New Jersey Gov. Chris Christie says he'll let a tax hike on businesses take effect if the federal government doesn't help the state replenish the unemployment fund.
Employers could see an increase of up to $1,000 per employee in their unemployment tax starting July 1 unless the fund is infused with state or federal money.
The fund helps pay unemployment benefits.
The increase is triggered by a growing shortfall in the Unemployment Insurance Fund. Business taxes are increased by law when the fund's balance dips below a certain level as measured every March. Christie says the fund will be $1.6 billion in debt by March.
"That's not my choice, what I would like to have happen," Christie said Monday. "But on the other hand, we can't continue to run that kind of debt."
The newly sworn-in Republican governor said his administration will ask the federal government to forgive the debt, but he said the state can't afford to pump money into the fund to stop the tax increase. New Jersey faces a deficit of more than $9 billion for the 2011 budget year, which begins in July.
Unemployment in New Jersey climbed to a 33-year high of 10.1 percent in December -- the first time since October 2006 that the Garden State's jobless rate eclipsed the national average of 10 percent.
Total employment in New Jersey fell to 3,910,400 in December, with losses in both the public and private sectors.
Manufacturing, construction and financial activities recorded the largest over-the-month private sector job losses and public sector employment was down by 1,200 over the month before.
Christie said that over $3.6 billion has been raided from the fund over the past decade.
David Socolow, the Labor Commissioner under Corzine, also recommended allowing the fund to replenish before he left his office this month.
Other states are in similar positions. According to the U.S. Department of Labor, 27 owe the federal government money for the unemployment benefits; California is the highest at $6.7 billion, and New York and Pennsylvania have each borrowed more than $2 billion.
Democratic Assemblyman Lou Greenwald said an unemployment tax increase would hurt businesses already battered by the tough economy.
"That will only dampen the spirit of economic recovery we've been trying to foster," said Greenwald, of Camden County.
"We threw in over $400 million at the end of last year to offset a UI tax increase," he said. "I think we should avoid a tax increase at all costs."