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 provide relief to New Jersey’s small business community, Majority Leader Louis Greenwald has introduced legislation to avoid potential UI tax increases for employers.
From March 2020 to the beginning of September 2021 – a span of one and a half years – 1.6 million New Jersey claimants received nearly $35 billion in unemployment benefits. While a portion of those benefits came from enhanced federal programs, nearly $9 billion came from the State itself.
Since a significant number of employees were laid off as a result of the pandemic, more money was withdrawn from the UI fund, while fewer taxable wages resulted in lower contributions to the fund during this time. As a result, New Jersey had to borrow funding from the federal government to pay unemployment claims.
On October 1 of this year, a scheduled increase of $252 million in employer UI taxes took place. 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-6227) would cap the rate for FY 2024 at the same rate employers will be paying in FY 2023.
“This legislation will do two things, the most important of which will be providing 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,” 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 the future.”
New Jersey was among at least 20 states that borrowed funds from the federal government last year 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.
To ensure transparency throughout the process of repayment and replenishment, the Commissioner of Labor and Workforce Development would be required 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.
A draft of the bill is available upon request.