BILL ANALYSIS �
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THIRD READING
Bill No: AB 226
Author: Solorio (D)
Amended: 4/14/11 in Assembly
Vote: 21
SENATE LABOR & INDUSTRIAL RELATIONS COMM. : 6-0, 6/22/11
AYES: Lieu, Wyland, DeSaulnier, Leno, Padilla, Yee
NO VOTE RECORDED: Runner
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 70-0, 5/12/11 (Consent) - See last page
for vote
SUBJECT : Unemployment insurance reporting requirements:
status of
funds
SOURCE : Author
DIGEST : This bill requires that the Employment
Development Department, whenever the Unemployment Fund
indicates a negative balance, include in its status report
the estimated impact on employers from changes in federal
tax credits and the estimated amount the state is expected
to pay in interest charges on any outstanding loan to the
federal government.
ANALYSIS : Existing law provides for the Unemployment
Insurance (UI) program is a federal-state program
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administered by the Employment Development Department
(EDD). The UI program provides workers, who lose their
jobs through no fault of their own, with weekly partial
wage replacement payments. Eligibility for benefits
requires that the claimant be able to work, be seeking
work, and be willing to accept a suitable job. The UI
program is financed by employers who pay unemployment taxes
on up to $7,000 in wages paid to each worker.
Existing law requires the EDD to submit to the Legislature
in May and October of each year a report on the status of
the Unemployment Fund and the Unemployment Compensation
Disability Fund. Each report shall include both actual and
forecasted information on the fund balances, receipts,
disbursements, claim data, tax rates, and employment
levels.
This bill requires that the EDD whenever the Unemployment
Fund indicates a negative balance, include in its status
report the estimated impact on employers from changes in
federal tax credits and the estimated amount the state is
expected to pay in interest charges on any outstanding loan
to the federal government.
Comments
Beginning in 2008, the state has been experiencing a major
economic recession that has increased unemployment to the
highest level in 69 years. In 2007, prior to this Great
Recession, one million people were unemployed in
California, comprising an unemployment rate of 5.8 percent.
In December 2010, 2.3 million people were unemployed,
comprising a 12.5 percent unemployment rate. In April
2011, California's unemployment rate decreased to 11.9
percent.
Due to continued high unemployment and significant pressure
placed on the Unemployment Insurance Fund, it is currently
insolvent. The "May 2011 UI Fund Forecast" report notes
that the UI Fund balance had a deficit of $6.2 billion at
the end of 2009, a deficit of $9.8 billion at the end of
2010, a projected deficit of $11.1 billion at the end of
2011, and a projected deficit of $12.7 billion at the end
of 2012, if not changes are made to the financing
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structure. Beginning on January 26, 2009, California began
borrowing from the Federal Government to pay UI benefits.
Interests owed on borrowed federal funds were waived
through December 2010; however, interest began accruing on
January 1, 2011. Repayment to the U.S. Department of Labor
would need to occur no later than September 30, 2011. The
estimated interest due on September 30, 2011, is $319.5
million and $592.8 million on September 30, 2012. This
situation will trigger both increased costs to the state
General Fund and increased taxes on employers.
According to the author's office, the state UI Fund has
experienced a negative balance during the last three years
and this fund presently owes the federal government $10.9
billion, a situation that the author feels will trigger
both increased costs to the state General Fund and
increased taxes on employers. The author's office argues
that as a result, employers in California will be required
to pay higher federal UI taxes in 2012 and the state
General Fund will be required this year to pay the federal
government an estimated $320 million in interest charges on
the federal UI loan.
The author's office states that there is a need for
employers and the state to know, as soon as possible, the
impact of a negative balance in the UI Fund in order to
better prepare for actions that may be necessary to return
the UI Fund to solvency. This bill will require EDD to
prepare and report these estimates.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
ASSEMBLY FLOOR :
AYES: Achadjian, Allen, Ammiano, Atkins, Beall, Bill
Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Chesbro, Cook, Davis, Dickinson, Donnelly, Eng,
Feuer, Fletcher, Fong, Fuentes, Furutani, Beth Gaines,
Galgiani, Gatto, Gordon, Grove, Hagman, Halderman, Hall,
Harkey, Hayashi, Hill, Huber, Hueso, Huffman, Jeffries,
Jones, Knight, Lara, Logue, Ma, Mansoor, Mendoza, Miller,
Monning, Morrell, Nestande, Nielsen, Norby, Olsen, Pan,
Perea, V. Manuel P�rez, Silva, Skinner, Smyth, Solorio,
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Swanson, Valadao, Wagner, Wieckowski, Williams, Yamada,
John A. P�rez
NO VOTE RECORDED: Alejo, Cedillo, Conway, Garrick, Gorell,
Roger Hern�ndez, Bonnie Lowenthal, Mitchell, Portantino,
Torres
PQ:do 7/12/11 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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