• BREAKING NEWS ABC shows live and on-demand -- Download the WATCH ABC app!

State owes billions to feds for jobless fund

October 20, 2010 12:00:00 AM PDT
You hear a lot about California's budget deficit. There's another deficit that lawmakers have largely ignored: the state unemployment fund. California owes the federal government billions of dollars.California's unemployment fund plunged into insolvency in January 2009, but it keeps paying out weekly benefits thanks to several loans from the federal government.

Two reports out, one from the Legislative Analyst's Office, estimates by the end of 2011, the account will be have a $20-billion deficit; another report from the state employment office says the deficit will be more than $13 billion. Either way, they spell trouble.

"Had we acted sooner, though, the deficit wouldn't be this bad," said Todd Bland, director of social services at the state Legislative Analyst's Office.

The California Employment Development Department has been sounding the alarm to lawmakers for years. The agency warned them of the looming gap when the Legislature approved doubling benefits without raising the employer tax that funds the unemployment account. Add to that the record number of people submitting claims.

"We've ended up with a very big imbalance that cannot recover on its own. It needs Legislation to address it," said Loree Levy, deputy director of public affairs at the Calif. Employment Development Dept.

But lawmakers haven't had the courage to address the problem because it would mean possibly cutting benefits or eligibility -- unpopular ideas at the unemployment office.

"My benefits are already low each month as it is. I think it's unconscionable that they would do that," said Nora Fitzsimmons, who is unemployed.

They could raise employer contributions for each worker, another thumbs-down idea.

"Increasing any tax on employers right now, particularly small businesses, is not going to help us recover from this recession," said Michael Shaw, National Federation of Independent Business.

Or lawmakers can do a combination of both.

The unemployment fund deficit is just one of many problems facing the new governor and Legislature in January; $400 million in interest on those federal loans come due in a year.

If California continues to ignore the problem, the federal government does have the power to raise business taxes to help fund unemployment insurance.


Load Comments