California is facing a looming crisis with the state’s unemployment benefits fund being $20 billion in debt to the federal government. The nonpartisan Legislative Analyst’s Office has proposed a comprehensive plan to fix the fund’s problems, including increasing the taxable wage base and redesigning employer tax rates.
Lawmakers, however, have been silent on the issue, with some suggesting that benefits should be more generous while others are concerned about increasing taxes on businesses. Businesses are not happy with the proposed changes that would require them to contribute more to the fund, and it is unclear if lawmakers will get on board with the recommendations.
The ongoing problems with the fund are expected to lead to deficits of $2 billion a year for the next five years unless action is taken. The system is currently funded by a payroll tax paid by employers, but tax collections routinely fall short of covering benefit costs.
California officials and lawmakers are facing pressure to address the structural insolvency of the fund, but disagreements over how to fix it remain. The proposed changes are aimed at restoring solvency to the fund and ensuring that the state can pay off its debt to the federal government, but concerns remain over the impact on businesses and workers in the state.
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Photo credit calmatters.org
