California owes billions for unemployment – NBC 7 San Diego


At the height of the pandemic, more than one in 10 Californians was unemployed.

Today, 1.5 million people in the state are still out of work. And while unemployment checks are still mailed, NBC 7 Investigates has learned that the state is running out of cash and there is a debate going on in Sacramento over who should foot the bill for these. checks.

Guillermo Gonzalez runs Casa Don Diego, a family-run Mexican restaurant in Chula Vista. Like thousands of restaurants, when COVID restrictions closed restaurants, it slashed its staff, dropping to just four employees after already having 16 employees.

“I have lost employees that I would have liked to have here today,” said Gonzalez.

Getting them back hasn’t been easy, although, Gonzalez said, he now advertises a higher salary than ever before in, essentially, entry-level positions.

“Unfortunately, we have to pay them top dollar just to train them,” Gonzalez said, “and see if they work.”

So when Gonzalez found out he could pay higher payroll taxes in the years to come, he wasn’t happy.

Why would I be happy to pay more taxes, “Gonzalez said.” We already pay taxes everywhere. “

During the pandemic, 20 states ran out of money for their unemployment funds, meaning they had to borrow money from the federal government.

California’s debt eclipses all other states, at over $ 21 billion and up. That’s more than double the second largest borrower: New York, at over $ 9 billion. The point is, the federal government expects to get that money back – with interest.

The state’s Department of Employment Development told NBC 7 Investigates that federal law requires employers in California to repay the loan in the form of a gradual increase in payroll taxes.

Rob Lapsley, who is part of the California Business Round Table, said that was wrong.

“We have unprecedented debt for this,” Lapsley said. “And the question is going to be: how are we going to pay it back?

Lapsley said the state forced millions of businesses to shut down in the first place, so the state, not employers, should foot the bill.

“This is a huge problem now facing employers and the state, to ensure that we can move forward with the recovery,” Lapsley said.

Alissa Anderson, senior policy analyst for the California Budget and Policy Center, takes a different view.

“I see no reason why the state should pay for something that companies should have paid from the start,” Anderson said. “Again, the reason we have this debt is that the companies weren’t putting enough into the fund initially. “

The payroll tax in California is capped at the first $ 7,000 of each employee, said Anderson, a figure that has remained the same for decades, far behind the rate of inflation and below what is needed to cover unemployment benefits for workers.

Governor Gavin Newsom is currently proposing that the state set aside $ 1 billion to help offset the federal payroll loan. Anderson said she would rather see that money go to other public programs.

“I don’t think it makes sense to waste a billion dollars basically on tax relief for companies that weren’t putting enough into the system initially,” Anderson said, “when that money could be better spent on address the very real needs that Californians face.

Back in Chula Vista, Gonzalez said the payroll tax hike on the horizon won’t just impact employers.

“Do you think the average American would come to their neighborhood restaurant and be happy to pay $ 20 or more for a meal? Gonzalez said. “Because that’s where we’re going. I don’t want to go, but this is where we’re going.”

As of Friday, California recovered nearly 52% of the jobs lost during the pandemic, according to the report from the Department of Employment Development. While this is certainly good news, it is still well below the national rate of 66%.

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