Posted on 10/21/2010 7:59:42 AM PDT by SmithL
California's now-resolved $19 billion budget shortfall got plenty of attention in recent months, but a state report released Wednesday highlights the state's other massive deficit - in the unemployment insurance fund, which will be $10.3 billion in the hole by year's end.
The report by the nonpartisan Legislative Analyst's Office warns of dire consequences if California's leaders do not tackle the fund's insolvency: The federal government could impose steep taxes on California businesses beginning in 2012, and the state could lose $400 million in federal dollars annually.
The deficit is the result of the state paying out more in unemployment benefits than it collects. The shortfall is offset by federal loans, but the state must begin paying interest on those loans next year.
The report warns that the only way for the crisis to be resolved without drastic change, such as tax increases, is for the state's unemployment rate to drop to 4 percent - a near impossibility.
"Such low rates of unemployment have been historically rare in California," the report states. "Given that the state's current unemployment rate is 12 percent and is expected to remain fairly high for the next several years, the Legislature will need to reform California's (unemployment) system to achieve and maintain solvency of the fund."
The LAO says there are three options for the state to achieve and maintain long-term solvency: reducing benefit payments; increasing taxes on employers to fund unemployment insurance; or a combination of both.
The office warns that the first two options have serious problems, however: Decreasing benefits alone would not address the fund insolvency quickly enough and would leave jobless Californians without help, while increasing taxes could hurt California's economy.
The report says that lawmakers should ideally make some changes - such as a tax increase - immediately,
(Excerpt) Read more at sfgate.com ...
The report says that lawmakers should ideally make some changes - such as a tax increaseSure, let those of us with jobs support everyone without one. Just go pick some more cash off of the Golden State Money Tree.
Glad this info came out now. Ok Californians, now imagine Jerry Brown as your Governor and how he will handle this. Start reaching in your pockets now to pay for higher taxes, as that is how Brown will “solve” the problem.
And when all major businesses move out of California, then what?
In which case even more businesses will leave the state thus increasing the amount of unemployed and decreasing the amount of employers paying into the fund. Yeah, that'll work. /
WHY NOT STOP GIVING BENEFITS FOR 99 WEEKS!?!@xX!!!
sfl
I thought all extended benefits were being paid by the feds.
Just send vouchers to the unemployed.
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