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Unemployment payroll tax cut proves NJ can fix long-term fiscal problems: Sweeney

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Senate President Steve Sweeney | April 24, 2019 | Asbury Park Press |


Ten years ago, New Jersey’s Unemployment Insurance Trust Fund, which is funded through a payroll tax on employers and employees, was essentially bankrupt.

Legislatures and governors from both parties had used the fund as a piggy bank, siphoning off $4.6 billion over a 15-year period to pay for hospital care for the indigent and other programs unrelated to the purpose for which it was created: paying jobless benefits for unemployed workers.

Within a few months after the Great Recession hit, the Unemployment Insurance Trust Fund plunged into the red, unable to cover the cost of unemployment benefits. The state was forced to borrow $2 billion from the federal government, and raise unemployment payroll taxes on both businesses and workers, including more than $150 million that was wasted because it just went to paying the interest on the federal loan.

That’s why we passed bipartisan legislation in December 2009 to put a constitutional amendment on the ballot to prohibit the state government from raiding the Unemployment Insurance Trust Fund and any other funds paid for through assessments on workers’ wages and intended exclusively to fund worker benefits.

That constitutional amendment — which also applied to Temporary Disability Insurance (TDI), Paid Family Leave and other worker benefit programs — was approved in 2010 with more than 80 percent of the vote, passing overwhelmingly in every county in the state.

Subsequent legislation tied the employee tax rates for both TDI and Paid Family Leave to the health of their respective funds. With the funds protected from budget raids, the state was able to cut Paid Family Leave employee contribution rates by 50 percent in 2011 and TDI employee rates by 60 percent in 2012. Benefits in both programs have since been greatly expanded.

The Unemployment Insurance Trust Fund law already required the state to lower UI payroll taxes for employers once the funds were sufficiently healthy to handle a future recession or increased demand, and the Legislature subsequently implemented tough anti-fraud measures to ensure that every dollar was properly spent.

With UI fund raids barred by the constitutional amendment, the state is now in position to take advantage of low unemployment rates to cut employer payroll taxes for the second year in a row.

Companies that pay into the Unemployment Insurance Trust Fund are saving $263 million during the current budget year, and Robert Asaro-Angelo, the state’s commissioner of Labor and Workforce Development, told the Senate Budget and Appropriations Committee last week that another $200 million cut is likely in the upcoming year.

Those reductions in payroll taxes are helping make our state more affordable for the 4.5 million New Jerseyans working today, for the large corporations and small businesses that drive our $500 billion economy, and for taxpayers who share in the state and local government savings.

These payroll tax savings seemed far off — perhaps unattainable — back in 2011 and 2012 when we were paying the government $48 million and $45 million in loan interest to the federal government to dig the Unemployment Insurance Trust Fund out of its fiscal hole.

But our success demonstrates clearly that with fiscal discipline, we can make the changes needed to fix the mess we find ourselves in — a crisis that led to a record 11 credit rating downgrades by the major bond rating agencies, ranking New Jersey second only to Illinois as an economic basket case and at the bottom of virtually every ranking for affordability and business climate.

We need to find savings everywhere we can, and we are. Over the last three years, we passed legislation to require quarterly pension payments to maximize investment earnings, implemented a Pharmacy Benefits Manager program to prevent overpayments for prescription drugs, and shifted retirees to cost-saving Medicare Advantage programs.

As the bipartisan Economic and Fiscal Policy Workgroup of economists, academics and fiscal policy experts pointed out, there is no silver bullet that can wipe out the massive unfunded liability in the pension system for teachers and state workers or slash our highest-in-the-nation property taxes

But the reforms laid out in the Workgroup’s Path to Progress report will enable us to get to our full Actuarially Determined Contribution pension payment by 2023, improve the quality of education, and save tens of billions of dollars for taxpayers in the years ahead.

Like the constitutional amendment that shored up the Unemployment Insurance Trust Fund, our plan to shift new teachers and state workers and those with less than five years of service into a hybrid pension plan will not produce savings in the first year, but it will save taxpayers an average of $500 million a year within the next decade.

We can save hundreds of millions of dollars a year for teachers and taxpayers by merging the  School Employees Health Benefits Plan into the new State Health Benefits Plan, providing 62,000 local school district and county college employees with the same healthcare cost savings that the state government’s largest union negotiated for its members.

We can achieve hundreds of millions of dollars a year in further savings for public employees and taxpayers by continuing to drive down healthcare costs from the Platinum to the Gold level established under the Affordable Care Act.

We can save hundreds of millions of dollars for local property taxpayers by having the state take over the cost of Extraordinary Special Education Aid for the developmentally disabled, which should be just the first step to a full state takeover of special education costs.

Working together to find savings, we can make New Jersey more affordable for everyone.

State Sen. Steve Sweeney, D-Gloucester/Salem/Cumberland, serves as Senate President and represents the 3rd Legislative District.


Read the full article from the Asbury Park Press