Governor Gavin Newsom’s recent decision to not pay back the $20 billion borrowed from the federal government to cover unemployment benefits during the pandemic lockdown is leaving employers to shoulder the expense.
The state allocated $750 million to start paying down the loans, but Newsom vetoed the plan in January and withdrew the funding. As a result, businesses are mandated by federal regulation to pay down the loans.
Newsom expects California will have a multibillion-dollar budget deficit not just this year, but also in each of the next three years, meaning it’s not likely the state will start paying off the debt anytime soon.
In total, 22 states borrowed money for unemployment insurance from the federal government. All but four, California, Colorado, Connecticut, and New York, have paid back their debts – with California owing the most by far at $18.6 billion as of May 2,, according to data from the US Treasury.
Adding fuel to the fire was “unprecedented levels of fraud across the state, due to limited oversight and antiquated computer systems,” Lee Ohanian, professor of economics at the University of California–Los Angeles told The Epoch Times.
Analytics firm LexisNexis estimated the total cost of the rampant fraud at $32.6 billion.