Maximum benefits paid edd8/5/2023 ![]() During the November 2008 special session, the Governor introduced a proposal, which has not yet been acted upon by the Legislature, to restore solvency to the UI fund. The state’s UI fund is currently insolvent and, absent corrective action, will remain so for the foreseeable future. At a minimum, take prompt action to bring UI benefits and tax revenues into line so that the accumulated deficit and associated interest obligation stops growing.Consider different approaches for the short term (20) than for the long term.Attempt to minimize adverse impacts on the economy.In developing a strategy to bring solvency to the UI fund, we recommend that the Legislature: The UI financing structure is not sufficiently robust.Employer tax increases could hurt California’s competitiveness.Options involving UI tax increases could quickly improve the fund condition.Decreasing UI benefits alone cannot address the fund insolvency in the near future.To assist the Legislature we examined multiple scenarios for achieving solvency and found that: The Legislature essentially has three main choices for returning the UI fund to solvency: (1) reducing benefit payments, (2) increasing employer tax contributions, or (3) adopting some combination of the previous two options. With the expiration of these ARRA provisions, EDD estimated in May 2010 that California could owe about $500 million in September 2011 and would face growing interest obligations in the out years.ĭifficult Choices for the Legislature. The federal American Recovery and Reinvestment Act (ARRA) of 2009 provides temporary relief to states from making interest payments on UI loans through December 31, 2010. Generally, loans lasting more than one year require interest payments. These federal loans have permitted California to make payments to UI claimants without interruption. Since January 2009, EDD has been obtaining quarterly loans from the federal government to cover the UI fund deficit. This recent spike in benefit costs is due to the recession, which resulted in more workers than ever applying for UI benefits.įederal Loan Supports Benefit Payments With Interest Costs to the State. During 2009, the state paid about $11.3 billion in benefits to workers while collecting only about $4.5 billion from employers. Absent corrective action, the fund deficit is projected to increase to approximately $20 billion at the end of 2011 (Employment Development Department will soon update these projections). The UI fund became insolvent in January 2009 and ended that year with a shortfall of $6.2 billion. The program is financed by unemployment tax contributions paid by employers. The Unemployment Insurance (UI) program provides weekly UI payments to eligible workers who lose their jobs through no fault of their own.
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