Finding Common Ground to Save Unemployment

by: Senator Fred Madden

Sat Mar 20, 2010 at 02:13:59 PM EDT

When Governor Chris Christie recently proposed cutting unemployment benefits by up to $50 per week and delaying an increase in the amount businesses contribute to the system, it would be easy to think yet another issue would break down simply along the lines of Democrat versus Republican.

Frankly, as a Democrat, my first instinct was to oppose the Governor's plan. The jobless and their families need every penny to stay above water - and as one of only three states where employees pay into the Unemployment Insurance (UI) Trust Fund, workers who lose their jobs deserve every cent they put into the system while they were working. And preventing money from flowing into the UI fund is every bit as dangerous to its long-term health as the past raids that left it on life support.

Yet simply opposing the Governor's proposal would be counter-productive. The UI Fund would still be woefully unprepared to cover the needs of the unemployed, and New Jersey's economic recovery would be threatened by a business tax increase. What is clearly needed is a compromise to protect both the jobless from a benefits cut and businesses from a potentially destructive tax increase.

The proposed cut in benefits is simply unworkable - and not just for the reason that the jobless need this money to survive. Follow me below the fold for why.

A loss of $25 may seem insignificant for a jobless resident receiving the $600 maximum weekly unemployment benefit. But for unemployed residents on the lower end of the scale, the $25 loss in federal funds would become highly regressive very quickly. One constituent of mine receives $115 a week in unemployment benefits, which she needs to provide for herself and her four-year-old child. While the Governor's plan would not diminish her state benefits, she would immediately lose the federal benefit, leaving her with only $90 per week. For this mother - and many other low-income unemployed residents like her - a 20-percent cut would simply be devastating.

Losing $40 million a year in federal assistance that the state cannot afford to make up and that the unemployed desperately need to survive makes the benefit cut unworkable.

At the same time, delaying the scheduled increase in the amount businesses pay into the UI Fund would only keep the system in debt longer at a time when we need to build it back to health. But, we should be open to the Governor's alternative.

Businesses pay into the fund based on a tiered system - the more stress on the UI Fund, the more the tax increases to keep it in balance. But with unemployment currently hovering at ten percent, the tax is scheduled to jump three tiers this year, or hundreds of dollars per employee.

I agree with the Governor that the size of the scheduled jump could have a chilling effect on business and slow the state's economic recovery. But before we lock ourselves into a slowed three-year ramp-up, we should make sure we do our due diligence.

To protect businesses now, we should allow the UI tax schedule to increase by only one increment over the next year, as Gov. Christie proposed. However, the next step should be determined only after taking a careful look at economic conditions and the health of the fund in 2011. If the economy grows and businesses can absorb the remainder of the tax increase, we should take that step as it would return the UI Fund to full health quicker. But we would reserve the right to again slow the scheduled increase should more recovery time be necessary.

Whether we adopt the Governor's plan or my compromise, the fact remains that returning the UI Fund to balance will take years. There is no quick fix.

But we should be willing to take a short-term view that protecting both the unemployed and the business community is what would be most beneficial.

Senator Fred Madden is chairman of the Senate Labor Committee. He represents the 4th Legislative District, which includes parts of Gloucester and Camden counties.