California’s Unemployment Insurance (UI) Fund has continued to go deeper and deeper in debt through 2010-a debt of $7.6 billion at present, projected now to grow to $18.4 billion by the end of 2010. But 2010 has not been all negative for the Fund.
This year has seen advancements in a series of Fund Information Technology projects that should improve call center operations, enable claimants to access their records and file and check claims via the internet, and enable the state to pay claims electronically and with greater security.
(One of Dorothea Lange’s most recognized photos, of unemployment
during the Depression, 1937. It was taken in California, in the Social
Security office in San Francisco.)
The cause of the deepening UI Fund debt is the same as the cause of the UI Fund initial debt: unemployment claims at unprecedented levels and well above the revenues coming into the Fund. Totals for 2009 show EDD paid out $20.2 billion in UI claims, and processed 6.5 million initial UI claims. For the first quarter of 2010, the number of Californians receiving UI at any one time was over 1.3 million.
California has survived in making UI payments in 2010 through a loan from the federal government to the Fund, covering the full amount of the debt. In living off a federal government loan, California is not unique among states. Thirty-five states currently receive loans to their UI Funds from the federal government. California’s loan amount is by far the largest (only 3 other states have borrowed in excess of $3 billion), though the total amount of loans to all states is now above $38.5 billion.
Given the politics of the UI Fund (which are very similar to the politics of the state budget), California will continue to be dependent on a federal loan at least through the end of 2010. At that point, it may be the federal government, rather than the state government that will take action.
The "taxable wage base" is the amount of wages that employer pay UI taxes on. The federal government sets a taxable wage base that is the minimum for the states, though states can increase the amount. Currently, the taxable wage base is at $7,000; and while some states have increased that amount two times or more, California and other states have kept to the $7,000.
Steve Carter, the expert on UI Fund administration, who is with TALX, the nationwide UI administrator, states that at some point in 2011, the federal government might increase the taxable wage base, phasing in increases over a series of years, and eventually tying to cost of living increases. For California, this would automatically mean increased revenues for the Fund, without any action by the state legislature. Of course, it will also mean increased costs for California’s 1.2 million employers-something that particularly in the next few years, the state wants to do everything to minimize and avoid.
For UI Fund administration, the later part of 2010 and 2011 should see technology improvements that will improve access of claimants to the system, as well as the security of the system. The Call Center Network Platform Application Upgrade will improve customer access to call centers and provide EDD with information to better detect identify fraud. The Identity Management system will give claimants access to their records and claim processes through the internet. The Electronic Benefit Payments will allow for UI payments by direct deposit or electronic payment card, rather than through paper check.
As the march of technology continues to destroy (and create) jobs in California, it also brings improvements to the administration of government, including the UI Fund.