Governor Says Cuts To Federal Funding For Upgrading Unemployment Systems ‘Undermine' Workers

By Sophie Nieto-Munoz, New Jersey Monitor

June 4, 2025

Gov. Phil Murphy criticized the federal government for terminating programs aimed at modernizing the unemployment insurance system, which suffered under the stress of hundreds of thousands of claimants applying for jobless benefits at the height of the pandemic.

“At a time of increased uncertainty about the U.S. economy, the last thing the federal government should be doing is taking away resources from states’ unemployment insurance systems,” Murphy said in a statement Monday. “These cuts undermine American workers.”

The Trump administration is terminating $400 million in funds for states across the country to modernize their unemployment systems, money that was authorized in the 2021 American Rescue Plan Act passed under the Biden administration.

The Murphy administration did not comment on whether any money would be returned to the federal government, or whether the change in funding would cause any disruptions to systems in the process of being upgraded. The state Department of Labor did not respond to a request for comment.

New Jersey received nearly $25 million for its upgrades. The grant money was expected to be accessible for tech upgrades through 2028.

Murphy said in his statement that the state has used those funds to “improve the efficiency of our state’s unemployment insurance application to ensure that all eligible workers can access the benefits to which they are entitled.”

According to Axios, the U.S. Department of Labor notified Congress last week that these grants were being terminated, suggesting that the funds were wasted on equity projects. However, “equity” in this case refers to efforts to make the system easier for people to use and access, not as a reference to diversity, equity, and inclusion initiatives, which the Trump administration has vowed to dismantle.

A record-breaking 1.1 million claims were filed in New Jersey during the first two months of the pandemic, pushing the state’s antiquated unemployment system past the limits of what it could handle. People saw their claims frozen, received their benefits months after they applied — if they received them at all — and were often told to reach out to call centers for specialists, only to be greeted with busy signals or messages to call back another time.

The unemployment system in New Jersey saw major overhauls following the pandemic, and its first substantial update in over a decade, as a result of a federal program with the U.S. Department of Labor. The unemployment application that rolled out in 2024 can be used on mobile devices, is available in multiple languages, can be saved if the applicant needs to return to it later, and includes revised questions to make it easier to understand.

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