Ban on fund raids may be put to New Jersey voters

AP News
Posted: Nov 30, 2009 3:58 PM

Taxes paid by New Jersey businesses to fund unemployment, disability and family leave would no longer be diverted to other programs if voters approve a prohibition on such raids.

Voters could be asked as soon as next November to approve a constitutional amendment banning future raids.

About $4.8 billion has been diverted from the Unemployment Insurance (UI) Fund since 1992, mostly to pay for charity health care. Gov. Jon Corzine, a former Wall Street CEO, is the first governor in nearly two decades not to try to divert money from employee benefit programs to help meet the rising costs of indigent health care or balance the budget.

John Burzichelli, a South Jersey Democrat who is co-sponsoring the measure in the Assembly, said a constitutional amendment constraining government raids _ even for worthy programs _ is responsible fiscal policy and will lessen the chances that an 11th-hour tax increase would be imposed on businesses to beef up a fund that's been raided.

"From an employers' standpoint, the amount they'll be required to pay in unemployment taxes will be known," Burzichelli said. "This helps make New Jersey a little more competitive in the job world."

The state's 250,000 businesses were assessed an additional payroll tax of $90 per employee on July 1 after the balance in the once-robust unemployment fund dwindled to a level that triggers an automatic tax hike.

"Despite the tremendous severity of the unemployment problem, had we had that $4.7 billion in the fund, we would have had more than enough to pay all the claims," said Philip Kirschner, president of the New Jersey Business and Industry Association, an employer group. "Employers are paying for the lack of fiscal discipline of administrations of both parties."

Govs. Jim Florio, Christie Whitman and Jim McGreevey each diverted more than $1 billion from the unemployment fund after receiving legislative approval to do so. In March, New Jersey turned to the fed for help paying its rising unemployment claims.

New Jersey, one of 25 states borrowing from Washington to meet its unemployment obligation, owed $800 million as of Nov. 25, the U.S. Department of Labor reports. The loan is interest-free through December 2010.

The Assembly Labor Committee on Monday approved the resolution asking voters to consider the ban on using money paid into the unemployment, disability of family leave funds for anything other than the intended purpose.

The resolution heads to the Appropriations Committee Thursday.

The Senate approved a similar version unanimously last year.

A Senate co-sponsor, Tom Kean Jr., said the resolution should be sent to voters in the next election.

"Continuing deficits caused by raids on the unemployment fund will lead either to more borrowing or calls for job-killing tax increases on employers," Kean said.

The proposal enjoys bipartisan support and could be approved before the end of the year.

It does not require the signature of the governor, but must pass both houses of the Legislature by a three-fifth majority to be placed on the ballot.