State must borrow to continue unemployment checks

January 27th, 2009, 11:46 am · 64 Comments · posted by Jan Norman, small-business columnist

California Unemployment Insurance Fund has run out of money and must borrow from the federal government in order to continue paying benefits to the jobless, according to the Employment Development Department.

The fund will need an extra $2.4 billion this year, and the shortfall will grow to $4.9 billion in 2010, the EDD said.

The unemployment insurance is paid by employers through payroll taxes. They are already paying the maximum allowed by law. The state must repay the federal loan out of the general fund, not from the Unemployment Insurance Fund.

“If the state is unable to pay back the loan’s principal by Sept. 30, we will owe $20 million in interest and if nothing is done by 2010, we will an additional $133 million in interest,” says EDD spokeswoman Loree Levy.

Lack of payment could also jeopardize the tax credit that employers get for their payments into the federal unemployment fund.

In 2004, the only other time the state borrowed from the federal government, it was able to repay the money before owing any interest. Officials don’t expect to be able to meet that deadline this year.

To keep the fund solvent, Gov. Schwarzenegger has proposed increasing the unemployment insurance tax $56 to $416 per employee per year - which would require a 2/3 vote of the legislature - and cutting benefits $1 to $44 a week perperson. The cuts would affect about a third of recipients.

Unemployed workers are eligible for payments of as much as $450 a week for up to 59 weeks.

The Unemployment Insurance fund is being drained by the rapid rise in unemployment, which hit 9.3% statewide in December. The fund is paying out $30 million to $34 million a day. It issued $1.1 billion in assistance checks to 429,000 unemployed workers in December.

In 2008, the state paid $6.8 billion in regular unemployment pay and $1 billion in federal extensions. By comparison, in 2007 it paid $4.9 billion.

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flop41 says:

January 27, 2009 at 12:05 pm

Well, no wonder they’re running out of money. When employers lay off employees, their contributions to the EDD is much less now that they don’t have all those employees. What did they expect?

Netteligent says:

January 27, 2009 at 12:10 pm

What Have You Done with all the high Taxes from property to income taxes and fees?
Government employees enjoy their union protections with nice paid, health insurance, and retirements..while the rest of us suffering.

Marmar says:

January 27, 2009 at 12:13 pm

Isn’t unemployment insurance supposed to cover you in situations like this? Has somebody been skimming money, or what?

All I have to say is that I better get my welfare check on the 2nd.

Cliff says:

January 27, 2009 at 12:15 pm

Just like Joe Lawyer was saying awhile back it will just be a matter of time before the civil unrest & riots start. I’m saying by summer we should start to see them. You thought the 92 riots were bad wait till you see the ones coming.

fern says:

January 27, 2009 at 12:16 pm

well they should also borrow to pay us our state income taxes. and they should also stop giving all these corrupt politicians and cops their pensions.

bw says:

January 27, 2009 at 12:26 pm

I wish politicians had backbones and would stand up to the unions. Cuts need to be made, period. Stop the borrowing and start the cutting. Raising taxes will only give the State more money to mismanage. There is a revolution coming, most people have reached the end of their ropes.

Homatlast says:

January 27, 2009 at 12:30 pm

I don’t care how they get it ~ show me my money!!!

annoyed_underemployed says:

January 27, 2009 at 12:35 pm

If we get unemployment deducted from our paychecks when we have a job, then we should be covered when we lose our job. This is an outrage!

jimmy says:

January 27, 2009 at 12:40 pm

ya who cares how they get they money! What have I been paying out of my check for the last 20 or so years? Not my problem- the state better pay up or there might be a taxpayer revolt…..
With all the banks being bailed out with taxpayer money, where the hell is the bailout for the TAXPAYERS? IT’S OUR money F the banks
!!

JohnB says:

January 27, 2009 at 12:43 pm

Part of the problem in afew years ago the state almost doubled the amount of benefits but never increased the funding for unemployment. Democrats pused thru the increases, but Republicans blocked any employer increases for funding.

Jan Norman, small-business columnist says:

January 27, 2009 at 12:44 pm

To annoyed: the money for the Unemployment Insurance Fund doesn’t come out of your paycheck. The employer pays it.

Also, just to be clear, the checks will still go out. The state will just have to pay interest to borrow the money.

Jan Norman
I write this blog

brianguy says:

January 27, 2009 at 12:52 pm

exactly what annoyed undermployed said.

economic good times seem to outweigh bad ones like this nearly 2:1. so how can they possibly be running out of money not even a year into a recession?

