Business owners in New Jersey stung last year by higher unemployment insurance payments will pay even more in 2013 to make up a shortfall left by the recession and depredations of past administrations.

And if the state fails to replenish its unemployment fund next year, employers will pay even more in 2014.

New Jersey business owners paid $4.6 billion in unemployment insurance before the recession to guard against tougher economic times. But when the economy crashed in 2008, that money was gone — taken and spent on other things by both Democratic and Republican administrations over 14 years.

When the recession struck, New Jersey borrowed money from the federal government to cover jobless benefits from the teeming numbers of newly unemployed.

Now, the state’s businesses must pay more into unemployment insurance to make up the difference, essentially paying the tax again at $105 more per employee in 2012 and $126 in 2013. New Jersey is increasing the cost to employ workers at a time when the state has a 9.6 percent unemployment rate — fourth highest in the nation.

“It’s really aggravating,” said Keith Laudeman, owner of the Lobster House restaurant and Cold Spring Fish & Supply in Lower Township. His business employed about 500 seasonal and full-time workers before the recession, but Laudeman declined to say how many he has now.

“We live within our means. If we can’t afford to go out and buy a new car or TV, we don’t do it,” Laudeman said. “But that’s not how the federal and state governments work. They keep spending and spending and spending. They don’t know how to say no.”

Higher unemployment insurance adds to other challenges for small businesses, including a proposed increase in the state minimum wage and mandated federal health insurance, he said.

“To see someone else run a business this way, and I’m the one who has to pay for their mistakes? It’s getting out of hand,” he said.

New Jersey’s unemployment-insurance crisis was self-inflicted over years of abuses by past administrations, both Democrats and Republicans, stretching back to 1994, when the state unemployment rate hovered around 4 percent.

The state collects as much as $2.7 billion per year in unemployment taxes from businesses and had an annual surplus of as much as $1.2 billion in late 2007. But every year from 1993 to 2007, the state raided hundreds of millions of dollars for other needs.

When the recession struck in late 2007 and unemployment began to climb into the double digits, New Jersey suddenly did not have enough money to pay workers’ claims. In March 2009, the state began borrowing from the federal government, ultimately taking $1.6 billion to meet the need.

Three years later, the state still owes about half, or $724 million.

As a result, the federal government will levy an unemployment surcharge of 0.3 percent on businesses next year, on top of the 0.6 percent they are already paying. And if the state fails to pay off the debt in 2013, businesses will see another 0.3 percent increase in 2014, and so on in subsequent years until it is paid off.

That might not sound like much, but it adds up, said state Sen. Jim Whelan, D-Atlantic.

“With small businesses, margins are very small. So when you hit them with a cost they weren’t anticipating, they feel it,” he said.

New Jersey is not alone. The recession strained state unemployment accounts across the nation, prompting 32 other states to borrow more than $48 billion to meet the demand.

Higher taxes are putting a greater strain on everyone, said David Goldberg, CEO of Atlantic City Linen in Pleasantville. His business employs about 800 people.

Goldberg said it’s easy to get upset about having essentially to pay twice to provide unemployment insurance to workers. But he suspects that business taxes would have gone up elsewhere if the Legislature had not relied on this source of money.

“Money is fungible. If they didn’t raid it from this fund, it would have come from another tax somewhere,” he said. “We rob Peter to pay Paul. I think we’re heading in the right direction. The No. 1 priority has to be to create jobs.”

Not every business contributes the same amount for unemployment. Employers pay these taxes based on the contributions they pay into the system versus the claims made by employees. States administer the program, charging the highest rates to employers who have the highest unemployment claims. This is called an “experience rating.”

States charge employers a range of rates for unemployment insurance, from zero to 13.5 percent.

Many businesses are extra careful when it comes time to hire new employees so they can protect their experience rating.

“It’s very important to me,” said Riley Gunnels, owner of Signal Graphics in Egg Harbor Township. His business employs about 12 people, most of whom have worked for him for years.

“I want to have good ratings like you want to have good credit,” he said. “I’m just one of thousands of small-business owners who are conscious about it.”

The rating can make a huge difference in how much a business pays toward unemployment insurance. Businesses in New Jersey with the highest unemployment claims by employees can pay as much as six times more than those with few claims.

New Jersey charges a minimum of 1.2 percent on wages paid by employers who have the least turnover or company layoffs compared to wages and a maximum of 7 percent on employers who have the highest turnover or layoffs compared to their contributions to the unemployment system, according to the state Department of Labor and Workforce Development.

The federal tax is 0.6 percent on the first $7,000 paid to each employee on top of the state tax.

“We make an attempt to hire the right people who are looking to work for the long run,” Gunnels said. “This is a family operation. We have 100 percent faith in our people. We think they’re loyal to us, and we want to be loyal to them.”

Employers are not the only ones who pay unemployment taxes in New Jersey, one of only three states that require workers to contribute. In 2010, workers contributed $300 million in dedicated taxes, or about 12 percent of the total collected for unemployment. Labor officials said employees, unlike their companies, will not have to pay more out of their paychecks to make up the shortfall.

Higher business taxes typically translate to fewer jobs, said Stephen J. Muldoon, co-owner of Bennett Chevrolet in Egg Harbor Township. Fortunately, his company has not had to lay off any of its 40 workers because of increased unemployment insurance costs.

But New Jersey’s high unemployment rate of 9.6 percent continues to strain the system.

“I don’t think anyone wants to see their unemployment insurance get raided. It’s there in case something happens, God forbid,” he said.

Since the recession, more laid-off employees have looked at new avenues to find work. That has included car sales, which can be a challenging job under any circumstances. This has boosted employee turnover somewhat in his business, Muldoon said.

“Someone who is in retail or the casino business may try their hand at car sales to see if it’s for them or not,” he said.

New Jersey responded to its unemployment crisis by forming a task force to identify problems within the system and come up with solutions.

The state’s first priority was to protect the unemployment trust fund from future pillaging by lawmakers or governors. Voters in 2010 approved an amendment to the state constitution to safeguard dedicated funds from being siphoned for other state uses.

But the state also took a harder look at how its unemployment claims are paid out. Last year, the state Department of Labor and Workforce Development started a program to prevent the most common types of fraud: the improper collection of payments by employees who return to work.

The program, the first of its kind in the nation, created a new-hire directory of workers that it compares to its roster of unemployed workers. When there is a conflict, benefits are withheld until the worker contacts the state to address the discrepancy.

This caught about 1,650 ineligible claimants per week in 2011.

“The more people they can catch who are collecting benefits and shouldn’t, the better,” said Laurie Ehlbeck, who serves on the task force on behalf of the National Federation of Independent Business.

Adding to the funding shortfall, New Jersey pays its unemployed workers one of the nation’s highest weekly benefits at $611. Muldoon said this has discouraged some workers from taking available jobs, even in a recession, because of off-the-books income they can use in some cases to supplement their unemployment checks.

“It’s a disincentive to find a job. When we’re interviewing a candidate, they start interviewing us,” he said. “As an employer, it makes you sick. You hate to see people take advantage of it. Add to that the already high rate of unemployment pay and the long-term availability, and it has made it very difficult to hire anyone who can collect benefits and still do (under-the-table) work on the side.”

Contact Michael Miller:

609-272-7217