It’s Your Money
September 23, 2019
When I first meet people
They always ask…
So… what do you do…
I respond…
We save companies money…
That normally gets a positive response…
People like to save money…
Now….
Do you have time for a quickie quiz…
How many of you have signed a contract…
Thought you got a good deal
Possibly a great deal and…
Never looked at the paperwork again
Can I see a show of hands…
You…
Yea…. you over there
Is your hand up or are you scratching your head…
It looks like you wanted to put your hand up
Come on…
Let’s be honest
We all have done it…
I believe that all of us have good intentions…
But let’s face it we just get busy
No matter how you planned your day
Something happens and you are once again
Putting out fires
The first thing we do with any potential client
Is validate what they are currently paying
Are you paying the exact rate you signed for…
Believe it or not…
This is not always the case
I have people tell me….
Yea… we signed a contract and I was told
We are paying well below market prices
That is always great to hear
But let’s see if that is their reality…
Do you mind if I see your contract…
And could we also get a copy of your latest bill…
I can’t tell you how many times
We find that people are being charged
The wrong rate
And most of the time it is for more than
What you signed for
We always direct them to call the provider
And clarify…
Why are we paying this higher rate…
Our contract states we should be paying xxxx amount
Guess what the response normally is…
Oh, we’re sorry
That was billed improperly
Let us correct that…
We can give you a credit
Or send you a refund
How nice of them….
If they were under charging you
I bet they would contact you and say
We have a problem
However, if they are over charging you
You don’t hear from them
This is your money…
Don’t be afraid to ask for it…
HBS clients have received thousands of dollars in refunds
Always be aware of what you are paying…
And if you are not sure…
Give us a call
HBS leaves no stone unturned in our search for savings
We find ways to save you money
Here Ye
July 23, 2015
Hear ye…. Hear ye… Hear ye……
This is to serve as notice
To all businesses in the State of New Jersey…..
Your new unemployment rates have just been mailed
By the State of New Jersey
You should be receiving your new rate notice….. Any day
Note:
All business owners have 30 days to question the new rates
you have been assigned
This is as good a time as any to verify…….
Is our new Unemployment Rate correct?
Unemployment…
Is the 2nd highest Employer Mandated Tax
By the US Government
Yet, people know so little about it
It is the only employer tax that can be controlled
Did you know that each claim can be worth up to $16,000????
Unemployment…..
Is like having a checking account with the State
Each year, at this time, the state sends you a notice
In NJ, it is called the
Employer Contribution Report
This report tells you…
How much money you had in your account at the beginning of the plan year
How much money you paid out in claims during the year
How much money you deposited into your account during the year
How much money is left in your account now….
It then goes thru a calculation based on the numbers listed above
As to what your new rate will be for the next 12 months
This new rate determines the funding level needed
To meet future claims
What is your rate????
Is your rate high or low????
Did your rate go up????
If so…You got a tax increase……
How do you know if your rate is correct????
That last question is the one question
All business owners should be asking
Especially if you have over 100 Employees
When there is a mistake in unemployment
The mistake is not on just 1 employee
It is the all factor
A mistake effect all your employees
That means the State may be taking more money
Out of your account than they should be taking
Remember….This is like a checking account
Would you miss money…..
If it was taken out of your personal checking account????
Who is holding the State accountable????
We are
HBS works with many established clients
Who took the time to ask the question
Is our rate correct????
Boy were they surprised…..
When we found there was a mistake
We went back to the State
Corrected the error
And our client received a refund
We are always asked how did you do that????
That is what separates HBS from all others
We know where to look
Many of the cost we work with
Most businesses take for granted
As the cost of doing business
Did you know……..
The state has over a 12% error rate
In the payment of unemployment claims
Once again…..
They are taking money out of your account
And they are not being held
Accountable
That is reason enough to ask the question….
Do you think you can look at our
Unemployment rate????
Is it correct??????
To learn more
Give us a call
We offer a free consultation
Posted by Ezra Klein on August 28, 2012 at 1:10 pm
On the Republican convention stage tonight, you’re going to see a really large clock. But the clock isn’t for keeping time. The idea isn’t to stop speakers from going over their allotted time, or the convention from running late. It’s a debt clock. And the idea is to blame President Obama and the Democrats for the national debt.
