Thursday, January 22, 2009

NJ jobless woes...

It may seem strange to focus on New Jersey so often, but their economy mirrors that of NYS and their difficulties often forecast troubles for NY.

There are a number of key observations from this story that is emerging from NJ. In effect, the unemployment fund has 10 weeks of payouts left until they would be out of money if they collected no additional payroll taxes. Since, the state is still collecting payroll taxes the fund probably has about one year left (they payout $45 million a week and collect $36.5 million a week in payroll taxes).

"Our Unemployment Trust Fund went into this recession without the kind of funds it should have had," Sokolow said.

Businesses and workers pay into the fund through payroll taxes. About $1.9 billion is collected each year. The fund is currently paying out about $45 million a week in claims, with jobless claims rising and tax collections shrinking.

An automatic tax increase is triggered to businesses if the fund dips too low.

Corzine said the fund has been overwhelmed because lawmakers previously diverted billions to cover the cost of state aid to hospitals and other programs.

The fund needs an estimated $200 million to avert a tax increase of $375 million to $600 million."

The choices will be increase the payroll tax on employers (and risk forcing out of your state or cut more employees) or cut unemployment benefits. Neither option is pretty.

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