To Replenish Unemployment Fund, Murphy Administration Raises Taxes On Businesses

New Jersey businesses are poised to pay an additional $250 million in taxes this year — and potentially three times more overall — to help refill the fund for unemployment benefits after the COVID-19 pandemic drained billions of dollars from it, according to the Department of Labor.

The agency's Friday afternoon update on its website that replenishing the Unemployment Trust Fund would come from tax hikes on employers and not federal relief money sent waves of frustration through the business community and lawmakers of both parties through the weekend and into Monday. 

More than two dozen other states have used federal COVID relief money to shore up their unemployment funds, but the Murphy administration has still not announced how it plans to spend its portion.

Unless the Murphy administration reverses course and decides to use at least some of its $6 billion in American Rescue Plan money, the business community will be responsible for restocking the unemployment fund. 

"They had nothing to do with why this was depleted. Now they're being asked to replenish it when, in fact, the American Rescue Plan is there for that exact reason," said Tom Bracken, president and chief executive officer of the New Jersey Chamber of Commerce.

Businesses, Bracken added, "continue to suffer, and this is an enormous amount of money that’s going to be placed on them, above and beyond the pressures they face already." 

Acting Gov. Sheila Oliver suggested during an unrelated event Monday that the administration plans to see through the tax increase on businesses, which in the first year is $252 million, according to legislative documents

She said a "process exists" to replenish the unemployment fund, and "we're committed to that process right now."

"I would ask businesses to look at how many people have had to rely on unemployment to survive for close to two years," Oliver added. "And I think that all of us have a responsibility to try to just help our people in New Jersey." 

Murphy's office did not respond to a message Monday asking whether the administration would use COVID relief funds to replenish the fund. 

After this story published Tuesday morning, the office said the rates for employers are set in law, "making any contribution of federal funds irrelevant in the current fiscal year." 

Darryl Isherwood, a spokesman for Murphy, added that because American Rescue Plan fund were not distributed until May, any contribution to the unemployment fund would have missed a March deadline for the current fiscal year. 

More than 2 million people have filed initial unemployment claims since the pandemic hit New Jersey last March, and $33 billion has been paid out, Labor Department spokeswoman Angela Delli-Santi said. 

The rate increase applies to the quarter covering July through September, and payments are due by Oct. 30, Delli-Santi said.

The unprecedented drawdown of the unemployment fund has had business groups wondering for months how the Murphy administration planned to refill it and pressing him to use federal aid instead of tax hikes on businesses. 

Gov. Phil Murphy and other officials have regularly said they were awaiting guidance on COVID relief funds or reviewing it.

A May analysis by The Associated Press found that at least 29 states have tapped federal relief funds for their unemployment accounts. 

Murphy signed a law earlier this year designed to give some relief to businesses by extending the time to repay money into the unemployment fund from one year to three. The total going back into the fund for those three years is $885 million, according to the Labor Department

As of last month, the Murphy administration said it had distributed more than $700 million through the Economic Development Authority to aid businesses, and "we remain committed to providing them with the resources they need to recover." 

Michele Siekerka, president of the New Jersey Business & Industry Association, said every dollar the state has spent on businesses is appreciated. but "this is like give it with one hand and take it from the other." 

Joseph Cleary, vice president and chief financial officer of Morey's Piers in Wildwood, said the $885 million figure that could be raised through tax hikes is "gargantuan." 

His business has been short-staffed through the summer after being forced to close under Murphy's restrictions. The decision to raise rates on businesses that struggled in the pandemic rather than tap federal relief money is "disappointing," Cleary said. 

"It's just another hit. It’s another reason to take away some of the optimism that folks were hoping to rebuild after the last 18 months," he said. 

Republican lawmakers condemned the action as an avoidable hike on businesses that could have a devastating ripple effect for years. 

But two Democrats on Monday also criticized the administration's increase. In a letter to Murphy, Sen. Troy Singleton asked the governor to "immediately" use federal funds to offset the increase on businesses. 

Singleton, of Burlington County, said businesses are just now regaining their footing after the pandemic and that raising rates is an "untimely and unwelcome burden" on them.

"We must take action now to avoid this impending disaster that could arrive on the doorsteps of our business community," he said. 

Sen. Dawn Addiego, also of Burlington County, made a similar point.

"With added uncertainty around what the fall will bring, business owners should not have to worry about an increase to their unemployment insurance on top of everything else," she said.

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