But in doing so, the Republicans will end up blaming Obama for the policies they pushed in the Bush years, and the recession that began on a Republican president’s watch, and a continuation of tax cuts that they supported. They’ll have to. Because if they took all that off the debt clock, there wouldn’t be much debt there to blame him for at all.
The single thing you should look at to understand the debt clock and what it is — or isn’t — telling you is this graph from the Center on Budget and Policy Priorities. It does something very simple. It takes public debt since 2001 — which is when we last saw surpluses — and breaks it into its component parts.
You can see it kind of looks like a layer cake. In fact, the folks at the Center on Budget and Policy Priorities call it “the parfait graph.”
The top layer, the orange one, that’s the Bush tax cuts. There is no single policy we have passed that has added as much to the debt, or that is projected to add as much to the debt in the future, as the Bush tax cuts, which Republicans passed in 2001 and 2003 and Obama and the Republicans extended in 2010. To my knowledge, all elected Republicans want to make the Bush tax cuts permanent. Democrats, by and large, want to end them for income over $250,000.
In second place is the economic crisis. That’s the medium blue. Recessions drive tax revenue down because people lose their jobs, and when you lose your job, you lose your income, and when you lose your income, you can’t pay taxes. Tax revenues in recent years have been 15.4 percent of GDP — the lowest level since the 1950s. Meanwhile, they drive social spending up, because programs like unemployment insurance and Medicaid automatically begin spending more to help the people who have been laid off.
Then comes the wars in Iraq and Afghanistan. That’s the red. And then recovery measures like the stimulus. That’s the light blue, and the part for which you can really blame Obama and the Democrats– though it’s worth remembering that Senate Republicans proposed and voted for a $3 trillion tax cut stimulus that would all have gone on the national credit card and added almost four times what Obama’s stimulus added to the debt.
Then there’s the financial rescue measures like TARP, which is the dark blue line. That’s almost nothing, as much of that money has been paid back.
If we didn’t have all that? If there’d been no Bush tax cuts, no wars, no financial crisis and everything else had been the same? Debt would be between 20 and 30 percent of GDP today, rather than almost 100 percent.
Now, the response you sometimes get to this graph is yes, that’s true, but Obama should have done more about the debt. But Obama has proposed a multi-trillion dollar deficit reduction plan. Republicans just refused to pass it. And, to be fair, he refused to sign their plan too. So the question then is less about what led to the debt and more about who has the right plan to get rid of it. I’ll get into that in a subsequent post.
Unemployment Insurance Cuts Come After Tax Cuts: Report
August 3, 2012
As reported in Huffington Post
WASHINGTON — In March, the commissioner of Georgia’s Department of Labor, Mark Butler, explained how the state’s unemployment insurance trust fund had gone broke.
“In an attempt to curry favor with Georgia businesses, Gov. Roy Barnes declared a ‘tax holiday’ before Barnes’ failed 2002 re-election campaign,” Butler wrote. “Businesses stopped paying into the trust fund. By the time we hit the Great Recession –- and many, many Georgians became unemployed through no fault of their own — the $2 billion Unemployment Insurance Trust Fund had been reduced by $1.3 billion.”
“Plainly speaking,” Butler added, “Georgia had not saved for that rainy day.”
Georgia lawmakers agreed to much of Butler’s plan to restore the trust fund to solvency — cutting the duration of benefits in an effort to save money. The legislature also modestly increased the amount of wages subject to the state payroll taxes that fund the unemployment system.
While the cuts to unemployment benefits were relatively drastic, the tax cutting that preceded them was typical. Most states failed to make prudent decisions about funding their unemployment trust funds over the years, according to a comprehensive report from the National Employment Law Project, a worker advocacy group.
States now owe $43 billion to the federal government, according to NELP policy analyst Mike Evangelist, and it’s likely lawmakers will rely more heavily on benefit cuts than tax hikes in order to get out of debt.
“Over the past 30 years, support for accepted norms in the UI program has been systematically eroded, with state lawmakers now more willing to go after long‐standing features of the program, such as the duration of state benefits or suitable work protections that were previously seen as untouchable,” Evangelist wrote in the report.
