Friday, March 9, 2012

State Budget deficit costs California companies

The state of California is running a deficit to pay unemployment benefits.  The federal government makes up the state shortfall but then reduces the tax credit it gives to employers in California.  As a result employers in California are paying $21 per employee more to the federal government than employers in other states.

It’s just one small example but when state government fails to pay it costs everybody else.  The state unemployment insurance (UI) Trust Fund has been insolvent since 2009.  By the end of 2012 the UI Fund deficit is expected to reach $10.7 billion, according to the California Employment Development Department (EDD).  Statewide the tax increase totals an estimated $289.8 million in 2012 and $615.7 million in 2013 according to EDD.


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