by Hank Kalet, Online Editor
There’s nothing like a crisis to get New Jersey legislators moving.
Too bad they rarely move until the crisis occurs — especially when it is a crisis of their own making.
Consider the constitutional amendment that state Sen. Stephen Sweeney is proposing that would prohibit the state from dipping into its unemployment insurance fund to balance its budget. The amendment, SCR-60, would ban the state from using money from the state’s Unemployment Insurance, Temporary Disability and Paid Family Leave funds. The proposed amendment requires voter approval.
It seems like a logical proposal, especially given recent history. State lawmakers, as The Star-Ledger noted on Monday, have “diverted more than $4 billion” from the unemployment fund “to cover the cost of state aid to hospitals.” This depleted the fund just as the unemployment rate started to rise, leaving the fund with just $161 million — “not even enough to meet one month’s worth of claims,” the Ledger said — down from $3 billion four years ago. (The state, according to published reports, paid $169 million in claims last month, up 23 percent from last November.)
That, says Gov. Jon S. Corzine, has forced state government to scramble to cover an expected shortfall.
”Now the piper is coming home to roost,” he told the Ledger. “We have to pay that piper. We have to do that either by putting money into that system from some other place, or we’re going to have to get help from the federal government.”
The unemployment fund, of course, is no different than any other fund at the state’s disposal. Over the last two decades, the state repeatedly has sought ways to offset increased spending by moving money between accounts, whether it has been selling roadways to itself, raiding the pension fund or borrowing against health benefits. In each case, as the governor puts it, the piper is now asking for payment.
In the case of the unemployment fund, the payment could be “an automatic $400 million tax hike next June” on businesses that John Rogers, vice president of human resource issues for the New Jersey Business and Industry Association, told the Ledger “would certainly devastate New Jersey’s economy.”
The business group — which pays “about $2 billion a year into the fund,” the paper says — had feared that the diversion would create problems down the road.
”We warned the diversions the Legislature has done to the fund would come home to roost at the worst possible time,” he said. “We’re hemorrhaging money out of a fund that was almost insolvent.”
Hence, Sen. Sweeney’s proposed amendment, which is being co-sponsored by Senate Minority Leader Tom Kean.
”The UI Fund, has been a favorite target in the past for budget-balancing maneuvers, but we can’t play any more games with people’s jobless benefits,” Sen. Sweeney said in a press release. “The UI Fund should be off-limits to raids, especially in this economic crisis.”
If the amendment is approved by voters, the state constitution would require that state funds generated by payroll taxes or other wage assessments be used only for their stated purpose.
”We shouldn’t subject the UI Fund — or any fund devoted to a specific cause — to the whims of budgetary shortfalls,” he said. “We know from our recent past how good intentions can get sidetracked by budgetary shortfalls. This will give some backbone to our intentions to make sure these benefits are there when people lose their jobs.”
It’s a great idea. Too bad he didn’t put it on the table years ago.
Hank Kalet is online editor for the Princeton Packet Group. His e-mail is [email protected] and his blog, Channel Surfing, can be found at www.kaletblog.com.