Businesses pay both state and federal unemployment taxes for each worker on payroll — state taxes fund the first 26 weeks of benefits for laid off workers, and federal taxes pay for extra benefits that Congress puts in place during recessions. When a state unemployment trust fund runs dry, the state can borrow from the federal government to pay benefits. If a state borrows for too long, federal payroll taxes go up.
When under pressure to refill trust funds, it used to be that state lawmakers would seek savings by tightening eligibility rules. But this year Georgia joined six other states states that had cut the standard 26 weeks duration of benefits for the first time ever. While each state differed in how they cut benefits, Georgia put benefits on a sliding scale that goes up and down with the state’s unemployment rate. When the rate goes down, the duration of benefits could be as low as 14 weeks. The upper limit is 20 weeks.
The states were strapped for cash because tens-of-millions of additional people filed claims, but also because of tax cuts.
According to Evangelist, 31 states cut unemployment taxes 20 percent or more between 1995 and 2005. And from 2000 to 2009, the overall percentage of wages subject to state unemployment taxes fell to the lowest level in the history of the federal-state unemployment system. In 2007, states were collectively $38 billion shy of recommended trust fund reserves.
Doug Holmes, an unemployment insurance expert who advocates for businesses, suggested states would be unwise to try and meet funding thresholds “because to do so would require dramatic increases in state unemployment taxes that would place these states in an uncompetitive position to attract and keep businesses in their states.”
It’s unlikely states will want to hike taxes to pay for unemployment, Evangelist wrote in his report. “Realistically, it is unreasonable to believe that states will close this gap without doing further harm to the UI program’s ability to sustain unemployed workers and their families through periods of temporary job loss.”
Nation’s Unemployed Hung Out To Dry In Debt Ceiling Deal
August 1, 2011
As reported in Huffington Post
WASHINGTON — The long-term unemployed have been left out of a deal between congressional negotiators and the White House to enact massive spending cuts and raise the nation’s debt ceiling before its borrowing limit is reached on Tuesday.
Under the so-called grand bargain President Obama tried to strike with House Speaker John Boehner (R-Ohio), federal unemployment benefits would have been extended beyond January 2012, when they are set to expire.
But those negotiations collapsed in July. On Sunday, congressional leaders and the administration crafted a not-so-grand bargain that will cut spending without raising taxes or preserving stimulus programs like federal unemployment insurance.
Asked Sunday night why spending to help the unemployed had been left out of the deal, a White House official said, “because it had to be part of a bigger deal to be part of this.”
In other words, Democrats need significant leverage to get Republicans to agree to additional spending on the unemployed. Federal unemployment insurance programs, which kick in for laid off workers who use up 26 weeks of state benefits, cost a lot of money: Keeping the programs through this year required an estimated $56 billion. In December, Democrats only managed to keep the programs alive for another 13 months by attaching them to a two-year reauthorization of tax cuts.
Anyone laid off after July 1 is ineligible for extra weeks of benefits under current law. People who started filing claims in July who exhaust their six months of state benefits in January will be on their own. (People who are in the middle of a “tier” of federal benefits will probably be able to receive the remaining weeks in their tier, but they will definitely be ineligible for the next level up.) Since 2008, layoff victims could receive as many as 73 additional weeks of benefits, depending on what state they lived in.
Nearly 4 million people currently claim benefits under the two main federal programs (known as Emergency Unemployment Compensation and Extended Benefits), according to the latest numbers from the Labor Department. Another 3 million are on state benefits.
// // The White House official suggested it would be easier for the administration to preserve a Social Security payroll tax cut enacted as part of the December deal because Republicans would view its expiration as a tax increase. “The payroll tax cut will be extended because if they do not that would be a tax increase on every American, something I’m confident, if you believe Speaker Boehner when he says we will not have tax increases, it will have to be [extended],” the official said.
Asked if the White House would continue to push for a reauthorization of federal unemployment benefits, the official said, “Absolutely, we will absolutely keep pushing for that.”
The unemployment rate is not expected to come down anytime soon, and economic forecasters said earlier versions of the deal currently awaiting action in Congress would significantly slow economic growth because of reduced government spending.
