During the pandemic, the Employment Development Department (EDD) virtually collapsed, and legislative offices like mine stepped into the breach. My office alone handled over 3,000 unemployment cases.
Solving that immediate crisis was critical for constituents needing their unemployment benefits, but the bill to cover those payments has come due. Twenty-two states, including California, were forced to borrow billions from the federal government because of a federal law requiring EDD claims to be paid whether or not states have the funds. Currently, California owes the federal government $18.9 billion, a huge sum, especially given our $22.5 billion budget deficit. California and New York are now the only states, along with the Virgin Islands, that have not paid back their EDD debt. And we hold 74% of that debt.
According to a recent report from the Legislative Analyst’s Office, our unemployment trust fund is “structurally insolvent.” California paid about $40 billion in fraudulent unemployment claims during the pandemic, including at least $1 billion paid to incarcerated inmates. California recently enjoyed a massive general fund budget surplus, and we could have paid back our debt to the federal government. Instead, the state mailed out stimulus checks that cost $21.4 billion.
Pandemic-related shutdowns forced thousands of businesses to close, many forever, costing thousands of jobs, and the businesses that survived are now left holding the bag for the state’s incompetence. An additional tax of about $1,500 per employee will be applied to all businesses over the next 15 years – or perhaps longer if there’s another recession. That’s $21 per employee this year, and it will rise $21 every year for each employee until the debt is paid. That could take 10 years, or more, and it will put a damper on new hires and job retention.
These types of economic policies are why businesses and employees alike are fleeing California by the thousands. We can and should do much better.