California's unemployment rate grew to 9.3 percent last month, the highest in 15 years.
Several years ago, lawmakers approved a bill that raised weekly unemployment benefits substantially, but employer taxes were not adjusted to cover the additional cost.
The EDD had warned that the unemployment fund would eventually run out of money without an increase of revenue.
If no steps are taken to fix the fund's revenue shortage, its red ink is projected to grow to $4.9 billion in 2010.
The dilemma adds one more problem for lawmakers to deal with as they try to come to terms on California's budget.
The state fund paid out $6.8 billion in unemployment benefits in 2008, up from $4.9 billion in 2007. The 2008 total doesn't include federal unemployment funds that covered an extension of benefits authorized by Congress.
The Associated Press contributed to this story.
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