http://economy.ocregister.com/2012/08/09/california-unemployment-payouts-drop-by-half/110796/
California sent out $1 billion in unemployment payments in June, a 50% drop from the peak two years ago, the Employment Development Department reports.
Part of the decline is due to fewer people being unemployed. By EDD’s count, there were 1.97 million Californians who were out of work this June compared to 2.26 million in June 2010 and 2.19 million last year.
However, the biggest reason for the drop in payouts this year is because California fell short in April of the federal eligibility requirements for the maximum 99 weeks of benefits.
Normally, unemployed workers are only eligible for 26 weeks of state aid. But because of the length and depth of the national economic downturn — the U.S. lost nearly 7 million jobs during the 18 months of the official recession — Congress extended unemployment benefits to 99 weeks.
Even though California has the third highest unemployment rate in the country, the state failed in April to meet the complex federal formula for state eligibility.
As a result, benefits in California were cut to 79 weeks in May and more than 90,000 long-term unemployed had their payments cut off.
With 709,000 of California’s unemployed in June out of work more than 52 weeks, thousands of other long-term unemployed are expected to exhaust their benefits each month.
California’s maximum benefits will be further cut to a maximum of 72 weeks in September as part of an overall effort by Congress to reduce the number of people getting aid.
Although the drop in total payouts is welcome news to the state, it does little to affect the projected $10.2 billion deficit in California’s unemployment insurance trust fund.
The state’s trust fund for unemployment payments ran out of money in January 2009, when claims outstripped payments by employers. California has been borrowing money from the federal government to make up the difference since then.
Last year, the state had to start paying back interest on the federal loan — a payment that totaled $303.5 million. Another $313 million in interest is due in September. The state is making the payments from money borrowed from the California disability insurance trust fund, which will have to be paid back within four years.
To begin paying off the $10 billion in principal due Uncle Sam, employers are being charged an additional $21 a year per worker this year in federal payroll taxes ($77 per worker total). The state legislative analyst estimates the increased payroll tax will cost California employers an extra $290 million this year and $580.9 million in 2013.
