CA Business brings a major debt for unemployment benefit

From And WaltersCalmness

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Companies owned by President Donald Trump have announced bankruptcy six times, a reminder that a corporation that is the default for paying money it has borrowed is often forced in bankruptcy court.

Several cities in California, including a hundredth and San Bernardino, who unreasonably make retirement promises to their employees that they cannot preserve, also transferred to a federal bankruptcy judge.

And then there is the state government of California.

Five years ago, California borrowed $ 20 billion from the federal government, as his unemployment system had not enough money to pay a strong leap to claims. More than Two million Californians had lost their job After governor Gavin Newo, he forced many businesses to close their doors because of the Covid-19 pandemic.

California was not alone in borrowing to maintain the benefits for workers without work, although no other country approached its huge debt and All others – recently New York and Connecticut – have repaid their loansS And California’s debt is still increasing.

Although the level of unemployment of the state, at 5.5% of its workforce, is only one third of the one in 2020, it is still the highest in the nation, with more than a million workers without a job. The California Employment Development Division is Payment of $ 7.4 billion For those covered by unemployment insurance this year, while collecting less than $ 5 billion in pay taxes.

California’s debt will reach $ 23.2 billion by the end of the year, according to the state’s most recent report, and is likely to grow even more in 2026. The state is also on the hook for more than $ 600 million a year in interest.

As California has not repaid its loans and still borrows money, federal employees have covered employers’ salaries in California. As the California Business Table for Business in Report recently noted, employers of the state will soon pay a wage tax of 5.2%-nine times more than those in other countries that are not without debt-plus their state taxes on pay.

This is a giant mess, born of my short -sighted political decisions and cowardice.

A quarter of a century ago, California had a convenient surplus in its unemployment fund, but the legislative power and the then participant. Gray Davis began to drain him with a sharp increase in benefits.

When the big recession later struck the state for half a decade, the fund was quickly exhausted and California borrowed about $ 10 billion to maintain running benefits, eventually being repaid by increasing the wage taxes.

However, the fund never regains significant reserves, since even after the end of the recession, the benefits continue to accept everything the state collects through wages.

Meanwhile there was Political impasse, digging employers against the unions Above what needs to be done about income/excavation, which continues to this day.

There is a widespread conviction, even among employees who need to know better that the debt to provide unemployment in California stems from billions of dollars in fraudulent claims, which also occurred during the recession caused by the pandemic.

In fact, the fraud, though real, included a separate program of advanced benefits Funded entirely with Federal Funds for RecoveryS California’s huge debt includes only the state unemployment system.

It is debatable whether employers should even be on the hook to pay off loans, since the main jump of unemployment is caused entirely by state business braking, not a natural recession or cuts ordered by the employer. This is a price that should be born from the state budget, as other impacts of the pandemic.

Financing unemployment benefits for federal loans and taxes on employers for debt servicing cannot continue indefinitely. It also leaves the system vulnerable to any future economic decline.

The crisis is another reminder of the chronic lack of California accountability to manage incorrect management.

This article was Originally Published on CalMatters and was reissued under Creative Commons Attribution-Noncommercial-Noderivatives License.