the UI Trust Fund.

“But they’re being [told] to make it up,” said Siekerka. “Again, making New Jersey businesses carry the burden in an unbalanced and unfair manner. We talk about stronger and fairer. Fairer has to be recognition that the business community needs some sustainable wholesale relief.”

She said that the increases stay with these companies and that supplementing one time can keep the complex system of how the rate increases go up down to a minimum, saving businesses money over time.

So what’s next? That remains uncertain.

Murphy’s office declined to comment for this story.

In a statement to NJBIZ, Gopal offered a little more insight, as well as potential timing for some sort of resolution.

“Sen. Madden and I have been actively working with the governor’s office to put together a proposal that will provide relief to small businesses that are wrestling with rising costs,” Gopal said. “I appreciate Gov. Murphy’s willingness to work with us on this issue and I am optimistic we will be able to announce a substantive small-business relief plan by the end of this month.”

Siekerka credited Gopal and Madden for their efforts championing this issue on behalf of the business community.

Meanwhile, Senate Republicans were critical of how the issue has been handled.

“New Jersey Democrats and the Murphy Administration have repeatedly refused to consider our proposals over the past 18 months to use federal pandemic relief funds to replenish New Jersey’s UI Fund, a solution that dozens of other states have successfully used to stabilize their unemployment systems,” said Senate Republican Leader Steve Oroho, R-24th District. “As a result of this failure, struggling employers and employees across New Jersey will be hit by new payroll tax increases that could have been avoided. The employee payroll tax is highly regressive hitting low- and middle-income employees the hardest. It’s no wonder that New Jersey is one of just two states that still collect it.”

Siekerka believes there is a bit of a stalemate and that the issue remains unresolved because of the difficult decisions involved. “If anything, there’s going to be an attempt to further compromise what was an extremely well-compromised bill,” she said. “And I just don’t know at what point it becomes unfair, to whether it’s taking the number of employees down further and leaving out another whole group.”