May 26, 2021 - The Governor’s 2021‑22 May Revision budget proposes $36 million General Fund to pay the first, partial payment on the state’s outstanding federal Unemployment Insurance (UI) loan and proposes to direct $1.1 billion in federal American Rescue Plan (ARP) Act funds to pay down a portion of the outstanding loan. In this post, we (1) provide an overview of the state’s UI system financing, (2) highlight how the pandemic affected the UI system, (3) look ahead to upcoming costs to employers and the state to repay the federal UI loan, and (4) assess the Governor’s proposed $1.1 billion pre-payment.
August 8, 2022 - California's Unemployment Insurance (UI) program provides wage replacement to unemployed workers. The program has faltered during recent downturns, causing hardship for workers and their families, holding back the state's economic recovery, and spurring frustration among Californians with their government. Recent failures trace back to the UI program's basic design, which results in more emphasis being placed on limiting fraud and business costs than making sure eligible workers get benefits quickly and easily. Although this emphasis is not new, the pandemic has highlighted the need to rebalance the UI program. We recommend about a dozen targeted changes to state practices to place a greater priority on getting payments to eligible unemployed workers.
March 23, 2020 - This post summarizes recent federal relief actions in the unemployment insurance program, discusses how these federal actions interact with current state programs, and highlight options the Legislature may want to pursue in responding to the ongoing crisis.
February 10, 2021 - The 2021-22 Governor’s Budget proposes $555 million General Fund to make the first interest payment on federal loans the state received to pay unemployment insurance (UI) benefits after the UI fund became insolvent during the pandemic. Our office’s estimate of the upcoming interest payment is much lower—about $260 million. This lower estimate reflects (1) more plausible, up-to-date economic projections and (2) recent federal action to waive a portion of accrued interest for 2021. We recommend the Legislature adopt this lower placeholder amount. In addition, we recommend the Legislature take advantage of a provision of federal law that allows states to defer 75 percent of their UI loan interest payments during economic downturns. If the state chooses to partially defer its interest payment, we estimate the 2021-22 UI loan interest payment would total roughly $65 million.
February 15, 2022 - In this post, we outline the challenges the Employment Development Department faced paying legitimate Unemployment Insurance claims and preventing fraud during the pandemic, review steps the department has taken to improve since then, and assess whether the six proposed anti-fraud vendor contracts are warranted at this time.
September 28, 2022 - Presented to: Assembly Committee on Accountability and Administrative Review Assembly Committee on Insurance
October 20, 2010 -
California's Unemployment Insurance (UI) program became insolvent in 2009, ending that year with a shortfall of $6.2 billion. Absent corrective action, the fund deficit is projected to increase to approximately $20 billion at the end of 2011. This report looks at the history of the UI program, compares California's program to those in other states, examines different scenarios for addressing the insolvency, and makes recommendations to the Legislature for solving this difficult problem.
(Video Summary)
September 30, 2016 - Due to a variety of factors, the state's Unemployment Insurance (UI) trust fund exhausted its reserves in 2009, requiring the state to take on loans to continue the payment of benefits to unemployed workers. In this series of four online posts, we (1) examine the current condition of the UI trust fund and how it may change in the near future, (2) provide context on who pays UI taxes and how much they pay, (3) assess the extent to which the UI trust fund is prepared for the next economic downturn, and (4) look at potential steps the Legislature could take should it wish to increase reserves in the trust fund as a means to address the fiscal impacts of the next economic downturn.
Update 6/13/17:
Post 1 updated to reflect estimates in the 2017-18 May Revision.
Update 1/20/17:
Post 1 updated to reflect estimates in the 2017-18 Governor's Budget.
May 10, 2017 - Presented to: Senate Labor and Industrial Relations Committee