A closer look at Christie's unemployment plan

Gov. Christie laid out his plan to decrease New Jersey unemployment benefits and soften a $1 billion tax hike on businesses last week. Here's a closer look at some of the details of his proposal, and the politicking to come.

The plan, which would impact newly unemployed people only:

- Cut maximum unemployment benefits from $600 per week to $550 (saves $295 million)

With the reduction, New Jersey's top benefit would go from being second-highest in the nation to third. Right now Massachusetts pays the most, up to $628 per week, according to the New Jersey labor department. Pennsylvania is third, at $558, and would move up to second. Hawaii ($545) is fourth, followed by Washington ($541) and Rhode Island ($528). Christie said that until the start of 2010, New Jersey's maximum benefit was $584, so the cut would be only $34 less than the unemployed received in 2009.

- Make people who lose their jobs wait a week before receiving unemployment benefits (saves $67 million)

Christie said 40 other states, including New York and Pennsylvania, already do this. Under this plan, a person who was unemployed for 10 weeks would get nine weeks of unemployment checks. But those who lose their jobs would still be eligible for the full 26 week benefit allowed, if they were unemployed that long. After 27 weeks, the person would receive the maximum 26 checks.

- Require anyone dismissed for misconduct to get another job before they become eligible for unemployment benefits (saves $189 million). Seems self explanatory.

- Eliminate "extended benefits" unless the federal government pays the entire tab (saves $1.6 billion)

New Jersey typically offers 26 weeks of unemployment benefits. When job losses are high (like now) the state extends the benefits for a longer period, depending on how high the unemployment rate gets. Normally, the state and federal government split the cost of these extra weeks of benefits. But under the federal stimulus act approved last year, Washington began picking up the full cost of the extended aid. If this stops, so would the extra time for unemployment benefits. The extended benefits have been offered in New Jersey since 1985.

In all the changes would spare businesses $700 million in tax increases (the taxes are set by law, and rise and fall with the value of the state's unemployment fund). As we reported in December, businesses are facing a $1 billion tax hike if no action is taken to shore up the state's unemployment fund, which has been depleted by years of raids and the soaring job losses of the recession. Under Christie's plan, businesses would pay about $300 million more in the next fiscal year. For businesses, the average tax increase would be $130 per employee, instead of $400 per employee. A key question, which seems impossible to answer now, is whether the smaller tax hike will provide enough money to pay out benefits set by law. If not, the state could go further into debt. It has already borrowed $1.2 billion from the federal government, though Christie and other governors are hoping for some form of relief.

(UPDATE - Tues. 3/2): The Christie administration supplied this chart that says the unemployment fund would recover faster under his plan than if nothing is done. With a smaller tax increase there might be less money going into the fund, but Christie argued at his news conference last week that the smaller tax increase will avert lay offs and mean less demand for benefits. And with benefit trims, less will be paid out.

Christie called his plan a compromise between the business community, which would prefer no tax increase, and advocates for the unemployed who don't want to see benefit cuts. He said now is not the time for a steep tax increase on businesses. But he will need the Legislature's help to get his plan approved, and Democrats could not have been more forceful in announcing their immediate opposition.

Senate President Stephen Sweeney (D., Gloucester) called the plan "a total non-starter that will not even find its way through the Senate doors." Assembly leaders called the plan "immoral."

This is likely the opening round in a negotiating process. It's unlikely that Democrats will want to stand pat and take responsibility for such a large tax increase, but it's also clear that they aren't going to accept Christie's plan in its initial form.

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