BILL ANALYSIS
AB 2030
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Date of Hearing: May 5, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2030 (Yamada) - As Amended: April 12, 2010
Policy Committee: InsuranceVote:7-5
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill establishes the Self-Employment Assistance Program
(SEA) and requires unemployment insurance (UI) benefits be paid
to eligible individuals who are pursuing training related to
self-employment. Under current law these benefits are not paid
to individuals particpiating in this type of training. This bill
requires the SEA weekly benefits to be equal to current law UI
benefits. This bill limits the number of SEA UI beneficiaries to
5% of the total statewide UI beneficiaries.
FISCAL EFFECT
1)On-going costs from the UI Trust fund of more than $50 million
(employer financed special fund) to provide benefits to more
than 5,000 SEA participants who would have otherwise not drawn
benefits. This estimate assumes average weekly benefits paid
out over 26 weeks, the standard UI duration when emergency
extensions are not available.
2)This bill limits SEA to 5% of individuals receiving UI
benefits. Under current law that would allow for the
enrollment of up to 37,000 people in SEA.
3)The California UI trust fund is insolvent due to the chronic
underfunding of the UI system. The system is financed by
unemployment tax contributions paid by employers. Recent
estimates show a $7 billion deficit in the 2009 calendar year,
rising to $18 billion in 2010 and $27 billion in 2011.
California has borrowed about $4 billion from the federal
government, permitting California to make benefit payments to
UI claimants without interruption. Federal loans lasting more
than one year generally accumulate interest charges of about
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five percent per year on the outstanding balance.
COMMENTS
1)Rationale . This bill re-establishes the Self-Employment
Assistance Program. This program was originally established by
SB 1482 (Watson), Chapter 1116, Statutes of 1994. Under
federal law, California has the authority to establish this
type of program and the author indicates this bill will help
individuals who wish to start their own business to return to
work via self-employment. Under current law, individuals
pursuing training to become self-employed as small business
owners do not qualify for UI benefits. This bill establishes
this eligibility.
2)UI Benefits . The UI program is a federal-state program that
provides weekly UI payments to eligible workers who lose jobs
through no fault of their own. The UI program is financed by
unemployment tax contributions paid by employers for each
worker. During relatively low rates of unemployment, eligible
individuals receive weekly UI payments for up to 26 weeks. Due
to current high rates of unemployment the federal government
has provided emergency extensions to these benefits.
California, a state with one of the highest unemployment rates
nationally (now over 12%) has qualified for the lengthiest
extension of benefits available to states.
3)Past Experience with SEA . Under a previous iteration of the
SEA program, of the 52 service delivery areas statewide, only
five programs agreed to operate the program and by the summer
of 1997, all but two of the service delivery areas dropped the
SEA program due to lack of interest. Despite efforts by EDD to
market the program and local efforts to engage claimants, the
SEA program failed to gain traction at that time.
4)UI Trust Fund Deterioration . Due to chronic underfunding of
the UI Trust Fund, California faces UI insolvency for the
foreseeable future. The UI program is financed by employers
who pay taxes each year on wages paid up to $7,000 for each
employee. California's tax rate for UI is the lowest allowed
by federal law and has not been increased since the 1980s.
Other large states have taxable wage bases that range up to
$12,500. Almost 20 states have a taxable wage base of more
than $15,000 and range up to $35,000. Taxable wages in
California are neither indexed nor inflation-adjusted. These
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factors and the major increases in unemployment have generated
the UI Trust Fund insolvency.
Analysis Prepared by : Mary Ader / APPR. / (916) 319-2081