September 30, 2016 - Due to a variety of factors, the state's Unemployment Insurance (UI) trust fund exhausted its reserves in 2009, requiring the state to take on loans to continue the payment of benefits to unemployed workers. In this series of four online posts, we (1) examine the current condition of the UI trust fund and how it may change in the near future, (2) provide context on who pays UI taxes and how much they pay, (3) assess the extent to which the UI trust fund is prepared for the next economic downturn, and (4) look at potential steps the Legislature could take should it wish to increase reserves in the trust fund as a means to address the fiscal impacts of the next economic downturn.
Update 6/13/17:
Post 1 updated to reflect estimates in the 2017-18 May Revision.
Update 1/20/17:
Post 1 updated to reflect estimates in the 2017-18 Governor's Budget.
February 10, 2021 - The 2021-22 Governor’s Budget proposes $555 million General Fund to make the first interest payment on federal loans the state received to pay unemployment insurance (UI) benefits after the UI fund became insolvent during the pandemic. Our office’s estimate of the upcoming interest payment is much lower—about $260 million. This lower estimate reflects (1) more plausible, up-to-date economic projections and (2) recent federal action to waive a portion of accrued interest for 2021. We recommend the Legislature adopt this lower placeholder amount. In addition, we recommend the Legislature take advantage of a provision of federal law that allows states to defer 75 percent of their UI loan interest payments during economic downturns. If the state chooses to partially defer its interest payment, we estimate the 2021-22 UI loan interest payment would total roughly $65 million.
December 4, 2014 - With a state as big, as populous, and as complex as California, it would be impossible to quickly summarize how its economy or state budget works. The purpose of Cal Facts is more modest. By providing various "snapshot" pieces of information, we hope to provide the reader with a broad overview of public finance and program trends in the state. Cal Facts consists of a series of charts and tables which address questions frequently asked of our office.
May 26, 2021 - The Governor’s 2021‑22 May Revision budget proposes $36 million General Fund to pay the first, partial payment on the state’s outstanding federal Unemployment Insurance (UI) loan and proposes to direct $1.1 billion in federal American Rescue Plan (ARP) Act funds to pay down a portion of the outstanding loan. In this post, we (1) provide an overview of the state’s UI system financing, (2) highlight how the pandemic affected the UI system, (3) look ahead to upcoming costs to employers and the state to repay the federal UI loan, and (4) assess the Governor’s proposed $1.1 billion pre-payment.
July 7, 2011 - Beginning in 2008, the Unemployment Insurance (UI) funds of many states, including California’s, were under stress and soon became insolvent. Many states sought loans from the federal government. As of June 2011, California’s outstanding federal loan totaled over $10 billion. Three federal proposals have recently been introduced to address the insolvency issue. All three would improve the solvency of California’s UI fund and two would likely eliminate California’s UI fund deficit by 2016. Regardless of whether Congress acts, we recommend that the Legislature ensure implementation of a long–term solvency plan by 2014. If federal reforms are enacted, it is likely that no additional action by the Legislature will be necessary. However, if no federal reforms are enacted, it will be critically important for the Legislature to adopt its own long–term solvency plan. We recommend that the Legislature consider an approach which includes both increased employer contributions and decreased benefits for UI claimants.
October 20, 2010 -
California's Unemployment Insurance (UI) program became insolvent in 2009, ending that year with a shortfall of $6.2 billion. Absent corrective action, the fund deficit is projected to increase to approximately $20 billion at the end of 2011. This report looks at the history of the UI program, compares California's program to those in other states, examines different scenarios for addressing the insolvency, and makes recommendations to the Legislature for solving this difficult problem.
(Video Summary)
May 10, 2017 - Presented to: Senate Labor and Industrial Relations Committee
March 4, 2015 - Presented to Senate Labor and Industrial Relations Committee
February 15, 2022 - In this post, we provide a projection of state and employer costs to repay the federal Unemployment Insurance loan under two economic scenarios, assess the effects of the Governor's proposed $3 billion General Fund payment toward the outstanding loan, and present an alternative to the Governor's proposal that could provide more immediate tax relief.