(The Center Square) – A California bill to pay striking workers unemployment benefits died in committee. An identical measure passed the California legislature last year but was vetoed by California Governor Gavin Newsom, who noted the state’s unemployment insurance fund is $20 billion in debt to the federal government and said he opposed doing anything to increase this “sizeable debt.”
This year’s SB 1116 and last year’s SB 799 were both authored by State Sen. Anthony Portantino, D-Burbank, whose number one donor sector is organized labor. The bill passed the California Senate, but failed in the California State Assembly Committee on Insurance.
“Although a labor dispute is not the fault of any worker, California has historically denied striking workers these earned benefits,” said Portantino in support of the bill. “This bill would reinstate eligibility for striking workers for UI after the first two weeks they were out of work because of a trade dispute.”
The California Senate Labor, Public Employment and Retirement Committee found that during the state’s “hot labor summer” in 2023, there were “dozens of strikes” over a wide range of industries, including at least 15 with 1,000 or more workers.
California business organizations remained united against the bill, with the California Chamber of Commerce labeling it a job killer.
“It would effectively require employers to subsidize striking workers, even if that employer is not presently (or has never) experienced any strikes. By forcing employers to pay unemployment insurance (UI) payments to striking workers, SB 1116 would also raise unemployment insurance taxes on employers across California,” wrote the Chamber in opposition. “This bill is a repeat of last year’s SB 799, which was vetoed by the Governor because of the debt it would add to California’s UI Fund—which is an even more pressing concern given the state’s long-term estimated budget concerns.”
As of June 18, 2024, California’s uninsurance fund’s federal loan debt was over $20 billion and is estimated to rise to $21 billion by the end of 2025. Each year the state’s insurance fund is in debt to the federal government, employers in the state lose 0.3 percentage points off their 5.4% federal unemployment tax credit, meaning after nine years the credit goes to zero.
California began borrowing from the federal government to cover its unemployment benefits starting on June 3, 2020. According to a state audit, the system lost $55 billion during the pandemic due to fraud and overpayments, leading the non-partisan, state-funded Legislative Analyst’s Office to declare the program “structurally insolvent.”
The 2023-2024 budget allocated $306 million from the state government to pay interest on the federal loan, while the 2024-2025 budget included a $331 million dollar interest payment. Businesses are responsible for paying for unemployment insurance, but the state government has significant control over unemployment benefits and could thus expand eligibility, or, as during the pandemic, boost payments.
