Unemployment insurance update

By CMTA Staff

Capitol Update, Aug. 15, 2013


California is currently $10 billion in debt to the federal Unemployment Insurance (UI) Fund. As a result, employers have been paying back that debt through higher and higher federal unemployment taxes. This tax will continue to increase by $21 per year per employee until the debt is paid off in 2018 (projected).

However, once the debt is paid, the system will continue to have a structural insolvency problem. It is unlikely that the current tax structure will generate enough revenue to pay for benefits, which will put the state back in debt with the next recession. Therefore, systemic structural changes will be necessary to ensure the future solvency and integrity of the fund.

The Brown Administration has signaled its desire to retire this debt as quickly as possible and has had discussions with representative of the business and labor communities, including CMTA, in the hope of developing a consensus proposal for legislative approval before the end of session in five weeks.

The business coalition supports a comprehensive solution going forward that includes minimizing the amount of the UI tax increase on employers, paying off the debt and aligning the state’s UI policies with other states in a manner that is equitable and improves the system. Any solution must address the primary benefit cost drivers through significant reforms and improve system integrity, including fraud and overpayments. It should also closely align tax and benefit levels with other states so that California remains competitive to attract and retain businesses.

As this policy discussion develops, we will continue to keep you posted. 

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