CA borrows $40M A DAY to pay unemployment
Extending unemployment benefits (up to 99 weeks) sounded like a great idea but it is proving to be a fiscal disaster for many state governments (previous post). Using fiscal chicanery and accounting practices that would put the average person in jail, congress and the regime have tried to soften the blow of the recession. As we all know, the federal government can run staggering deficits year to year but state governments cannot. So when congress mandates extensions to unemployment, state governments must find ways to fulfill their part of this obligation. They can pull money from other programs, increase unemployment taxes on employers, or borrow from the federal government (or all of the above).
At least 32 states have borrowed almost $41B from the federal government to cover unemployment payments. According to this story, California, a state with 12.5% unemployment and a $20B budget deficit, is now borrowing $40M a day to cover its unemployment obligation.
With one in every eight workers unemployed and empty state coffers, California is borrowing billions of dollars from the federal government to pay unemployment insurance.
The Los Angeles Times reports that the state owes $8.6 billion already, and will have to come up with a $362-million payment to Washington by the end of next September.
The continued borrowing means federal unemployment insurance taxes are going to increase, upping the annual payroll costs $21 a year per worker.
California tops the list of 32 states that have borrowed a total of $41 billion to pay claims.
The state took out its first loan from the federal government early last year, to deal with rising payment of benefits and number of claims.
At $40M a day, that works out to about $1.2B a month or $14.4B a year – just for unemployment. And they’ve already borrowed $8.6B. Am I the only one who sees a problem with this? Apparently the voters of California don’t.
And for an eye-opening look at the size and scope of the CA state government, here’s a list of state government agencies.