I, along with my respective employers, have paid into unemployment since I was 15!! I’m nearing my mid 30’s and have never once collected a check. if I got laid off and there was nothing there, whose fault is it. mine? my workplace? hell no! SHOW US THE MONEY

“That could also cause employers to lose their tax credit for their payments into the UI Fund.”

… which will only lead to higher unemployment in CA. does the state NOT get it? that is not even an option, and therefore should never even be mentioned.

it’s not the employers’ fault, it’s the state. pure and simple

January 27, 2009 at 12:56 pm

I have heard on another message board that if this recession drags on PAST 2009 the state will STOP taking unemployment applications from California residents. WOW, if that ever happened it would be horrible.

January 27, 2009 at 12:59 pm

JohnB, good information to see the history of exactly how this came about. Thank you for clarification Jan

January 27, 2009 at 1:01 pm

Brianguy, like I said afew years ago the state almost doubled the amount of benefits paid, but never increased the funding. We have a bunch of idiots in Sacramento.

January 27, 2009 at 1:03 pm

“the state will STOP taking unemployment applications from California residents”

just curious, will they keep taking them from Mexico’s residents?

RL says:

January 27, 2009 at 1:06 pm

They better not cut benefits. What they gave per week is not enough to survive in a high-cost area like OC. What do they expect us to do? Turn to crime?

ocobserver says:

January 27, 2009 at 1:07 pm

This is just another ploy to pile more taxes onto the taxpayers shoulders. Before long they will threaten to cut back on cops and stop giving little children chemotherapy treatments. This is the way they do it. By tugging at your heartstrings. Instead of taking away all taxpayer funded benefits from illegal foreigners that would save us $12 billion a year this is the route they take. To load you down with higher and higher taxes!

LR says:

January 27, 2009 at 1:12 pm

Why doesn’t the state stop paying for all the illegals around here. That should take care of all the states problems!!

Jane Doe says:

Oh why did we vote for a hollywood actor???? I know I didn’t! We thought Gray Davis was bad and look he has not helped our situation at all. I know that the entire country is falling apart but we are supposed to be a strong state with a large population of people. I guess since the employment rate is down people wont mind taking back jobs from the illegal aliens working here. Make the jobs that illegals are working pay actual wages to Ca state residents!!!! Get out your gloves and get your hard work on. A job is a job and these people are making so much money off of illegal aliens it’s not even funny! They should be paying us to do the job at a reasonable pay and not getting rich off of people who come here illegally!

builderguy20 says:

January 27, 2009 at 1:20 pm

A bit confusing, huh? What about the countless people who were in the working class their entire life and never needed to collect this? Years and years of money that went where? It really doesn’t make complete sense.

Is there someone out there that might be able to answer these questions?

Thanks….

debthereb says:

My Company closed in 2007, how many companies are not around anymore making payments into the fund??? Sacramento has no control over that. . .

JYoung says:

January 27, 2009 at 1:22 pm

Jan, stop signing your posts with your name. And stop putting your idiotic “I write this blog” crap at the end of all your posts too.

bill says:

January 27, 2009 at 1:24 pm

unemployment pay is a joke. Why not make those who receive it work–pick up trash, clean off graffeti–anything get something done-dont just give money out-it just encourages abuse of the system–

I bet a number of people would be off unemployment quickly if work was attached to giving money away

Warren says:

January 27, 2009 at 1:25 pm

Isn’t time we stop giving the illegals and their children our tax dollars. Americans should be first excluding the Anchor/Jackpot babies.

adam says:

January 27, 2009 at 1:37 pm

if the state raise unemployment tax, I will cut employee hours or cut an employee to pay for that
I guess the state doesn’t get it, if you raise taxes, especially raising stupid taxes, it will hurt business
o well i guess it will cut more hours so I can pay more taxes

January 27, 2009 at 1:38 pm

I echo that sentiment bill.

Jyoung it’s called a signature line.

hunterr83 says:

January 27, 2009 at 1:40 pm

What I don’t understand is why Unemployment benefits are paid out to begin with. Stop making employers contribute to the Unemployment fund and give that money to employees and make them set up their own emergency fund. People complain that the gov’t is too big… unemployment precautions are something that should be the responsibility of the individual, not that of Big Brother.

