As if New Jersey didn't have enough financial problems, the state's fund for paying unemployment insurance benefits is so low that a recession could exhaust it in four months.
Like many of the state's fiscal woes, this one was avoidable.
In the last 14 years, the state has used more than $4.7 billion from the fund, including $350 million in 2005-06, to reimburse hospitals for services they provide to the poor and uninsured.
When the diversion started in 1992, it wasn't viewed as a problem. If the unemployment fund got too low, diversions would stop, or the unemployment insurance tax rate would rise under a provision that required an increase when the fund fell to a certain level.
But the diversions continued, and to avoid tax increases the Legislature rewrote the law to change the level that would trigger higher rates.
Now the balance is $1 billion, a drop from $3 billion four years ago. The federal Advisory Council on Unemployment Compensation recommends that states have enough reserves to pay benefits for one year under recessionary conditions. New Jersey has a third of that.
This is an alarming statistic because a lot of New Jerseyans count on unemployment benefits. Although the average benefit replaces only 35 percent of a worker's wages, 317,000 people collected unemployment insurance payments in 2005.
New Jersey has the highest rate of unemployment insurance use in the country, with 63 percent of those out of work receiving benefits in 2005.
(There are numerous reasons that the rest of the unemployed did not receive benefits. Fired workers are not eligible, nor are undocumented immigrants or the self-employed. Some aren't aware of the system or don't know they are eligible. Some have been out of work longer than the 26 weeks covered under law.)
In 2005, the average duration of unemployment was just over 20 weeks. Nearly half (46 percent) the workers who received benefits in 2004, a non-recessionary year, exhausted them.
Employers contributed on average $387 per employee to the state unemployment fund in 2004. New Jersey is one of just three states that require employees to contribute to the fund, too, and each contributes less than $100 per year.
New Jersey never should have let the need to help unemployed workers collide with the equally important goal of making sure the poor and uninsured get medical care.
It's one more example of the shortsighted, politically expedient behavior that jeopardizes New Jersey's fiscal situation.
Gov. Corzine's budget proposal offers a way to relieve pressure on the unemployed and fund charity care.
He wants a $430 million tax on hospitals. Half of it would be returned to them based on their Medicaid caseloads. This could, and state administrators say probably would, be matched by the federal government.
Corzine does not redirect money from the unemployment fund for 2006-07, and that's a step in the right direction.
Whether a new tax on the state's hospitals is the right way to plug the hole in the unemployment fund, it's clear that the diversions had to stop.
The time has come to raise the unemployment insurance tax rates for employers and employees, at least temporarily, to build the fund back up.
Since 1935, unemployment insurance has been an important safety net for those out of work through no fault of their own.
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