California’s Unemployment Insurance (UI) Trust Fund that pays out state benefits is now “structurally insolvent,” according to a recent report.
The Legislative Analyst’s Office noted the debt crisis involving the California Employment Development Department’s (EDD) UI trust fund on July 7.
The state report was released following last week’s “May Fund Forecast” report by the EDD. It said that a temporary surcharge, which state businesses are currently paying to cover the agency’s multi-billion dollar debt to the federal government, may continue to be in place for some time.
The additional taxes being paid by employers will offset the $20 billion in federal loans taken by the state to cover UI benefit payments during the pandemic and related stimulus measures.
The money that California is using to pay claimants’ benefits, is already guaranteed by the feds, no matter what financial condition the EDD is in.
California is one of the two states that has remaining debt from the pandemic and accounts for 73 percent of that debt nationwide, with New York accounting for the rest.
Maximize savings. Support great patriot Mike Lindell. Use promo code “JDR” at MyPillow and take advantage of the $25 EXTRAVAGANZA happening right now.
According to California Globe, the EDD has been called one of the most mismanaged agencies in the state, with government insiders allegedly calling it “the place where state careers go to die.”
California Will Take Years to Pay Off Debt
The EDD said that even without the debt incurred from the state’s pandemic response, which is the cause of the latest insolvency and tax hike, California would still have had to borrow money over the next few years.
The report said this would continue even in a “good” economy and that the structural insolvency would need at least two to five years to fix.
“Historically, benefit payments have only exceeded contributions during major economic downturns—most recently, during the pandemic and Great Recession,” the EDD report said.
Survival Beef on sale now. Freeze dried Ribeye, NY Strip, and Premium beef cubes. Promo code “jdr” at checkout for 25% off! Prepper All-Naturals
“For the first time, the fund is expected to be out of balance during a period of job growth.”
The EDD believes that the surcharge fee will now last about 15 years and not the six or seven years as originally projected in order to pay back the $20 billion borrowed from Washington.
California lost about $40 billion to unemployment fraud during the pandemic, most of which could have been prevented early on, with a state fraud prevention identity security system.
However, the disgraced former labor department chief Julie Su, who was aware of the problem the whole time, waited months to install an anti-fraud system.
Bypass Big Tech Censors
Taxpayers Paying for State Mismanagement
The EDD expects to take in about $5.3 billion in UI tax money over the next couple of years to pay off some of the debt.
The unpopular surcharge tax will cost each California employee about $1,500 over the next 15 years, with rates starting at $21 per employee and rising until it hits $420 a year until the federal loan is paid off.
The insurance department expects to pay out an extra $2.6 billion in benefits and overheads, which is more than it will receive in the next two years.
This will raise the amount the UI trust fund owes to its creditors from $17.6 billion to about $20.3 billion by the end of 2024, despite the extra $1.2 billion raised in extra taxes, according to the May report.
This includes interest, which was projected add an extra $300 million a year to the debt.
Rob Moutrie, a policy expert with the California Chamber of Commerce, told the California Globe, that his organization is “disappointed to see that California businesses will be paying an extra tax for even longer than expected.”
Moutrie said that California’s UI fund “was never intended to be used by the state as a society-wide social safety net” and that most other states made sure they were able to immediately pay off any pandemic debt they incurred.
It has been hoped by many advocates that this latest scandal will force a reform of the agency. But action may require additional UI taxes to address the issue, making it unpopular with the state’s politicians and the public.
Article cross-posted from our premium news partners at The Epoch Times.
Bypass Big Tech Censors
It’s becoming increasingly clear that fiat currencies across the globe, including the U.S. Dollar, are under attack. Paper money is losing its value, translating into insane inflation and less value in our life’s savings.
Genesis Gold Group believes physical precious metals are an amazing option for those seeking to move their wealth or retirement to higher ground. Whether Central Bank Digital Currencies replace current fiat currencies or not, precious metals are poised to retain or even increase in value. This is why central banks and mega-asset managers like BlackRock are moving much of their holdings to precious metals.
As a Christian company, Genesis Gold Group has maintained a perfect 5 out of 5 rating with the Better Business Bureau. Their faith-driven values allow them to help Americans protect their life’s savings without the gimmicks used by most precious metals companies. Reach out to them today to see how they can streamline the rollover or transfer of your current and previous retirement accounts.