Corzine moves to avoid employer tax hike

April 1, 2008 6:39:36 PM PDT
Gov. Jon S. Corzine on Tuesday moved to avoid a tax increase on employers that would be triggered if a state fund meant to pay benefits to out-of-work New Jerseyans dwindles too low. The fund had been raided for 14 years to help pay for health care.

The governor said the fund, which pays weekly unemployment benefits, is projected to fall below a minimum reserve level that would trigger an automatic $350 million increase in employer payroll taxes as of July 1.

"We should avoid imposing a $350 million tax increase on employers during this national recession," Corzine said. "I am asking for the Legislature's help to address this problem now to prevent this tax increase, so that businesses will have a stable and certain tax environment for economic growth in New Jersey."

The problem comes after legislators and governors diverted $4.7 billion from the fund from 1993 until 2006 to help hospitals pay for treating uninsured patients.

"We are now seeing the result of 14 years of Unemployment Trust Fund raids and fiscal mismanagement," Corzine said.

The money was diverted before Corzine became governor, and he decried the moves as "unsound fiscal policy" on Tuesday.

He proposed changing the date of the fund balance calculation to June 30 for this year only and transferring $260 million to the fund from a state budget reserve fund. The current date for the fund balance calculation is March 31.

Corzine said transferring the surplus money will give the fund enough cash to stave off tax increases this year and next.

"This strategy will protect both our vulnerable unemployed population as they struggle during these difficult economic times, as well as our state's business community which is vital to restoring our state's economy to fiscal health," he said.

Corzine's $33 billion budget proposal for this year calls for no tax increases, nor did last year's state budget.

Senate Minority Leader Tom Kean Jr. said the problem stems from what he called "antibusiness" policies from Democrats who have controlled the governor's office since 2002 and the Legislature since 2004.

"For six years, business leaders and the members of my party have been warning that the antibusiness policies of the last six years would lead to economic stagnation and job loss in New Jersey," said Kean, R-Union. "Now the state is being forced to funnel badly needed dollars into the unemployment insurance fund to deal with the reality created by these antigrowth policies."