California still owes the federal government $8 billion on a loan
California is falling behind on repaying a loan to the federal government. The state borrowed $10 billion from the federal government in order to ensure the recovery of its troubled Unemployment Insurance Fund. The fund exists as an insurance pool that is designed to cover the financial issues related to lack of employment. The economic recession that hit the country in 2008 and persisted through the following years placed the fund under a great deal of financial strain.
Higher taxes allow the state to raise money to cover the loan
California still owes the federal government some $8 billion from the loan it had taken out initially. This year, the state is expected to pay $174.5 million toward this debt, according to a report from the state’s Employment Development Department. The debt is slowly shrinking due to raised taxes on employers, who use the Unemployment Insurance Fund. The report notes that increased taxes on these businesses have raised $2 billion so far, with another $1.3 billion expected to be raised by the end of this year. Another $1.7 billion may be raised by the end of next year.
Governor Brown wants to reform the Unemployment Insurance Fund
Governor Jerry Brown suggests that the state should make reforms to its Unemployment Insurance Fund. The Governor wants to see changes made to the fund’s tax structure, which would allow the state to repay its federal loan more quickly while also building up reserves for the fund to handle additional costs in the future. In the event of a future recession, revisions to the fund could allow it to cover the unemployment insurance benefits that consumers will need throughout the state.
No details concerning reform plans have yet been released
There are no specific details about how the Governor would change the fund, however. For many employers, benefits reform should be a part of the state’s overhaul of the fund, if such efforts are to be made. Labor unions, however, are opposed to making any significant changes in benefits, as this could cause a significant degree of financial stress for consumers in the future.