I have been curious with the various news reports about where the billions in NJ Unemployment Trust Fund money wound up. Numerous accounts stated that it went to special projects, or state expenses, or other elusive statements. The answer to where it went is quite interesting.

On January 20, 2010 the NJ Department of Labor and Workforce Development reported that New Jersey’s unemployment rate climbed to a 33 year high of 10.1%. In March 2009, with NJ Unemployment Funds exhausted, the Federal Government loaned $1.2 billion to the State of NJ to pay unemployment benefits. Under existing laws, the Federal Government will continue to loan money to NJ’s Unemployment Fund until 2015.

New Jersey’s Unemployment Trust Fund was established to provide an income for employees in the event of involuntary unemployment. Both employees and employers contribute. Monies in the fund are not property of the state, but owned by the contributors.

Fund balances in 2001 were over $3 billion. NJ’s Unemployment Fund insolvency was created not by the record number of unemployed applicants, but by legislators and governors who removed billions of the contributions that were made by employees and employers. The diversions started back in 1991. According to the NY Times, David J. Socolow, former state labor commissioner reported back in 2008 that funds were diverted to pay for the state’s hospital charity care.

The fund’s balance suffered as revenue was diverted to pay for the state’s hospital charity care from 1991 to 2005. That diversion amounted to $4.7 billion, Mr. Socolow said.

It gets even more interesting when one looks into the NJ Hospital Charity Care Program. Hospitals in NJ do not ask immigration status on patients who are uninsured. Joel Cantor director of the Center for State Health Policy at Rutgers University reported estimates in 2009 that approximately 400,000 of the 1.2 million uninsured in NJ are undocumented. These numbers are alarming, as approximately 33% of the patients cared for are undocumented or illegal immigrants. This translates to over $1.5 billion of the NJ unemployment money diverted was used to care for illegal/undocumented people. On this account, the $1.2 billion ‘borrowed’ from the Federal Government should be excused.

This Senate Budget and Appropriations Committee statement from 10/6/08 expands the amount raided to $5.4 billion and gives a break down of the destinations.

From a historical perspective, according to an Office of Legislative Services analysis of the Governor’s proposed budget for the Department of Labor and Workforce Development in Fiscal Year 2008-2009, from 1992 to 2007 approximately $5.4 billion was diverted from various funds dedicated to benefits for workers. Of that amount, $4.7 billion was diverted from the Unemployment Insurance trust fund to the Health Care Subsidy Fund; $598 million was transferred from the Temporary Disability Insurance trust fund to the General Fund; and $95 million was diverted from several funds related to workers’ compensation to the General Fund.

The fund has been looted to the point of insolvency. Unfortunately, this type of activity continued for many years. Senate Concurrent Resolution (SCR-60) - “Proposes constitutional amendment requiring contributions collected from assessments on wages to be used for employee benefits and prohibiting use of the contributions for any other purpose”. The resolution passed the NJ Senate on 12/15/08 but did not pass the Assembly until 12/7/09, missing an inclusion on November 2009’s ballot. If approved by the voters in the next general election, the practice of removing monies from unemployment trust fund and using it for non-related spending should stop.

CONCURRENT RESOLUTION - A resolution adopted by both the Senate and General Assembly to express the policy or opinions of the Legislature; often used to petition Congress to take certain actions; to establish study commissions composed entirely of legislators or appointees of the presiding officer, to adopt joint rules; and to propose amendments to the State Constitution. Requires no action by the Governor.

If this looting had been performed by other than our elected legislators and governors, people would be required to pay restitution and go to jail. The government fines employers for hiring illegal aliens, but the state of NJ has spent over $1.5 billion of the employer’s monies to care for the same illegal people the government fines the employers for hiring.

Burden of restitution to refuel our unemployment fund will be totally on the backs of already struggling NJ employers if the Legislators don’t include cuts to unemployment benefits. Any hit to employers will also transfer to cut hours, wages, or jobs to those still employed; and the bigger whack on businesses translates to more being cut from private sector employees.

NJ businesses, the highest taxed in our nation, have been fighting to survive the largest recession since the Great Depression. Aside from services and products, we rely on them to employ, pass through sales and employee taxes, and pay business taxes. Small companies, amount to 99.7% of all employer firms. The day the per employee unemployment shortfall billing is due, may be the day the business has to choose between paying the state, or the electric company turning off the lights.