Payam Javan: During the COVID-19 pandemic, California borrowed $20 billion from the federal government to cover unemployment benefits. However, Governor Gavin Newsom decided not to repay the loans, shifting the responsibility to employers. According to Marc Joffe of the Cato Institute, California could have used the COVID-19 relief funds received in 2021 to repay the loans. The state initially set aside $750 million in the 2023-2024 budget to start repaying the debt, but Newsom changed the plan and withdrew the cash in January. The governor’s office did not comment on the matter.
Federal regulations state that firms in California are now liable for the loans, resulting in an increase in the federal unemployment tax rate for employers. Starting in 2023, the tax rate will rise by 0.3 percent annually until the debt is repaid. Among the 22 states that borrowed money for unemployment insurance during the pandemic, only California, Colorado, Connecticut, and New York have not fully paid down their loans. As of May 2, California owed approximately $18.6 billion, followed by $8 billion by New York, $187 million by Connecticut, and $77 million by Colorado, according to the U.S. Treasury Department.
Furthermore, investigations have uncovered fraudulent payments for unemployment benefits in California. Individuals with criminal records received these fraudulent payments, with some residences receiving up to 60 such payments. The total estimated cost of the fraud, according to analytics company LexisNexis, is $32.6 billion.