Nicole Rice

California on track to pay off unemployment insurance loan

By Nicole Rice, Policy Director, Government Relations

Capitol Update, Sept. 17, 2018

California is on schedule to pay off its unemployment insurance (UI) loan to the federal government by the end of this year. If that occurs, manufacturers could see a significant decrease in their tax payments in January 2019. This is due to the reset of the credit employers receive on their federal UI taxes that has been decreasing since the state borrowed over $10 billion in 2012 to continue paying benefits during the Great Recession. California is the last state to carry debt to the federal fund (the U.S. Virgin Islands also has an outstanding debt).

The revenue generated from that tax increase was used to pay down the debt. If the loan is paid-in-full by November of this year, California’s UI trust fund will be solvent once again. A strong economy will continue to keep the trust fund financially sound for now. However, whether it can weather a similar or even milder recession in the near future is an issue. At this time, the state has not taken any steps to address the potential for insolvency.

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