Improving Workers’ Skills

The state’s Department of Labor is hard at work for businesses and employers.

In New Jersey, the Department of Labor and Workforce Development (LWD) is helping job seekers by helping our business community.

We deeply value our private sector employers because we fully understand that they are the force driving our economy. To employ more people in the Garden State, we continue to focus our workforce development efforts on identifying the skill needs of our businesses, directing our training programs and working with our partners in education to give job seekers the exact skills employers say they need.

My department also is doing its utmost to unburden employers from unnecessary regulations and costs, and, this year, we reached a milestone in that effort. We brought the New Jersey Unemployment Insurance Trust Fund back to solvency, two years before many had predicted.

The significance of this accomplishment cannot be overstated. This administration’s steady efforts to bring the fund into solvency prevented a $322-million tax hike on employers this year and will go on to reduce their taxes by at least $1 billion over the next five years.

The Trust Fund, of course, finances a temporary safety net provided to New Jersey workers who lose their jobs, through no fault of their own, and who need help getting back on their feet. While workers do contribute to the Trust Fund, the lion’s share is financed by employers – and it was those employers who shouldered the financial burden after the Trust Fund became insolvent.

That happened in 2009, following two decades of diversions that totaled $4.6 billion and a severe economic recession that resulted in high unemployment levels and New Jersey paying out benefits to a growing number of unemployed workers. The state started borrowing from the federal government to pay the mounting benefit claims, and the deficit peaked at $2.1 billion in April 2011.

State and federal laws designed to replenish the Trust Fund were triggered, imposing automatic, severe and annually compounding tax burdens on the very people we were relying upon to improve our economy – New Jersey’s business community.

Governor Christie offered some early relief, signing bi-partisan legislation in 2010 that significantly reduced the annual state tax increases triggered under Trust Fund laws. That bi-partisan actions ultimately saved businesses $1 billion in tax increases in the years that followed. However, the federal taxes continued to compound, as did federal interest payments on the outstanding federal debt.

I am proud to say it was our sound fiscal management practices and several unique anti-fraud measures we initiated that led to the Trust Fund showing its first positive balance last year. Although temporary, achieving a positive balance last fall avoided a $213-million federal tax hike that would have otherwise been imposed on employers in January under compounding, annual tax assessments that had been required by the Federal Unemployment Tax Act (FUTA). This positive balance also triggered an automatic reset of the FUTA tax rate, reducing it back to the base level for all New Jersey employers.

By May of this year, I had the honor of announcing to Governor Christie and the state Legislature that the Trust Fund was fully solvent. By being “back in black,” as we like to say, New Jersey was free of federal borrowing and we spared New Jersey employers a $109-million Federal Loan Interest Assessment or FLINT tax this year and in future years.

This turnaround was not accomplished by chance. The Trust Fund solvency was due directly to the implementation of key reforms under the Christie Administration that bolstered the fund’s integrity, particularly several anti-fraud programs my department put into motion that the US Department of Labor has repeatedly recognized as leading the nation.

Between 2011 and this past May, our anti-fraud efforts prevented more than $440 million from being improperly diverted from the Trust Fund. The bulk of that savings is due to our first and most simple reform: we began cross-checking our Unemployment Insurance rolls against the National Directory of New Hires to determine if people filing unemployment claims have actually returned to work.

We plan to continue and expand the protections we have developed for the Trust Fund because the effort continues to pay off. Employers may already look forward to more than $1 billion in annual, incremental reductions over the next five years of the taxes they pay into the fund. We believe these cumulative tax cuts will keep more money in our employers’ pockets to invest in growth, which will mean an expansion of New Jersey’s economy and a growth in Garden State jobs.

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