Another Multi Billion Dollar Hole Blown in California’s Budget


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The Dan Walters column carried in the Sacramento Bee newspaper today (Oct. 21) reports that the Legislature’s budget analyst has alerted the Legislature that the California Unemployment Insurance Fund is on track to run a $ 20 billion deficit by the end of 2011.

It seems that the high rate of unemployment in California has predictably resulted in a run on unemployment benefits, and that the current situation is that the unemployment fund is paying out at the rate of $ 11 billion a year while taking in only $ 4.5 billion a year. That intake is from payroll taxes paid by employers. Legislative Analyst Mac Taylor made this report to the Legislature, and pointed out the fund went into deficit in January, 2009 and has been able to make unemployment payments since then only because the federal government has loaned it money.

This raises all kind of issues, such as: Why has our Legislature and Governor let this deficit situation go on for over a year and a half? Has California built up a multi-billion dollar debt to the federal government, a debt that increases every day, without full disclosure to the public? Is this yet another example of a state being bailed out by the federal government using federal deficit spending? Is this not some kind of death spiral?

It seems that at the point where unemployment fund monies are depleted, but the machinery keeps issuing unemployment checks to the 2.5 million workers who are jobless in California, the program has moved from an insurance program to a welfare program. And that move is blowing another hole in State finances.

When and how will this end? Will a new Governor and Legislature have the guts to raise payroll taxes to return this fund to solvency? And, if they do, what impact will that have on an already sluggish economy in which employers are reluctant to hire?

I realize I am good at posing questions here. That’s because I don’t have answers. Then again, I am not running for Governor either.


About Over But Not Out

A retired Orange County employee, and moderate Republican. The editor seriously does not know OBNO's identity as did not the former editor, but his point of view is obviously interesting and valued.