Brown aims to fix state's unemployment insurance program


Normally, up to 26 weeks of unemployment benefits are available. However, as the recession worsened, Congress loaned out money to states extending that period people can receive a check to 99 weeks.

"What we have now is something that's every antiquated," said Loree Levy from the California Employment Development Department.

Now the tab is due and EDD says the balance is now $10 billion.

"What happened was we just couldn't collect enough from employers to offset what was being paid out to unemployed workers," said Levy.

With the program insolvent, Brown's labor secretary is meeting with business groups and employee unions for input on how to solve the deficit. One idea is to raise the payroll tax. Employers contribute about 6.2 percent on a worker's first $7,000 of wages into the unemployment fund -- a figure that hasn't changed in nearly three decades. The Brown administration won't detail its proposal, but California could follow 48 other states and raise that $7,000 wage threshold.

"When you look at the size of the debt, that means there's going to be for business, large and small, at least a $25 an employee increase over the next couple of years at a minimum," said Rob Lapsley from the California Business Roundtable.

While California's economy is improving with more jobs being created, the California Small Business Association says this is hardly the time to raise taxes on employers.

"The thing we worry the most about today is they will down size on the number of jobs because they have to pick up the amount of money from some place to pay the increased tax," said Betty Jo Toccoli from the California Small Business Association.

"The aim here is to get to a point where you can continue to cover the cost of regular unemployment benefits, to eliminate that deficit and interest payments being paid, and to come up with a rainy day fund," said Levy.

To get rid of the state deficit, they could also cut benefits, which in California is up to $450 a week. But that too is an unpopular idea since the maximum time period people can be on unemployment with extensions has just been shortened to 73 weeks.

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