CCSNJ Supports Constitutional Amendment Regarding the Siphoning of the UI Fund
Monday, December 08, 2008

MEMORANDUM

TO: Members of the Senate Labor Committee

FROM: Christina M. Genovese, Manager, Government Relations

RE: SCR-60 (Sweeney/Kean)

DATE: December 8, 2008

The Chamber of Commerce Southern New Jersey supports SCR-60 (Sweeney/Kean), which proposes a constitutional amendment requiring contributions collected for assessments on wages to be used for employee benefits and prohibits the use of contributions for any other purpose. As our Chamber has stated in previous testimonies, we believe it is essential to keep the Unemployment Insurance (UI) Trust Fund and the Temporary Disability Insurance (TDI) fund solvent and to use monies in these funds only for the purposes for which they are intended.

The UI Fund was designed to be forward-funded, building up surpluses during strong economic times to carry it through down periods of the business cycle, such as the one we are experiencing today. However, since 1993, $4.7 billion in employer and employee tax contributions to the UI Fund have been diverted to pay for other expenses, such as charity care. Furthermore, revenue collected from employers and employees for TDI have also been diverted during budget cycles to balance the budget. In fact, legislation recently signed into law temporarily diverts $25 million from the TDI fund for start up costs of the Family Leave Act.

As a result of this continuous siphoning of funds, the UI fund is now in crisis. Over the years, our Chamber has voiced its concerns over continually diverting money from the UI fund and the impact these diversions have upon the fund balance. Earlier this year, the fund had dipped to the level where an automatic increase to employers and employees – some $350 million – would have been inevitable without an appropriation from the General Fund. This tax increase would not have been a result of businesses and employees not paying enough into the fund, or because the state paid out significantly more money in benefits; it is because the state has diverted this money year after year over the objections and cautions voiced by the business community.

The State must take the appropriate steps to assure that both employer and employee taxes paid into these funds are used exclusively for their stated purpose, not to make up for budget shortfalls. For this reason, we ask you to support SCR-60 (Sweeney/Kean).