Christie proposes cut in unemployment benefits

TRENTON - The maximum benefit for the unemployed would drop from $600 to $550 a week under a proposal Gov. Christie announced yesterday.

The proposal would allow the state to phase in a tax increase on employers for the unemployment-insurance fund now set to kick in July 1, saving businesses an estimated $700 million in the next fiscal year.

The new benefit rates would apply only to people laid off after the plan took effect. The plan would require legislative approval and marks a change for the administration; Christie had said he did not plan to delay the tax hike.

Several Democratic leaders criticized the idea of cutting unemployment benefits in a dismal economy, setting the stage for the first substantive clash between the Republican governor and the Democratic-controlled Legislature.

"This is the wrong time, under the wrong economic conditions, to impose such an onerous and undeserved tax hike on New Jersey businesses," Christie said. "If we want to grow payrolls and improve our economy, we cannot ask businesses to shoulder the full brunt of the irresponsible budgeting policies that bankrupted the unemployment compensation fund in the first place."

Christie characterized his plan as a compromise between the interests of business and the interests of workers who may rely on the fund. He said the plan would keep the fund solvent and require businesses to pay higher taxes, but without the kind of steep increase that he said would be a wet blanket on job growth and possibly lead to more layoffs.

"It's not what I prefer to do, but it's what I have to do to be a responsible steward of the financial situation in this state," Christie said.

Democratic and Republican administrations have raided the state's unemployment insurance fund to fill various budget holes.

According to the Christie administration, the state diverted $4.6 billion of employer and employee contributions from 1992 to 2006, requiring it to borrow $1.2 billion from the federal government to pay unemployment benefits. By law, when the fund dips to a certain level, a tax increase kicks in to replenish it.

In July, employers were slated to pay an average of $400 more per employee, an increase of 52 percent.

Under Christie's proposal, the immediate increase would instead average $130 per employee, with future increases to be phased in. Under the plan, employers would pay $300 million more than they do now, compared to $1 billion if nothing were done to avert the scheduled tax hike.

New Jersey now has the second-most-generous unemployment benefits in the nation; under his proposal, it would be bumped to third, Christie said.

Christie's plan also would require a one-week waiting period before benefits could be claimed, to save an estimated $67 million annually; require employees who lose their jobs because of "misconduct" to obtain other employment for a certain period before qualifying for unemployment benefits, to save an estimated $189 million annually; and make extended benefits contingent upon federal funding, for annual savings of $1.6 billion.

Senate President Stephen Sweeney (D., Gloucester) said he could not support a cut in unemployment benefits in the current economic climate.

"If you've ever been unemployed, which I have been as an ironworker, the bills don't wait a week," Sweeney said. "You pay into it, you should be able to collect it.

"We're one of the few states in the country where the workers contribute. The workers aren't at fault here."

Unemployment in New Jersey reached 10.1 percent in December, just above the national average of 10 percent.

Assembly Speaker Sheila Oliver (D., Essex) and Assembly Majority Leader Joseph Cryan (D., Union) called Christie's actions immoral.

"Gov. Christie himself said just a few weeks ago that we cannot continue to run an unemployment fund based on debt, yet that is exactly what he is now proposing," they said in a statement. "It's becoming more and more clear that under Gov. Christie, the rich will be getting richer while the working class and the poor continue to struggle."

Christie responded that Democrats "are the stewards of failed policies; they voted for those budgets that stole those monies."

Businesses applauded Christie's proposal while unions denounced it.

Dennis Bone, chairman of the New Jersey Chamber of Commerce, said Christie should be applauded for his efforts to cut costs for businesses.

"Unfortunately, due to the economy, the increase on employers is unavoidable," Bone said. "This plan includes innovative proposals that in the short term make any increase less painful, and it looks to the future by creating a more stable [unemployment insurance] fund."

New Jersey AFL-CIO President Charles Wowkanech said businesses had received four unemployment tax cuts since 1998, worth billions of dollars. Recently, he said, the state, under Gov. Jon S. Corzine, diverted $300 million from the general fund to the unemployment insurance fund to postpone the tax hike.

"In total, corporations have benefited from these unemployment-insurance fund changes to the tune of billions of dollars," Wowkanech said. "We cannot let corporate executives once again avoid their responsibility to the unemployment insurance fund."