California becomes first state to borrow from D.C. to help pay unemployment claims
California became the first state in the nation to borrow federal funds to help its beleaguered unemployment system, state officials said Tuesday.
“This has been an unprecedented time for unemployed workers across our state. As of April 30, California borrowed $348 million from the federal government to ensure Unemployment Insurance (UI) benefit payments are made to eligible unemployed workers,” the Employment Development Department said in a statement to The Bee.
“We are using every tool at our disposal to ensure people have the resources they need during this difficult time, and that funding is available to continue to meet the increased demand for these benefits,” said the department, which manages the state’s unemployment program.
The state could tap as much as $10 billion through the end of July.
The unemployment agency has been deluged with claims since mid-March, when the coronavirus outbreak began. It has processed 3.5 million claims so far and paid a total of about $4.5 billion.
It has pledged to pay regular unemployment benefits with 21 days, and pay benefits to Pandemic Unemployment Assistance recipients within 24 to 48 hours. PUA is a special federally-funded program aimed at helping those who would ordinarily not qualify for regular benefits.
But the agency has been overwhelmed. Readers have told The Bee phone lines are difficult if not impossible to access, even though the state set up a new line April 20 to help handle the volume.
That California needs federal assistance is not unexpected.
In March, the independent Legislative Analyst’s Office reported that “during downturns, the state’s unemployment insurance Trust Fund typically becomes insolvent as benefit payments exceed payroll tax collections.“
In such cases, it said, Washington provides a loan, with interest payments made from the state general fund. Legislation passed in March suspends any interest accrual, though, through the end of the year.
The LAO predicted that the trust fund would likely become insolvent “in the coming months.”
It noted that during the 2007-09 Great Recession, the state’s loan balance peaked at $10.3 billion at the end of 2012 and the general fund paid about $300 million annually in interest. The loan was fully repaid by April 2018. California was one of 36 states to use the loan program during the recession.
This story was originally published May 5, 2020 at 1:29 PM with the headline "California becomes first state to borrow from D.C. to help pay unemployment claims."
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