NJ Unemployment Fund Underfunded

Just when you thought that the business climate in New Jersey couldn't possibly get any worse..

From the Star Ledger:

Recession could trigger large corporate tax hike

New Jersey's fund for paying unemployment benefits is so de pleted that even a moderate reces sion would push the fund into bankruptcy and trigger an enor mous corporate tax increase, the state labor commissioner told a Senate committee yesterday.

The fund has a balance of $850 million -- about enough to cover six months of payouts during good economic times, said Commis sioner David J. Socolow. Only three years ago, the fund had a balance of more than $3 billion.

He said the fund has been battered by the state's decision to divert tax revenues from it to pay for hospital services for the poor. Those diversions have cost the fund about $4.7 billion since 1993.

"We're not ready for a recession," he told a special hearing of the Senate Labor Committee.

This year the fund narrowly missed falling so low that it would have triggered a $200 million tax hike. Next March, Socolow said, a tax hike will be unavoidable if any money is diverted from the fund in the upcoming state budget year or if the state slips into recession.

A minor recession seems inevitable for New Jersey, should the housing bubble burst. A significant number of construction and other housing-related jobs have been added as a result of the housing boom. But history is not on our side. In the two year period after the prior housing bubble burst in the late 80's, New Jersey lost more than 40,000 construction-related jobs. It took almost 12 years to recover those jobs.

Caveat Emptor!
Grim