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National debt crisis threatens Californians

July 29, 2011 12:00:00 AM PDT
If the debt crisis in Washington, D.C., is not resolved, millions of Californians could suffer the consequences very quickly.

So many Californians depend on programs that use federal funds. It's not just Social Security. Without a resolution to the debt crisis signed by the president, a lot of hurt could be on the way.

The California Employment Development Department is racing to put together letters to 1.2 million Californians receiving unemployment checks notifying them their money may stop coming if the debt crisis isn't resolved in Washington by Tuesday.

Approximately $320 million a week in benefits would abruptly stop because the program has been running on federal loans since January 2009.

"We don't have a reserve in our Unemployment Insurance Trust Fund," said Loree Levy, deputy director, California Employment Development Department (EDD). "It's about $8.5 billion in the hole right now. So we don't have that kind of backing to pay those payments right now."

Roberto Guerrero could be hit with a double-whammy. He collects Social Security because of his age and unemployment after losing his part-time job. It's possible he wouldn't get either, as the feds will have to prioritize what gets paid.

"I might end up in a soup line like they did in the Depression days. I don't know. I just know it's going to be bad," said Guerrero.

Besides unemployment checks, public schools are worried they won't be able to provide federally funded free lunches any more. Sometimes it's the only hot meal that low-income kids get.

And the 18 cents of federal gas tax that go to highway and other transportation projects would be put on hold in California, jeopardizing thousands of jobs.

The scenarios seem familiar.

"We've been through some scary times in California," said state Sen. Darrell Steinberg (D-Sacramento), senate president. "As you know, in 2009, we were very much on the edge with a $42-billion deficit. We got it done. They've got to get it done in Washington, D.C."

But the clock is ticking and so many lives are on the line.

"The politicians aren't even thinking about that or don't care. They're saying they care about the public, but they don't," said Guerrero.

State Treasurer Bill Lockyer took out a $5-billion loan for California earlier this week in anticipation of the problems in D.C. But EDD doesn't think it can tap into that because the state has its own bills to pay.

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