unemployment insurance

Editorial: California must avert unemployment insurance fund disaster

(INSIDE BAY AREA) - CALIFORNIA’S 12.5 percent unemployment rate is the worst since 1940, at the end of the Great Depression. As a result, the state’s jobless benefit fund is heading for a fiscal crises unless the Legislature acts to prevent it.

During the robust economy earlier in the decade, the Legislature significantly increased unemployment benefits, which were grossly inadequate in a state with a high cost of living.

Even with the increase in payments to a maximum of $450 a week, there are 15 states that pay higher unemployment benefits.

Unfortunately, in an all-too-typical action, the Legislature increased obligations on unemployment benefits without any increases in taxes to pay for them. Employer contributions were not raised because it would have required a two-thirds vote, which was politically impossible at the time.

During a healthy economy, California had no problem financing the higher jobless benefits. But with the steep and lengthy recession, the state is unable to raise enough revenues to meet its unemployment benefit obligations.

California’s unemployment insurance fund is expected to end the year $7.4 billion in the hole. To keep benefits flowing, the state already has borrowed $4.7 billion from the federal government, which it must repay.

Interest payments have been waived until 2011 as part of the federal stimulus package. However, interest is accruing at a 5 percent annual rate

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