Measure would also halt 2024 tax hike on businesses
Senate lawmakers will weigh a bill Monday that would use federal aid dollars to pay off loans taken to prop up New Jersey’s unemployment trust fund.
New Jersey borrowed hundreds of millions from the federal government to pay unemployment benefits when pandemic-related job losses led to the depletion of the trust fund, which pays out benefits to laid-off workers. The bill (S733) would require the state to use some money it received from the American Rescue Plan to make annual deposits into the trust fund, repaying the loans and eliminating millions in interest payments.
New Jersey received more than $6 billion from the $1.9 trillion stimulus bill. About a third of that money was earmarked during last year’s budget negotiations, but billions remain unspent.
The Senate Labor Committee is expected to hear the bill Monday morning.
Widespread shutdowns in the pandemic’s early months prompted an unprecedented surge in unemployment claims that drained the trust fund. A tax on businesses pays for state unemployment benefits, its rate set by the trust fund’s balance and the number of workers claiming benefits.
With the fund drained, the tax increased, though Murphy signed a bill last year that raised the tax successively over three fiscal years instead of all at once.
Republicans and some Democrats, including the bill’s prime sponsor, Sen. Fred Madden (D-Gloucester), have called for the governor to head off the tax hike entirely by replenishing the fund using federal aid dollars. Administration officials have said this was impossible last year because the funds reached the state after a budgetary deadline.
The bill before the labor committee would allow the unemployment tax rate to rise in the 2022 and 2023 fiscal years but would prevent the third increase from taking effect in fiscal year 2024.
“The overwhelming majority of New Jersey businesses are small businesses and literally cannot take this hit without us as a state doing something to address it,” said Sen. Troy Singleton (D-Burlington), one of the bill’s sponsors. “This is what I believe is the proper approach for us to do that, creates a good balance, and I think is the right way to use those dollars that we have.”
Republicans would likely prefer the hikes were eliminated altogether, but at least one GOP senator welcomed the legislation’s movement. Sen. Tony Bucco (R-Morris) last year sponsored a similar measure that would have headed off the tax hikes entirely, though that bill died without being heard in committee.
“Would I prefer they move my bill? Sure, I sure would. But if that’s not going to happen, then it’d better to give some relief than none,” Bucco said. “But we certainly have the wherewithal with the money that we’ve received — and the governor is still sitting on — to move my bill and stop any increase in the tax, whatsoever.”
It’s unclear how much money Madden’s bill would put toward paying back the loans: It does not list an amount, and the Office of Legislative Services has yet to release a fiscal note for the legislation. But the number is likely in the hundreds of millions.
New Jersey owes the U.S. Treasury nearly $582 million for federal unemployment insurance loan advances, including nearly $23 million drawn in the current month. That debt accumulates 1.59% interest annually.
“Here we are moving along and as time goes on, things are continuing to get tougher for businesses, and I accept the responsibility as the labor chair to listen to businesses and monitor it,” Madden said.
Despite the movement, the bill still faces an uncertain future. A spokesperson for the governor declined to comment on the bill, and Cecilia Williams, a spokesperson for Assembly Speaker Craig Coughlin (D-Middlesex) said the chamber leader was still reviewing the bill and its costs.
Singleton, at least, believes the bill has the blessing of Senate President Nicholas Scutari (D-Union).
“I can tell you that if the Senate president didn’t feel that this was something of importance it would not be on a legislative agenda for us to move forward,” he said. “I take that as a good sign.”