JamesMeares says:

January 27, 2009 at 1:41 pm

Soon as we stop giving freebies to the illegals, the riots start.

Watch some Spanish language TV, all it has are stories of evil whites hurting poor browns.

They are setting us up for the biggest looting, raping and pillaging we can imagine.

And all you stupid idiots do is hire illegals to care for your lawn, home and kids.

Truthfully, you deserve what you are going to get.

January 27, 2009 at 1:49 pm

Bill ~ I certainly hope your company doesn’t close. If you are a professional with years and years of expertise in a particular field, you will discover that those same type of positions are not available. After paying into the unemployment fund for decades, it is disheartening to have to jump through the hoops of EDD and then hear there horror stories about our “tomorrows”….

Jyoung ~ give her a break ~ she is doing her job. And doing it well!

zacksmom says:

January 27, 2009 at 1:50 pm

I agree with previous posts that things are going to get really bad in CA. The Federal Government needs to enforce our borders and benefits for non citizens need to be eliminated. If we need to call in the National Guard then so be it because we cannot afford to neglect our own citizens who have paid for the right to collect benefits. Time to hunker down people like in the first Depression and after WWII. Time to plant a garden, live with family if you need to, but we all as Americans need to pull together and do what we need to lawfully to weather this coming economic storm.

smartayss says:

January 27, 2009 at 1:57 pm

I have no job. I’m pumping out multiple illigitimate babies. Boozing it up and doing drugs - NOW SHOW ME MY MONEY!!! I deserve it - the democrats said so!!

govtworker says:

January 27, 2009 at 2:00 pm

This is for nettelligent:

Govt workers are getting laid off too and we have to pay for medical coverage and the retirement is coming directly from our paychecks, so our take home is not as high as YOU… So get your facts straight before you make a claim about Intelligence…

We government workers are underpaid, over-worked, and have been getting too much negative press.. You don’t realize that we too have mortgages, families, bills, etc and are not sure if we will still have a job tomorrow.. So cut us some slack!!!

January 27, 2009 at 2:03 pm

To jyoung, I didn’t mean to annoy you, but the Register wants associates who comment on stories and blog posts not just to id ourselves but make it clear what our role is.
We want these comments to be a conversation but we don’t want you to think we’re padding the conversation by pretending to be just folks in the community.
I don’t presume that readers necessarily pay attention to the author of a post, so I was trying to clarify that.
Jan Norman

beach closure says:

January 27, 2009 at 2:07 pm

we give away our tax dollars to benefit invaders from other countries, mostly mexico and we can’t even take care of our own citizens??

i just finished moving both of my businesses out of state before the end of 2008 because of Arny, Pelosi, Feinstein and Boxer’s continuous abuse on us. i am already feeling the positive effects of fleeing california and forming nevada llc’s.

i can hardly wait to receive my IOU’s…

they are down says:

January 27, 2009 at 2:17 pm

govtworker Says:
January 27th, 2009 at 2:00 pm
This is for nettelligent:

Govt workers are getting laid off too and we have to pay for medical coverage and the retirement is coming directly from our paychecks, so our take home is not as high as YOU…

Um, we in the private sector also have to pay for our medical, dental, vision, and retirement in the form of our 401k’s out of our paychecks. So what makes you think that govt workers bring home pay is not as high as the private sector?

January 27, 2009 at 2:18 pm

there’s a reason why government workers are mostly stupid… they are willing to work for the government. apparently, not too many have you learned that relying on the government is a bad bet.

hey govt worker, expect to be paid crappy wages and little benefits.
this is what happens when people have to rely on an employer. especially an employer that let’s pretty much anyone with a pulse onto it’s payrolls. i would hope that if you are college educated, government work including politics wouldn’t be your ultimate goal. ooof.

it’s sad that schools have never really tried to teach the children how to be entrepreneurs.

you know who says:

January 27, 2009 at 2:30 pm

If it wasnt for unemployment i would be homeless.And we all know what what that would lead to! Probably another state run program.At least this one is partially subsidized by our employers who no longer needed our services.

January 27, 2009 at 2:43 pm

I agree hunterr83 that people should be responsible for their own well being. However, I think the majority of the people would spend their money on TVs, Cars, and Vacations instead of putting money aside for a raining day. However, we could buy into a private unemployment insurance plan. But, what would happen to the private plan during hard times that we are having now? The same thing. Funds would dry up.

jake says:

January 27, 2009 at 2:49 pm

RL Says:
January 27th, 2009 at 1:06 pm
They better not cut benefits. What they gave per week is not enough to survive in a high-cost area like OC. What do they expect us to do? Turn to crime?

no, they expect you to get a job.

