After historic unemployment levels during the COVID-19 pandemic heavily reduced the State’s unemployment insurance (UI) fund, employer contribution rates recently increased to begin replenishing this critical fund. To help make New Jersey more affordable for small businesses, a bill sponsored by Majority Leader Louis Greenwald would limit potential UI tax increases for employers.
From March 2020 to September 2021, 1.6 million New Jersey claimants received around $35 billion in unemployment benefits – nearly $9 billion of which came from the State’s UI fund.
With a record number of employees withdrawing benefits from the UI fund and the State having fewer taxable wages to draw from in order to replenish it, New Jersey ultimately had to borrow funding from the federal government to pay out unemployment claims. New Jersey was among at least 29 states to use federal dollars to replenish State unemployment funds.
As such, a scheduled increase of $252 million in employer UI taxes took place in October 2021. The Department of Labor has estimated these taxes could rise to $296.6 million in Fiscal Year (FY) 2023 and $336.4 million in FY 2024.
To prevent employers still struggling from the pandemic from facing this significant payroll tax burden, Majority Leader Greenwald’s legislation (A-2152) would cap the rate for FY 2024 at the same rate employers will be paying in FY 2023.
“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. 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,” said Majority Leader Greenwald (D-Camden, Burlington). “It will also promote fiscal responsibility by paying off our state’s debt so that we can begin to rebuild our UI fund and prepare for a future where New Jersey’s small business community can further grow and thrive.”
New Jersey was among at least 20 states that borrowed funds from the federal government during the pandemic to continue paying out unemployment benefits. In September 2021, the federal government began collecting interest on any remaining unpaid unemployment-related loans. The bill addresses this by using federal assistance allocated to New Jersey for unemployment compensation purposes under the American Rescue Plan Act to repay those loans in order to replenish the fund and limit additional interest.
The Chamber of Commerce Southern New Jersey (CCSNJ) is among the organizations in support of this legislation, saying they “applaud Majority Greenwald for this forward-thinking legislation, which will provide relief to the New Jersey business community.”
“Businesses continue to struggle to recover from the devastating impact of the pandemic and even with restrictions lifted, many cannot to return to pre-pandemic operations due to the labor shortage and critical supply chain issues. The employer community was already dealt a $252 million increase in UI taxes in October. This legislation will help provide some relief to employers when they need it the most,” CCSNJ continued.
To ensure transparency throughout the process of repayment and replenishment, the Commissioner of Labor and Workforce Development would be required under the bill to report to the Legislature on the amount of loans being repaid and the amount of money needing to be deposited into the UI fund before the annual deadline to avoid a contribution rate increase for employers.