Judy Conti is a lobbyist who deals with Congress and the administration for the National Employment Law Project, a worker advocacy group. She agreed with the official that unemployment benefits would have to be part of a big deal.
“Things like the payroll tax holiday and unemployment insurance are controversial and increasingly partisan issues. In order for those to be resolved so far in advance before their expiration there would have had to have been a very significant deal,” Conti said. “Once the grand bargain died, the chance for any meaningful stimulus died as well.”
Sam Stein contributed reporting.
Why You Pay More
July 8, 2011
Each year at the end of July or in early August,
the State of New Jersey
mails to all NJ employers
the updated Employer
Contribution Reports.
This report notifies
employers of their new unemployment rate
For the next 12 months
This begins a yearly ritual.
The owner sends a copy to their accountant,
the account reviews it
and life goes on.
Unemployment is a necessary evil.
Did you know….
Unemployment is the 2nd highest employer mandated tax paid by a business?
It is the only tax that you have the opportunity to control
what you contribute?
Unemployment is similar to having a checking account with
the State.
With this report….
The State tells you how much is in your account (reserve
balance)
The State also show you how many dollars were paid out in
claims
(how much was taken
out of your checking account)
The State assigns a rate based on the reserves you are
carrying
As a percentage of the taxable wages you have paid over the
past 3 to 5 years
This rate determines how much you will contribute into the
unemployment fund
over the next 12 months.
Seems pretty simple….
You hear all the latest political buzz
Everyone is talking about the deficit….
What are we to do about the debt ceiling?
Reduce our cost…….
Don’t raise taxes……
My guess is that nobody wants to talk about
The unemployment
deficit!!!!!
Each month we get updated numbers on the job market
Unemployment is over 9%
How are we to support the growing number in unemployment?
Did anybody tell you
That you will be getting a tax increase
To help cover the shortfall?
In the NJ Unemployment Rate Table
There are 6 columns the State uses to determine employers’
rates
In 2009/2010.
NJ worked off column
B to establish employer rates
Because of the rise in unemployment claims
The reserves became depleted
In order to build up the reserves in 2010/2011,
There was talk in NJ of working off column D.
The State chose to buffer the increase passed onto employers
and work off column C instead
That meant
last year every employer in NJ saw their rates go up
automatically
And pay more into the unemployment fund.
Did the shift from column B to C help?
The state still has a shortfall
This year,
There is talk of using column
E
for 2011/2012
However, most feel again
this would be too much of an increase
Instead,
Governor Christie’s signed a bill last Friday (7/1/11)
to work from Column D
I must have missed
that phone call!!!!!
Wasn’t that the Friday
before the holiday weekend?
I think I was stuck in
a traffic jam…
Each year,
the state continues to increase taxes by
shifting the table
used to assign rates to each employer.
We are all supposed to sit back and accept this as
The cost of doing business???
Besides jumping around on the table charts
How does an employer
even know their rates are correct?
Well, the State sent
me this form and it said this is our new rate
If you are an employer
with over 100 employees,
you should be asking that question.
The new rate does
not affect just 1 employee
But all employees
Therefore businesses with a larger employee base
Are affected more
If you currently employ over 100 employees,
Take the time to question your new rate
when you receive your notice.
Did you know that NJ has close to a 10% error rate in the processing of claims?
Nationally the error rate is over 11%
If the State is paying too much out in claims…..
Are they taking too
much money out of your checking account?
Really, close to a 10%
error rate
Who is holding the
state accountable?
For the last 10 years
Hutchinson Business Solutions along with our strategic
partner DCR
Has been asking this question for our clients.
We are your public
advocate.
There have been multiple instances that we have found an
error
In the rate assigned by the State
This is just not a NJ issue,
We see this in all the states we currently service
unemployment
How do you know if your current unemployment rate is
correct?
We would like to validate your
New unemployment rate,
for no cost.
We currently service many of the major corporations in the
Tri State area
For over 20 years
HBS and DCR have been at the forefront of unemployment
Representing the clients interest
Now more than ever, employers need to be proactive
Take the time to contest claims
Verify that the amount paid out for claims are correct
As the cost of unemployment continues to rise
You must be diligent
And take the necessary steps to manage your reserves
There may be some instances you cannot control
The state switches columns and everyone is affected
However,
There are multiple rates within each column
That is something we can
manage.
