LAO reports on UI fund insolvency

By CMTA Staff

Capitol Update, Oct. 28, 2011

The California Unemployment Insurance (UI) Program continues to be plagued with financial problems ever since the program became insolvent in 2009.  Following the 2007 economic decline, the state UI program began paying out more than it was bringing in and, in order to stay afloat, had to borrow $11 billion from the federal government. Starting in January, 2012, state employers may be charged an additional 0.3 percent by the federal government to begin paying back the federal loans.

According to a recent report by the nonpartisan Legislative Analyst’s Office (LAO), the California UI fund became insolvent due to a slew of factors including inadequate funding, high program costs, lengthy UI program benefit duration and larger than average caseloads due to insufficient job opportunities.  The LAO found that while California provides relatively low weekly benefits compared to other states, UI claimants may receive up to 26 weeks of state benefits making it the longest benefit duration period in the country.  Once state benefits run out, claimants may apply for an extension through a federal program that may provide an additional 73 weeks of benefits.

The report recommends that the Legislature look at lowering UI program costs by implementing stricter eligibility requirements and reducing the prior earnings limit.

The LAO report can be seen here: www.lao.ca.gov/reports/2011/ssrv/ui_comparison/ui_comparison_101311.pdf.

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