State Sen. Vin Gopal said he won’t give up the fight when it comes to getting relief — any relief — for the business community, which has been stuck with a $1.7 billion bill to replenish the unemployment insurance fund.
It’s going to be a tough battle.
While most other states already have used federal money to help replenish this fund, a bill Gopal cosponsored — one that had bipartisan support, one that would have brought some relief to the business community — was yanked in the closing moments of the budget negotiations last week.
That’s why the business community was hit with a $296 million tax increase last Friday (the start of the fiscal year). The tax increase, which comes in the form of higher UI payments, is payable over the next year — when it will be replaced by an even bigger tax the following July 1, unless something is done.
(Simply put, the state depleted its UI fund during the pandemic and now needs to rebuild it. See explainer at bottom of story on how that will fall on business community.)
Despite the failure to get anything done during the budget process, Gopal (D-Ocean Twp.) said he’s confident another bill, another financial measure, another revenue source will become available this fall.
“We’re going to try to work out a bill in September, which the Governor’s Office has said they’ll be receptive to working on,” he said. “There’s still a lot of money (available) — and it doesn’t have to go through the budget process.
“I have a feeling there’s going to be a lot of financial pieces done in September, October, November, December on a variety of things, as we have in past years.”
Most in the business community think it’s all wishful thinking.
Gov. Phil Murphy has had plenty of opportunity to act on the UI issue. And while there always are questions, the biggest response has been only a change in his stated line on using federal funds to replenish the UI fund — something more than three dozen states have done in one way or another.
Instead of “all options are on the table,” it is now a desire to get the “biggest bang for the buck.”
Murphy, on Tuesday, pointed out all of the programs the state has implemented to help small businesses since the start of the pandemic.
To be fair, he said New Jersey has given out the third-highest amount of money in grants to small businesses (trailing only California and New York). By size, that means the state has the highest per-capita expenditure. But, also to be fair, many feel the UI tax increase more than wipes those out.
Murphy, when asked directly, chose not to answer the UI replenishment question with any specifics.
“I want to make sure that, as we continue to push resources toward small businesses, that we get the highest bang for our buck,” he said.
“I continue to be open-minded about the unemployment insurance angle, but I do want to make sure that the money we put on the street has the biggest return and bang for the buck.”
Chris Emigholz, the highly regarded vice president of government affairs at the New Jersey Business & Industry Association — the point person for the organization when it comes to the state budget — can’t understand why this is even a debate.
The increase in UI funding is a tax on the business community when there is money available to help, he said. The state — after accumulating record revenue — has a rainy-day fund of more than $5 billion.
“It’s almost like punishing the business community just because you can,” Emigholz said. “In a way, this tax increase is akin to taxing the shutdown, because the UI fund would not have been drained to the extent that it was if we didn’t have one of the more severe shutdowns in the nation.”
Emigholz is clear: He’s not against the shutdown or any of the actions the state took.
“I’m not here to debate whether it was the right or wrong thing, public health-wise,” he said. “Public health, as the governor rightly said, is economic health. If something was necessary for public health, then do it. But, whatever was done for public health had economic health ramifications. And, so, in essence, you are choosing to tax your shutdown if you don’t do anything to address this.
“(The governor) made businesses shut down, made people get laid off. To then choose not to compensate those businesses that are now paying more taxes because you made the layoff happen in the first place is tough to swallow. And I think that’s a point that gets lost here.”
While Emigholz feels replenishing the UI fund is a fairness issue for the business community, Gopal feels it’s one of survival. He sees the impact on small business every day in his district, which includes Asbury Park, Red Bank and Long Branch, among other areas.
“I’ve got more Main Street businesses in my legislative district than I think anywhere in the state,” he said. “A lot of mom-and-pops — people who took a real hit during the pandemic. This is a way we can support them.”
Gopal was proud that so many groups got something in the budget, rattling off help that went to property tax relief, schools (both K-12 and higher education), seniors, veterans and others.
“The one area that’s glaring is small business,” he said. “This budget didn’t do enough for small businesses, and that’s what we need to correct.”
If nothing else, Gopal said something must be done for the smallest of businesses, those with 25 or fewer employees.
“Let’s tighten the language,” he said.
Gopal is confident there is support on the UI issue from state Senate President Nick Scutari (D-Clark) and Assembly Speaker Craig Coughlin (D-Woodbridge). And he said the governor’s chief of staff, George Helmy, has been receptive, too.
“(Helmy) said he’s committed to work with me when we return in September to see what we can do for small businesses,” Gopal said.
Where does it go from here?
The administration, when asked specifically if it is looking to help pay down the UI shortfall, issued a lengthy statement that said it is proud of its efforts to help the business community — while not mentioning the UI fund.
“We are incredibly proud to have worked with our legislative partners throughout the pandemic to prioritize small business recovery, including putting nearly $800 million into programs to assist small businesses,” the statement said. “The focus on our economic growth and revitalization of our Main Streets is continued with historic investments in this budget.
“This budget invests millions more into our Black and Latino Seed Fund, invests millions to support our manufacturers, puts over $50 million into the Main Street Recovery Program and includes additional funding for the Neighborhood Preservation Program and Neighborhood Revitalization Tax Credit program.
“Gov. Murphy looks forward to working with the Legislature in the coming months to further support our business community.”
Whether that includes replenishing the UI fund remains to be seen.
Emigholz feels said the impact of doing nothing on the UI fund could be felt for years — and used against the state by other states in the neverending battle for businesses.
What more bang for the buck could you want? he asked.
“This is a competitiveness issue, because the majority of states in the nation said, ‘We don’t want businesses to pay more taxes because of a pandemic; that wasn’t their fault,’” he said. “If you’re one of those states that doesn’t choose to do that, what are you telling businesses?”
The Unemployment Insurance Fund situation
There are a number of estimates of how much additional tax will be needed to replenish the unemployment insurance fund — and approximately how much will be raised from the three-year cycle in which New Jersey businesses use different columns to figure their tax.
From the Office of Legislative Services, using guidance from the Department of Labor & Workforce Development, here’s what the state expects to gain from the move.
Moving from Column B to Column C:
$252 million increase
Moving from Column C to Column D:
$548.6 million increase
$296.6 million increase, on top of the $252 million increase for moving from Column B to Column C
Moving from Column D to Column E:
$885 million increase
$336.4 million increase on top of the $548.6 million increase for moving from Column B to Column D
$252 million + $548.6 million + $885 million = $1.686 billion
Note: Companies calculate their unemployment insurance taxes based on which column the state is in — the column is based on the health of the fund, with A being the best, E+10% being the worst. Pre-pandemic, New Jersey was in Column B.