Our goal is to keep the dollars in your account
And achieve the best rate possible for our clients
Notice that the state will always contact you
If you owe taxes
Unfortunately,
They do not contact you,
If you are overpaying
taxes
The onus is on you
Let us help you
All you need to do is ask.
Let us validate your unemployment rate?
Many clients have been surprised at what we have found.
To learn more about how unemployment rates affect your
business, email
george@hbsadvantage.com
or call 856-857-1230
Visit us on the web www.hutchinsonbusinesssolutions.com
Unemployment Benefits: More States Eye Cuts
May 20, 2011
Written by Arthur Delaney for Huffington Post
Add Pennsylvania and Wisconsin to the list of states considering cuts to unemployment insurance.
The Pennsylvania General Assembly needs to pass a law in order for the state to remain eligible for the federal Extended Benefits program for the rest of the year, which provides the final 20 weeks of checks in Pennsylvania for people who use up 73 weeks of combined state and federal aid. Within the past two months, lawmakers in Michigan, Missouri and Florida permanently slashed state unemployment aid in bills that preserve temporary federal aid.
Two Republican-sponsored measures moving through the GOP-controlled Pennsylvania statehouse would achieve similar results. And in Wisconsin, a proposal by Republican Gov. Scott Walker would restore the Extended Benefits program after local lawmakers let it lapse with virtually no public debate last month. But Walker’s bill would also permanently install a one-week waiting period for new claimants before any jobless claims are paid, relieving Wisconsin businesses of a $45.2 million tax burden. (Wisconsin is one of 13 states that had no waiting week in 2010.)
“Without knowing exactly how the state arrived at the $45.2 million figure, it is safe to say that a roughly equivalent amount will come out of workers’ pockets,” said Mike Evangelist of the National Employment Law Project, a worker advocacy group.
States pay for the first 26 weeks of unemployment benefits, and during recessions the federal government pays for extra weeks. While current federal unemployment benefits will only be around until January barring an unlikely congressional reauthorization, changes to state law will be permanent.
The bill in the Pennsylvania House of Representatives would save the state $632 million chiefly by cutting the average weekly payment from $324 to $277, according to Sharon Dietrich, an attorney with Community Legal Services, a nonprofit group that advocates for poor people in Pennsylvania. The bill in the Pennsylvania Senate — which Dietrich said she considers “way more innocuous” — would, like its counterpart in the House, tighten work-search requirements, but would only result in a net spending decrease of $50 million, Dietrich said. Each bill will reach the floor of its respective chamber early next week.
“On June 11, approximately 45,000 unemployed Pennsylvanians who currently qualify for federal extended benefits will be dropped from the unemployment rolls unless we slightly modify the state law,” State Sen. John Gordner (R) said in a statement. “It costs the state no money to qualify for these fully funded federal benefits through the end of the year, and results in an estimated $150 million in economic benefits.”
South Carolina is also considering cutting state aid, and lawmakers in North Carolina and Tennessee are still debating measures to revive the EB program after they let it die last month.
And in the U.S. Congress, Republican lawmakers are pushing a bill that would give states leeway to trim federal aid to the unemployed to use the money instead to repay federal unemployment government loans
States ignored warnings on unemployment insurance
April 28, 2011
As reported by Ebru News Feb 19,2011
WASHINGTON (AP) – State officials had plenty of warning. Over the past three decades, two national commissions and a series of government audits sounded alarms about the dwindling amount of money states were setting aside to pay unemployment insurance to laid-off workers.
“Trust Fund Reserves Inadequate,” federal auditors said in a 1988 report.
It’s clear now the warnings were pretty much ignored. Instead, states kept whittling away at the trust funds, mostly by cutting unemployment insurance taxes at the behest of the business community. The low balances hastened insolvency when the recession hit, leading about 30 states to borrow $41.5 billion from the federal government to pay unemployment benefits to their growing population of jobless.
The ramifications will be felt for years.
