California’s unemployment fund is billions of dollars in the red. The state relies on a federal loan to keep paying benefits. But soon, it’ll owe hundreds of millions of dollars in interest. Officials are calling for big changes to the system.
Loree Levy with the Employment Development Department says the fund has been insolvent for about two years and is eight-and-a-half billion dollars in the hole. She says that’ll get worse over the next few months. “By the end of 2011, we anticipate being 11.1 billion dollars in the red in the unemployment insurance trust fund,” she said.
Levy says that’s money the state has to borrow from the federal government – and the first interest payment of 320 million dollars will be due in September. She says the state’s system hasn’t changed since 1984. According to Levy, “salaries have gone up. The minimum wage has gone up and therefore how much people can collect in benefits has increased significantly while we’ve remained very static in what we can collect from employers so what you’ve got is a growing imbalance in the system.”
Levy says a change is needed. She says the options are to either increase the amount of money that employers put into the system, to decrease benefits or do a combination of both. Recent proposals to make such changes have been unsuccessful. Levy says more than two dozen other states also rely on loans from Washington to pay unemployment benefits.