Discontent over the Southern California summer — a series of shutdowns from hotels to Hollywood — has inspired pro-labor Democrats in the state legislature to try to change the law so that striking workers can earn Unemployment benefits.
The bill introduced this week would make California the third state to do so, after New York and New Jersey. But unlike most states, California currently doesn’t have enough money to pay benefits for unemployed workers. Business groups opposing the bill argue that making more people eligible for the checks will only make the problem worse.
Unions and progressive policy groups say businesses are to blame for not putting enough money into a fund that pays unemployment benefits. The fund is financed by taxes that businesses must pay for each worker. But the tax applies only to the first $7,000 of an employee’s wages — a figure that hasn’t changed since 1984 and is the minimum amount allowed by federal law.
Since then, the state legislature has increased unemployment benefits twice, once in 1989 and again in 2001. That’s why California’s unemployment insurance trust fund “has been one of the most unbalanced funds in the country,” said Jared Walczak, vice president of California’s unemployment insurance program. Tax Foundation, a nonpartisan tax policy organization.
“Something has to give,” he said. “Either benefits need to be reduced, or taxes are higher, or both. But the country has chosen to live on the edge for decades.”
The issue, which could spark the biggest battle in the final weeks of this year’s California legislative session, could be exacerbated by the ongoing writers’ and actors’ strike and potential future shutdowns, including at Kaiser Permanente, the largest in the country. ) of 85,000 healthcare workers may go on strike. Not-for-profit healthcare provider.
During periods of high unemployment, such as a recession or the coronavirus pandemic, when the government forces many businesses to close, states often run out of money to pay unemployment benefits. But this year, despite three straight years of record job growth, California estimates benefit payments will exceed taxes by $1.1 billion. It’s the first time this has happened during a period of job growth, according to the nonpartisan Office of Legislative Analysis.
$18 billion owed to the federal government
While businesses only pay unemployment tax on the first $7,000 of their employees’ wages, workers’ wages have been increasing. Alissa Anderson, a senior policy fellow at the California Budget and Policy Center, said the average annual salary for a full-time private sector employee in California is about $67,000 today.
“Businesses take a smaller and smaller percentage of workers’ income over time, paying payroll taxes, and that’s not sustainable,” she said. “You can’t fund projects that way.”
Meanwhile, California still owes the federal government more than $18 billion, money it has borrowed to pay unemployment benefits during the pandemic. The government will likely pay off the debt plus interest over the next decade.
Christina House/Los Angeles Times
Most other states have used some of the billions in federal coronavirus aid to pay down debt. But to the dismay of business owners, the state didn’t do that and used it for things like taxpayer rebates. This year, businesses began paying an additional $21 per employee to begin repaying federal loans. But even with that increase, it’s still not enough to cover the amount of benefits California pays out to unemployed workers.
That’s one reason business groups say the state can’t afford to make more people eligible for unemployment benefits.
“We want lawmakers to understand that when you’re in debt, don’t add anything to your credit card,” said Rob Moutrie, a policy advocate for the California Chamber of Commerce.
But unions view unemployment benefits as benefits workers earn while on the job. Lorena Gonzalez Fletcher, the chief official of the Cal Labor Federation, said the government is “acting on behalf of employers” in labor disputes if they deny workers access to these benefits during a strike.
Fletcher, a former state lawmaker who tried to pass a similar bill in 2019, said the legislature would eventually have to change how the state pays unemployment benefits. But she said larger issues shouldn’t distract the legislature from supporting striking workers.
“Yes, with or without this (bill), there are issues,” Fletcher said. “It is absurd that these workers are at risk of homelessness or food insecurity because employers are not engaged in addressing underfunding.”
Despite California’s reputation as a high-tax state, raising corporate taxes remains difficult. John Kabatek, state director of the National Federation of Independent Business, said business owners pay many other taxes in California.
“The claim that small business owners aren’t paying their fair share is ridiculous and, frankly, insulting,” he said.
Cutting benefits will also be difficult. Anderson, a senior policy fellow at the California Budget and Policy Center, said California unemployment benefits are roughly half of what workers were earning.
“A lot of people can’t last very long on half the salary,” she said.
The bill was authored by state Sen. Anthony Portantino, a Democrat from Southern California who is also a member of Congress. Portantino said the health of the state’s unemployment insurance trust fund will be part of discussions around the bill. But he said that “should not be an excuse for one side or the other”.
“Strikes are hard,” he said. “Some people have a romanticized view of it. There’s nothing romantic about it. For many people in California, it’s a family struggle of life and death.”