In the short term, states must find the money to pay interest on the loans. Generally, that involves a special tax on businesses until the loan is repaid. Some states could tap general revenues, making it harder to pay for schools, roads and other state services.
In the long term, state will have to replenish their unemployment insurance programs. That typically leads to higher payroll taxes, leaving companies with less money to invest.
Past recessions have resulted in insolvencies. Seven states borrowed money in the early 1990s; eight did so as a result of the 2001 recession.
But the numbers are much worse this time because of the recession was more severe and the funds already were low when it hit, said Wayne Vroman, an analyst at the Urban Institute, a liberal-leaning think tank based in Washington.
The Obama administration this month proposed giving states a waiver on the interest payments due this fall. Down the road, the administration would raise the amount of wages on which companies pay federal unemployment taxes. Many states probably would follow suit as a way of boosting depleted trust funds.
Businesses pay a federal and state payroll tax. The federal tax primarily covers administrative costs; the state tax pays for the regular benefits a worker gets when laid off. The Treasury Department manages the trust funds that hold each state’s taxes.
Each state decides whether its unemployment fund has enough money. In 2000, total reserves for states and territories came to about $54 billion. That dropped to $38 billion by the end of 2007, just as the recession began.
Over the next two years, reserves plummeted to $11.1 billion, lower than at any time in the program’s history when adjusted for inflation, the Government Accountability Office said in its most recent report on the issue. Yet benefits have stayed relatively flat, or declined when compared with average weekly wages.
“If you look at it from the employers’ standpoint, they’re not going to want reserves to build up excessively high because then there’s an increasing risk that advocates for benefit expansion would point to the high reserves and say, ‘We can afford to increase benefits,”‘ said Rich Hobbie, executive director of the National Association of State Workforce Agencies.
A review of state unemployment insurance programs shows how states weakened their trust funds over the past two decades.
In Georgia, lawmakers gave employers a four-year tax holiday from 1999-2003. Employers saved more than $1 billion, but trust fund reserves fell about 40 percent, to $700 million. The state gradually has raised its unemployment insurance taxes since then, but not nearly enough to restore the trust fund to previous levels. The state began borrowing in December 2009. Now it owes Washington about $588 million.
Republican Mark Butler, Georgia’s labor commissioner, said his state had one of the lowest unemployment insurance tax rates in the nation when the tax holiday was enacted.
“The decision to do this was not really based upon any practical reasoIt was based on a political decision, which I think, by all accounts now, we can look back on and say it was the wrong decision,” Butler said. “Now we find ourselves in a situation where we’ve had to borrow money and that puts everyone in a tight situation.”
In New Jersey, lawmakers used a combination approach to deplete the trust fund. The Legislature expanded benefits and cut taxes, as well as spending $4.7 billion of trust fund revenue to reimburse hospitals for indigent health care. The money was diverted over a period of about 15 years and helps explain why the state’s trust fund dropped from $3.1 billion in 2000 to $35 million by the end of 2010. The state has had to borrow $1.75 billion from the federal government to keep the program afloat.
“It was a real abdication of responsibility and a complete misunderstanding of how you finance an unemployment insurance fund to make sure you have sufficient money in bad economic times,” said Phillip Kirschner, president of the New Jersey Business and Industry Association. “In good economic times you build up your bank account, but in New Jersey, they said, ‘Well, we have all this money, let’s spend it.”‘
California took its own road to trust fund insolvency. Lawmakers kept payroll tax rates the same, but gradually doubled the maximum weekly benefit paid to laid-off workers to $450. The average benefit now is about $300 and is paid for about 20 weeks.
Loree Levy, spokeswoman for the California Employment Development Department, said lawmakers were warned of the consequences.
“We testified at legislative hearings that the fund would eventually go broke and would become permanently insolvent if legislation wasn’t passed to increase revenue,” Levy said.
California has borrowed $9.8 billion to keep unemployment insurance payments flowing. It owes the federal government an interest payment of $362 million by the end of September.
