N.J. borrows federal cash for jobless claims

DENNIS TOWNSHIP, N.J. - New Jersey has joined the list of states unable to pay the escalating number of unemployment insurance claims without borrowing from the federal government, Gov. Corzine said yesterday.

Corzine told a group of small-business owners in South Jersey that the state's unemployment insurance fund had temporarily run out of money. He said that the fund expected a cash boost from businesses to begin the second quarter in April, but that until then, it would have to borrow from Washington. The loan is interest-free through December 2010, Corzine said.

"There is a standard procedure that is in place when you run down your unemployment fund," Corzine said.

New Jersey's unemployment claims have continued to rise as the recession deepens. They are running about double last year's numbers.

Labor Department spokesman Kevin Smith said that about $75 million in claims was being paid out weekly as of Feb. 28, compared with $45 million the previous year.

Unemployment claims are funded mostly through a payroll tax on businesses, with a smaller contribution from workers. Last year, New Jersey employers paid $1.5 billion into the fund, and workers contributed $350 million, Smith said.

New Jersey began borrowing from the federal government March 5, said Leni Fortson of the federal Department of Labor in Philadelphia. As of March 19, the state had borrowed $120 million. Fourteen states are borrowing federal cash to pay jobless claims, Fortson said.

New Jersey's fund has been depleted by years of raids by lawmakers of both parties and is now chronically underfunded. About $4.7 billion has been diverted from the fund since 1993 to pay for charity care to hospitals and other programs.

"I wasn't there," Corzine said of the raids. "I put money in."

Corzine put $260 million in the fund last year to avert an automatic tax increase to businesses. The increase is triggered when the fund falls below a certain threshold, measured on March 31.

Corzine's $29.8 billion budget proposal calls for allocating $150 million to the fund, about $120 million less than he said he would put into it in February. About $207 million in additional help will come from the federal government. But that will be too little to stop an automatic $350 million payroll-tax increase to businesses on July 1, or about $90 per employee.

Had he not infused the fund with state money, a larger tax increase would have been triggered.

Bill Lloyd, an Avalon business owner who hosted Corzine yesterday morning, said the tax increase was inevitable because of the sour economy.

Lloyd owns Avalon Coffee on Route 9 in Dennis Township, where Corzine spent 45 minutes hearing the financial concerns of six small-business owners. Lloyd said that he did not vote for Corzine in 2005 but that the incumbent Democrat will have earned his vote this fall.