California’s massive budget deficit, coupled with the state’s relatively high level of joblessness, has become a major barrier to reducing the billions of dollars of debt it has incurred to pay unemployment benefits. The surge in unemployment brought on by the COVID pandemic pushed the state’s unemployment insurance trust into insolvency. And over the last year California’s joblessness has been on the upswing again, reaching 5.3% in February, the highest among all states. The March job numbers come out Friday. To keep the safety-net program operating at a time when the taxes paid by employers and earmarked for jobless benefits are insufficient, Sacramento has been borrowing billions of dollars from the federal government. The debt now stands at about $21 billion and growing, an increasing burden for state deficit fighters and for the businesses that pay into the jobless insurance program.
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When COVID struck in March 2020, U.S. unemployment jumped to 14.8% a month later and brought unprecedented jobless claims, forcing California and many other states to borrow from the federal government to keep paying benefits. Almost all of the other states have since repaid those loans, some with pandemic relief money they also got from Washington. Today only New York and California, plus the Virgin Islands, still owe money for unemployment insurance loans. Analysts said California could have used some of the $43.5 billion the state received in American Rescue Plan Act money to pay down the debt. Instead, state officials spent the relief money for other purposes, including additional stimulus checks to residents.