In Michigan, unemployment insurance tax rates declined from 1994 through 2001. The trust fund prospered during those years because of the healthy economy and low unemployment rate. Then the recession arrived and reserves plunged. In response, Michigan lawmakers passed legislation that lowered the amount of wages subject to unemployment taxes from $9,500 to $9,000. They increased the maximum weekly benefit from $300 to $362. The trust fund dropped from $1.2 billion to $112 million over the next four years. In September 2006, Michigan was the first state to begin borrowing from the federal government.
Other states held their trust funds purposely low as part of an approach called “pay-as-you-go.” Texas is a nationally recognized leader of this effort. Its philosophy is that, in the long run, it’s better for the economy to keep the maximum level of dollars in the hands of businesses rather than government. Texas had to borrow $1.3 billion in 2009. State officials have no regrets about their policy.
“By keeping the minimum in the (trust fund), Texas is able to maximize funds circulating in the Texas economy, allowing for the creation of jobs and stimulation of economic growth,” said Lisa Givens, spokeswoman for the Texas Workforce Commission.
The pay-as-you-go approach goes against the findings of a presidential commission that looked into the issue of dwindling trust funds in the mid-1990s.
“It would be in the interest of the nation to begin to restore the forward-funding nature of the unemployment insurance system, resulting in a building up of reserves during good economic times and a drawing down of reserves during recessions,” said the Advisory Council on Unemployment Compensation, which President Bill Clinton appointed.
Hobbie, from the association representing state labor agencies, said there’s no way to tell which approach is better over the long haul. He acknowledged that keeping reserves at the minimum in good times goes against one of the original aims of the program – to act as an economic stabilizer in bad times. That’s because businesses are asked to pay more in taxes, which leaves them less money to invest in their company.
A survey from Hobbies’ organization found that 35 states raised their state unemployment taxes last year.
Hobbie said he suspects that some states allowed reserves to dwindle out of complacency.
“I think we just got overconfident and thought we wouldn’t experience the bad recessions we had in, say the mid ’70s, and then this big surprise hit,” he said.
MICHAEL L. DIAMOND
TRENTON — Speaking on a panel before a group of business leaders last month, Assembly Republican Leader Alex DeCroce must have thought his remarks that the state’s unemployment benefits were too generous would resonate with the audience.
They may have. But soon after the New Jersey Business and Industry Association panel discussion ended, The Associated Press reported his comments to a wider audience, including his observation that jobless benefits “are too good for these people” and don’t provide enough incentive to return to work.
Senate President Stephen Sweeney, who also was a panelist, fumed. DeCroce the next day tried to apologize, if not to his Democratic colleagues, at least to unemployed workers.
“My comments were made to a gathering of business leaders and I wanted to convey the need to fix a system that is on the verge of collapse,” he said in a statement. “I wanted to emphasize that there are individuals who are gaming the system (and) contributing to its current state.”
That system is broken. For the third consecutive year, New Jersey likely won’t have enough money to pay benefits to jobless workers, forcing it to borrow from the federal government.
It leaves employers facing another payroll tax increase. It leaves business and labor leaders to hash out ways to improve the unemployment system and keep their constituents satisfied. And it leaves observers hoping that the state will address the root of the problem: the recession and slow recovery, and the state’s history of diverting revenue intended for the unemployment trust fund to the general treasury.
“I think there was an implication (in DeCroce’s remarks) that people who collect unemployment have an entitlement mentality,” said John Sarno, president of the Employers Association of New Jersey, a Livingston-based organization that advises employers.
“I disagree with that. I don’t think they’re too generous. It insures two-thirds of someone’s wages. Are there a few people who would rather just collect unemployment? Yeah, there are always a few people who are trying to game the system. But you can’t attack the system just because there are a few people gaming it.”
DeCroce’s desire to see benefits cut doesn’t appear to be gaining traction.
A state task force is expected to recommend keeping unemployment benefits at their current levels.
Workers who lose their jobs this year through no fault of their own are entitled to receive two-thirds of their wages, up to $598 a week. The top benefit fell from $600 last year because the state’s average wage in 2009, used to determine benefits, declined for the first time in 40 years.
The money for jobless benefits comes from an unemployment trust fund financed by taxes on employers and workers. The amount employers pay depends on how often their workers file claims. It ranges this year from .4 percent to 5.4 percent of wages up to $29,600 per employee. Employees pay .38 percent of their gross pay on wages up to $29,600 — a maximum of $113.22 a year.
