Governor outlines goals for UI solvency plan in budget

By CMTA Staff

Capitol Update, Jan. 15, 2014

Governor Jerry Brown released his 2014-15 State Budget last week, which discussed the current state of California's unemployment insurance (UI) deficit.

His proposal projects that the balance of the state’s UI loan to the federal government will be $8.8 billion at the end of 2014 and includes $231.6 million from the General Fund to make the 2014 interest payment. The loan was previously $10.2 billion at the end of 2012 but an annual increase in employers’ federal UI tax has been slowly paying it down. This tax increase will continue until the debt is eliminated.

While the Governor does not offer any specific plan to address the outstanding debt, he does outline several goals and principles that are meant to shape the discussion:

  • A prudent reserve in the state UI Fund by 2021;
  • Reforms to improve the integrity of the UI program;
  • Phase-in of changes to the UI Fund financing structure to smooth the impact on employers;
  • Repayment of interest payments made from the General Fund and state Disability Insurance Fund; and
  • No benefit increase consideration until the UI Fund is solvent, has a prudent reserve and can support any proposed increase going forward.

The budget also includes a decrease of $251.8 million in 2013-14 and a decrease of $3.2 billion in 2014-15 for UI benefit payments based on current economic conditions and the expected expiration of the federal benefits extension program.

In speaking to the solvency issue following the budget release, newly appointed Labor and Workforce Development Agency Secretary David Lanier acknowledged that the state faces “big challenges this year” in addressing the solvency of the UI Fund. He further commented that the goals presented by the Governor represent “parameters of [an] agreement.” They will no doubt guide future discussions between the Administration and stakeholders like CMTA once conversations resume.

CMTA remains involved in this dialogue and will keep you apprised of any new developments.

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