California stiffs feds on $20B loan - taxpayers pick up the tab
California remains the only US state yet to repay a $20 billion federal loan taken out for unemployment claims during the pandemic. The unpaid debt has now led to higher taxes for employers, with no immediate plan to clear the balance.
The state’s unemployment insurance trust fund faced a $24 billion shortfall in 2020 after a record surge in jobless claims. Instead of using federal stimulus funds to cover the debt, California directed the money toward infrastructure, homelessness, and other programmes.
Business groups pushed Governor Gavin Newsom and lawmakers to offer tax rebates to ease the burden. No relief was granted. As a result, employers will pay an extra $42 per employee in payroll taxes next year to help settle the debt. The state’s unemployment system has struggled for years, compounded by fraud during the pandemic. Officials admitted to losing $31 billion to fake claims, though $1 billion has since been recovered. The remaining debt will continue to grow until fully repaid.
The extra payroll tax will rise each year until the loan is cleared. Employers will bear the cost, while the state’s unemployment fund remains under pressure. No further action has been announced to speed up repayment.