The tax is meant to help workers such as Cherlyn Jackson, 46, of Asbury Park, who lost her child care job more than a year ago. She quickly dismissed the notion that the benefits were generous enough for her to stay home and kick up her feet.
What was life like on unemployment?
“Hard. Trust me, hard,” Jackson said recently at the state’s One-Stop Career Center in Neptune. “It’s like you’re waiting on that check to come to make ends meet. But you still have to borrow from someone and then pay them back. You fall further behind.”
“You don’t see one smiling face around here,” she said. “Look around.”
New Jersey’s insolvent unemployment trust fund is a product of its own making. Lawmakers from 1992 to 2006 diverted $4.6 billion from the fund to pay for other programs, leaving it on thin ice if the unemployment rate were to soar unexpectedly.
The economy collapsed in late 2007, and the unemployment rate climbed from 4.5 percent in December 2007 to 10 percent two years later, a 33-year high. It was 9.2 percent in November, according to the most recent statistics.
The result: New Jersey in 2009 paid $3.2 billion in benefits and collected $1.9 billion in unemployment taxes. Last year, it paid $3.4 billion in benefits and collected $2.2 billion in taxes. Its cushion gone, the state borrowed $1.75 billion from the federal government the past two years to pay benefits, according to the Department of Labor and Workforce Development.
Voters in November approved a referendum preventing lawmakers from using unemployment funds for other purposes. But for employers, who are required by law to keep the trust fund solvent, it came too late.
They were in line for a payroll tax hike of $1 billion last year until Gov. Chris Christie and the Democratic Legislature agreed to enact a smaller tax increase that on average amounted to $130 per worker, borrow the balance from the federal government, tighten the rules so workers fired for misconduct would have a harder time collecting benefits and set up a task force to seek long-term solutions.
Christie in his proposal last Februrary to reform the unemployment system supported a $50-a-week cut in maximum weekly benefits. New Jersey last year had the fourth highest benefit — behind Massachusetts, Rhode Island and Connecticut, according to the National Employment Law Project, a worker advocacy group.
Christie eventually backed away from that proposal and compromised with the Democrats.
Still, some thought Christie had a point. Christine Nichlos, chief executive officer of People Science, a Shrewsbury-based recruiting firm, said some people — particularly those in two-income families — reject job offers in the hopes of getting better ones, because of the cushion of unemployment benefits.
An informal People Science poll found that nearly half of those seeking jobs would consider a less-than-ideal position if their benefits were running out.
“We could be enabling them to delay decisions that will put them on a different career path,” Nichlos said.
Others said it is unfair to measure the state’s benefits without taking into account its average wages, which are among the nation’s highest. New Jersey’s jobless benefits ranks 28th in terms of the percentage of lost wages they replace, according to Patrick J. O’Keefe, director of economic research for J.H. Cohn, an accounting firm.
“Times change and people change, but the integrity of the unemployment fund has to be there for people in tough times to see them through,” said William T. Mullen, president of the New Jersey State Building and Construction Trades Council, a coalition of labor unions.
The report of the unemployment fund task force is expected to be released by the end of the month. Michael Drewniak, a spokesman for Christie, said the governor would review its recommendations before announcing his strategy.
Laurie Ehlbeck, director of the National Federation of Independent Business in New Jersey and a task force member, said the group didn’t support lowering benefits.
“The last thing we want to do is hurt people who are legitimately unemployed,” she said, noting that the state could have managed the high unemployment rate if it hadn’t diverted money from the fund. She declined to discuss other details about the final report.
Employers could face payroll tax hikes each year to restore the trust fund — unless the number of jobless workers dramatically declines. That’s one reason Sarno at the Employers Association and others are advocating a change to the unemployment system to include a more aggressive re-training program.
“Its purpose is to tide people over during periods of unemployment, and that’s a social good,” Sarno said. “But folks who are long-term unemployed, we’re talking 100 (weeks), their skills are rusty. There’s some evidence to suggest employers are hesitant to hire long-term unemployed, so re-training becomes critical. It’s not only an unemployment check, which is fine, but it’s also re-training for jobs that are in demand.”
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