California’s borrowing to pay unemployment benefits will balloon to $26.7 billion by the end of next year as state funds prove inadequate to cover the costs of unprecedented joblessness caused by the COVID-19 pandemic, a new report warns.
Even as the economy is rebounding, unemployment remains high, and the debt is forecast to grow beyond the $24.3 billion estimated for the end of this year, state officials said.
Business leaders said Friday that as borrowing from the federal unemployment trust fund is paid back by higher payroll taxes, state officials must tap more of a projected budget surplus to lessen the financial hit on employers already struggling to recover from the economic shutdown of the last year.
“If they don’t do anything more, businesses are going to end up having to pay that tax at a critical time of our economic recovery,” said Rob Lapsley, president of the California Business Roundtable. “If some [businesses] are teetering on the edge of a fiscal cliff, it could drive them right over the edge, and they go out of business.”
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