Senator Declan O’Scanlon warned that New Jersey could waste tens of millions of dollars on interest payments for Unemployment Insurance (UI) Fund debt if Governor Phil Murphy fails to act by a looming September deadline.
Sen. Declan O’Scanlon warned that New Jersey could waste tens of millions of dollars on interest payments for Unemployment Insurance Fund debt if Gov. Phil Murphy fails to act by a looming September deadline. (©iStock)
“It’s absolutely ludicrous that Governor Murphy might waste millions on unnecessary interest payments for UI Fund debt when we have billions in federal relief funds sitting in the bank that we could use to repay the debt in full before any interest is owed,” said O’Scanlon (R-Monmouth), a member of the Senate Budget & Appropriations Committee. “The governor has a short window of opportunity to work with the Legislature to allocate the necessary funds before interest accrues. It makes no sense for Governor Murphy to flush tens of millions of dollars down the toilet when we have the means to act responsibly.”
According to the federal government’s Treasury Direct website, New Jersey currently owes $112 million at an interest rate of 2.2777% for funds borrowed to maintain the solvency of the state’s UI Fund. As noted in a footnote on that page, the accrual of interest on borrowed funds has been deferred until September 6, 2021.
The UI Fund debt jumped nearly 50% from last week when a Murphy administration spokesperson said it was $75.2 million.
O’Scanlon questioned why the Murphy administration continues to refuse to stabilize the state’s UI Fund with federal relief funds that have already been provided to New Jersey.
“We offered a rock-solid plan back in March to use a portion of the $6.5 billion in American Rescue Plan funds that came to New Jersey to shore up our UI Fund and provide relief to struggling taxpayers, workers, and employers,” added O’Scanlon. “If implemented, our plan would prevent interest from being paid unnecessarily and stop the $250 million payroll tax increase the Murphy administration will start charging employers in October. Unfortunately, Governor Murphy refuses to acknowledge this rational solution to fix New Jersey’s UI Fund and prevent financial harm to both businesses and taxpayers. We can only guess why.”
New Jersey’s unemployment rate jumped last month to 7.3%, nearly 2 points above the national average.
In an appendix to the FY 2022 State Budget (page 136), the Murphy administration estimated that the UI Fund’s deficit — which would be filled with more borrowed federal funds — could grow to $931 million by the end of the fiscal year as New Jersey’s economic recovery lags behind the rest of the nation.
At current rates, the annual interest owed on that debt could top $20 million.