California's unemployment fund has deficit of $10.3 billion

The Sacramento BeeNovember 9, 2010 

California businesses already pay some of the highest unemployment taxes in the country – and the tab is likely to increase.

The recession and the Legislature's decision years ago to raise benefits have drained the state unemployment insurance fund, which now has a estimated $10.3 billion deficit.

The nonpartisan Legislative Analyst's Office, in a recent report titled "California's Other Budget Deficit," said the state will probably need to raise unemployment taxes on employers as well as reduce benefits to bring the fund back in balance.

Raising the tax would require a two-thirds vote in both houses of the Legislature and might be politically impossible. Gov.-elect Jerry Brown has promised not to raise taxes without voter approval.

But pressure is growing on Sacramento to fix the system soon – whether it wants to or not. California has borrowed about $8.5 billion from the federal government to keep benefits flowing, and the repayment obligations are coming due.

"The longer we go without a fix, the bigger the hole becomes," said Loree Levy, a spokeswoman for the Employment Development Department, which doles out the benefits.

She said the U.S. government is scheduled to bill the state about $362 million in interest next year. The Legislature would have to find the money somewhere to pay it; it wouldn't be allowed to dip into the unemployment fund, she said.

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