Ameise00 says:

January 27, 2009 at 2:53 pm

They are already creating concentration camps in this country. Google “Fema Concentration camps” and you will be suprised what comes up. Brace yourself..They are ready for the riots.

gp says:

Perhaps they can borrow some money from all of the funds needed to Print everything in Spanish.

Rich says:

January 27, 2009 at 2:58 pm

The State needs to learn to quit running the large corporation high wage paying employers out of the state.

The chances of THAT however are pretty slim - Our political “leaders” either lack the foresight or the political will or are simply too beholden to major campaign contributors to do what needs to be done to save the state - cut spending, cut taxes, reduce regulations.

At the same time, the voters need to quit voting for more spending everytime a nice sounding ballot initiative comes along, particularly when we’re already in the midst of the result of long running budget stupidity.

what's next says:

January 27, 2009 at 3:00 pm

Insurance is a risked based financial product. When the risk goes up, than the premiums must go up as well. This risk has gone up for unemployment; therefore, the premiums employers pay must go up.

The reason for the insurance as opposed to purely private savings covering individuals is because insurance actually costs far less to cover a large population.

This is not complicated. Also, if the funds are not available the benefit must decline so that the funds coming in and going out balance.

There are many more complicated issues in the economy than unemployment insurance and those who run the legislature do not even seem to grasp the most basic understanding of economics. They really do seem to think that perception is reality. They focus upon words and rhetoric because that is all they know. They truly do not understand what creates real money and that they are completely dependent upon those who create it. The time has come for them to learn.

The governor has very little power compared with the legislature. People must stop voting for politicians who keep promising something for nothing. Do people really think they are successfully going to steal from their neighbor via taxes and attempt to redistribute it via programs and not eventually pay a price?

If California keeps heading in the direction it’s heading, the productive will continue to leave and those left behind will wonder, what happened?

Dina says:

January 27, 2009 at 3:23 pm

The high price of cheap labor. WIC, ESL, Free school meals, 40% of oc students get free meals. (All of Santa Ana) tell you something?

luke says:

January 27, 2009 at 3:26 pm

unemployment benefits should require work/service to be done-this will reduce taxes and reduce abuse of system
individual should pay into fund-voluntary

or just think if the employees got the pay that the employers pay into the system-
I would rather pay my employees more that pay into a welfare system. Give the employees a option into unemployement fund or into a paycheck reserve(to save for a raining day)-

the individual should have ownership of these funds-if they pay into to it and its out out their own fund they will be less willing to abuse it

if the government owns it it becomes medicare/dmv like-very inefficeint

just think how much more money employers and employees would have if we just straightened out the system

I am just venting because many of the issues are so easy to fix yet it seems like things never get fixed

OCNewswatcher says:

January 27, 2009 at 3:31 pm

Do they hate small business?
We are taxed to the hilt and because of an economic problem NOT of our making (banks/mortgage and loan companies excluded) and who gets the biggest burden to pay for the un- affordable? US. the small business who actually do most of the hiring and economic good for the country.

Nevada/Utah/Arizona/Texas is looking better and better..

omg says:

January 27, 2009 at 3:34 pm

If you are fed up with illegals taking things that don’t belong to them, visit numbersusa.com and take action

Pat W says:

January 27, 2009 at 3:43 pm

Perhaps the State of California should develp incentives in form of tax credits for small to mid sized companies who hire someone on unemployment. This situation would be very similar to incentives for hiring a parolee. This way both sides of the fence are happy. Granted the loss of tax revenue will be noticed, but locally as long as businesses stay open and continue to pay employees; groceries, fuel, and other small company products continue to get purchased as well as local sales and property tax paid.

Obviously we’ve been here before, why can’t someone up state just think outside the box…….

Laura says:

January 27, 2009 at 4:02 pm

Funny that the state can borrow money to give out for unemployment, but not for tax refunds. The state will just withhold tax refunds to people who rightfully deserve to get their money back.

