TRENTON, April 30, 2009 – Today, during testimony before the New Jersey State Assembly’s Budget Committee, Commissioner David J. Socolow highlighted how Governor Jon Corzine’s historic infusions of cash into New Jersey’s Unemployment Insurance (UI) Trust Fund over the past 10 months have helped minimize the size of an automatically-triggered increase in employer wage taxes. Without Governor Corzine’s intervention, these employer wage taxes would have jumped by nearly $900 million beginning July 1, 2009.

While previous administrations weakened the UI Trust Fund by diverting more than $4.7 billion to other uses over a period of 14 years, Governor Corzine and the New Jersey Legislature transferred a total of $380 million in state funds from the General Fund into the UI Trust Fund in 2008 and 2009.  Those transfers of monies into the UI Trust Fund, along with legislation that helped New Jersey qualify for a $207 million award through the federal Unemployment Insurance Modernization Act, helped bolster the balance in the UI Trust Fund on March 31, in time to count for the calculation of the next fiscal year’s tax column.

Without the addition of this extra $587 million to the UI Trust Fund over the past 10 months, the annual rate calculation for FY 2010 would automatically have triggered a shift in the tax table from Column A to Column D, an increase of approximately $886 million in tax revenues from all employers.  Because of these additional resources, the UI Trust Fund’s tax table will instead only shift to Column B, thus holding to $340 million the total tax increase on all employers.  As a result, employers will be spared from an additional tax increase of $546 million during FY 2010.

The Unemployment Insurance law requires that an assessment of the Trust Fund balance as of March 31 determines the tax rate at which employers pay to fund Unemployment Insurance benefits.  The calculation is based on the ratio of the UI Trust Fund’s fund balance and the sum of all covered wages paid by employers in the prior calendar year.

While high levels of unemployment due to the national recession have depleted state UI Trust Funds nationally, payments due on first quarter 2009 wages also will help replenish the Fund. In addition, the Unemployment Insurance Law provides a mechanism to ensure that benefits are paid to eligible claimants by borrowing, if necessary, from the U.S. Unemployment Account. Such federal cash flow loans will not accrue interest through December 31, 2010, due to the statutory change included in Section 2004 of the American Recovery and Reinvestment Act (ARRA). 

 Comparison of Tax Table Columns