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Bringing predictability to grim UI tax increases Bill aims to help execs plan as state shores up jobless benefits fund

By , - Last modified: March 7, 2011 at 5:18 PM

Instead of getting socked with an annual spike of $300 per worker in unemployment insurance taxes next year, the state will mete out less pain to employers over a longer period of time under a bill introduced in Trenton that seeks to shore up the state’s deficit-ridden UI fund, which now owes $1 billion to the federal government.

The Assembly and Senate bills give employers predictable UI tax increases — averaging $130 per worker — for the fiscal year beginning July 1, 2011. UI taxes are expected to rise again for the following two years, eventually hitting the $300 increase.

By steadily increasing the UI contributions, the bills make the best of a tough situation — and give employers the information they need to budget future labor costs, according to Laurie Ehlbeck, New Jersey director of the National Federation of Independent Business.

“Nobody’s happy about having an increase,” Ehlbeck said, though she was pleased a consensus has formed to support the bills, which are backed by both business and labor.

The bills are based on recommendations from the unemployment insurance task force appointed by Gov. Chris Christie, which includes three representatives each from business and labor. The task force released its first report Feb. 25.

In addition to phasing in the UI tax increases, the bills raise the amount of money that must accumulate in the UI fund in order to trigger a decrease in taxes — a change supported by business groups seeking to reduce uncertainty and fluctuations of future tax increases.

The bill is fair to labor and businesses, said Edward Fedorko, executive director of the Mechanical & Allied Crafts Council of New Jersey.

“It’s not a good situation, but we have to be worried about the debt that has to be repaid to the federal government,” Fedorko said, referring to the more than $1 billion the state has borrowed to fund benefits.

Two proposals from Christie that appear to be off the table — at least, for now — are reductions in the maximum weekly benefit and a mandatory one-week wait to start receiving benefits.

Ehlbeck said the current federal law governing extended UI benefits prevents the state from reducing benefits, and added this may not be the best time to make the changes, given the fragile state of the economy.

However, Ehlbeck said, business owners remain concerned that New Jersey has some of the most generous benefits in the country. Out-of-work residents can collect a maximum of 60 percent of their average weekly wages in the base year, up to $598. That’s the second-highest maximum in the country, after Massachusetts, for workers without dependents.

Assemblyman Joseph V. Egan (D-New Brunswick), who sponsored the bill in his house, said he wanted to include only one year of increases in the bill, but agreed to allow a two-year increase. Egan and state Sen. Fred H. Madden Jr. (D-Turnersville), who sponsored the Senate version of the bill, are the chairmen of the labor committees in each house, and served as nonvoting members of the task force.

Egan credited state Labor Department officials with providing the information needed to reach a consensus on the task force.

The state raided the UI fund for years without raising the taxes to build it. Since the recession, employers have been hit with two increases in their UI taxes.

E-mail to: akitchenman@njbiz.com

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