Me says:

January 27, 2009 at 4:03 pm

Listen idiots U do not pay for unemployment from your checks!! Employers pay it! Duhhhh!!

toxicnut says:

January 27, 2009 at 4:15 pm

At the current rate of decline the dollar may no longer be the standard very soon, then all of you that talk from your backside about government having to much to do with our life will beg for intervention of some type as we quickly slips into third world status. The end of the USA as THE world power is very near, I would not be suprised if OPEC starts demanding that oil prices be based on the Euro wich has shown to be much more stable over that last couple of years than the dollar.

TC from YL says:

January 27, 2009 at 4:23 pm

The answer to the whole situation is to develop a true budget with real G/L designations and get rid of the general fund - too many “kids” sticking their hands in the “cookie jar” It is far to easy to conceal spending with a “general fund”

As for taxes, we would not have public services (including the roads we drive on, clean drinking water and those necessary public utilities) without taxes. The problem is establishing a “fair market value or FMV” for the services rendered. Oh, and put folks to work on our public infrastructure and pay them a reasonable salary from the taxes that are collected.

Finally, all public servants (i.e. electred officials except the judiciary) should take a salary/benefits of $1.00 a year - period!

Serve the people because you want to, not because you can make a nice salary, great benefits, outstanding pension and 401 and get lobby money to boot!

January 27, 2009 at 4:28 pm

Hold it. If employers pay $56 per worker per year in California with 20 million workers, that means revenue should have been upwards of $11 BILLION each year for payout in claims. Unemployment was low from 2001-2007. There should have been a massive accumulations. Where did that money go? Even with relatively high unemployment in 2008 the payout only amounted to about $8 billion, $3 BILLION less than unemployment insurance revenue. Where’d the money go? And now they want to massively increase u/e insurance premiums for employers and cut benefits for recipients? Who mismanaged the revenue? They should not only get fired, they should be jailed!

January 27, 2009 at 4:48 pm

“If California keeps heading in the direction it’s heading, the productive will continue to leave and those left behind will wonder, what happened?”

the rug pulled out from everyone, that’s what. it can only translate to lower cost of living for the same inflated costs. not good

January 27, 2009 at 4:55 pm

“the individual should have ownership of these funds-if they pay into to it and its out out their own fund they will be less willing to abuse it”

agreed, it only makes sense.

“Listen idiots U do not pay for unemployment from your checks!! Employers pay it! Duhhhh!!”

well, mine have been paying in while taking 0 out for the last 20 years. if I get laid off next week where’s mine? DUHHHHHHH!

scbeachgoer says:

January 27, 2009 at 5:07 pm

I’m just sickened by the lack of government control and the $10 mil a year Cali spends on illegal aliens and now they claim unemployment is out of money. DUH! Were in for a revolution soon.

Get with it government..i’m ready to claim poverty and dig holes in my backyard for my money so my taxdollars won’t go towards lavish cars and vacations and extra marital affairs…the list goes on.

The rest of the world must be looking at us as a joke.

CA Dude says:

January 27, 2009 at 5:45 pm

Hey brianguy,

Apparently, Mexicans are a number one priority for the State. They must get their money. Since we have no health insurance, if something happens where we have to have medical attention, we are going to give the last name of Gonzalez.

January 27, 2009 at 6:36 pm

Well, since the employees are not paying toward unemployment ~ only the employers are ~ if the employers didn’t have ‘that’ tax, it would be going to the employees. Then, Hunterr83, we would have that much more for our “out of work” slush fund.

cycleitin says:

January 27, 2009 at 11:06 pm

We need TAX reform! Zero accountability… NO, Zero accounting… take ALL government city, county, state along with federal and give each a budget sheet and have them be accountable from zero. No special projects, kick backs, pork fat projects, or budgets from days gone by, nothing zero, thats ZERO, without accountability and open books to all. We, our country is a business. Lets start running it like one. A new tea party might be brewing.

jeff says:

January 28, 2009 at 7:26 am

this explains why my benefits were cut. a big THANK YOU to california for getting me involved in a budget deficit that has nothing to do with me.

January 28, 2009 at 7:28 am

and for crying out loud, can someone show me an example of ‘illegal aliens’ stealing 10mil ? this is simply not happening. don’t believe the racist propaganda.

January 28, 2009 at 8:41 am

@Jeff
It’s probably closer to 12 Billion now though.

http://usgovinfo.about.com/od/immigrationnaturalizatio/a/caillegals.htm

January 31, 2009 at 2:25 pm

There is an 800 lb Gorilla in the room called illegal immigration. Interesting how some still do not see anything that size sitting next to them.

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