California may pay unemployment to striking workers. But the fund to cover it is already insolvent

Aug 23, 2023, 10:05 PM

Striking Hotel workers from Unite Here Local 11 join the picketing actors of SAG-AFTRA, and writers...

Striking Hotel workers from Unite Here Local 11 join the picketing actors of SAG-AFTRA, and writers of the WGA, outside Netflix studios on July 21, 2023, in Los Angeles. Some Democrats in the California Legislature are trying to change the law to make striking workers eligible for unemployment benefits. Business groups oppose the bill, noting California doesn't have enough money in its unemployment trust fund to pay for benefits now. (AP Photo/Chris Pizzello, File)
Credit: Chris Pizzello/Invision/AP

(AP Photo/Chris Pizzello, File)

SACRAMENTO, Calif. (AP) — Southern California’s summer of discontent — marked by a series of work stoppages from hotels to Hollywood — has inspired labor-supporting Democrats in the state Legislature to try and change the law so striking workers can get unemployment checks while they picket for better pay and working conditions.

The bill, introduced this week, would make California just the third state to do this, joining New York and New Jersey. But unlike most states, California currently doesn’t have enough money to pay the benefits owed to unemployed workers. Business groups who oppose the bill argue making more people eligible for those checks will only make the problem worse.

Labor unions and progressive policy groups say businesses are to blame for not putting enough money into the fund that pays unemployment benefits. The fund is filled by a tax that businesses must pay per each worker. But the tax only applies to the first $7,000 of employee wages — a figure that have not changed since 1984 and is the lowest amount allowed under federal law.

The state Legislature has twice increased unemployment benefits since then, once in 1989 and again in 2001. It’s why California’s unemployment insurance trust fund “has consistently been one of the most imbalanced in the country,” said Jared Walczak, vice president of state projects for the Tax Foundation, a nonpartisan tax policy group.

“Something has to give,” he said. “Either the benefits need to be less generous or the tax is higher or both. But the state has just chosen to live on the edge for decades.”

The issue could cause one of the biggest fights in the final weeks of California’s legislative session this year, heightened by the ongoing writers and actors strike and future potential work stoppages — including a possible strike of 85,000 health care workers at Kaiser Permanente, the country’s largest nonprofit health care provider.

States usually run out of money to pay unemployment benefits during periods of high unemployment, like a recession or the coronavirus pandemic when governments forced many businesses to close. But this year, despite three years of record job growth, California estimates benefit payments will exceed tax collections by $1.1 billion. It’s the first time this has happened during a period of job growth, according to the nonpartisan Legislative Analyst’s Office.

While businesses only pay unemployment taxes on the first $7,000 of their workers’ wages, employee paychecks have been increasing. Today, the average full-time California worker in the private sector makes about $67,000 per year, according to Alissa Anderson, senior policy fellow at the California Budget and Policy Center.

“Businesses are paying a payroll tax on a smaller and smaller share of workers’ earnings over time and it’s not sustainable,” she said. “You can’t finance a program that way.”

Meanwhile, California still owes the federal government more than $18 billion, which is money that was borrowed to pay unemployment benefits during the pandemic. The state will likely spend the next 10 years paying off that debt, plus interest.

Most other states used some of the billions of dollars in federal coronavirus aid to pay off their debts. But to the consternation of business owners, California did not — and instead spent it on things like rebates for taxpayers. This year, businesses began paying an extra $21 per employee to begin paying off that federal loan. But even with that increase, it’s still not enough to cover the amount of benefits that California is paying to unemployed workers.

That’s one reason why business groups say the state can’t afford to make more people eligible for unemployment benefits.

“We are hopeful that the legislators will understand you don’t add things to the credit card when you are deeply in debt,” said Rob Moutrie, policy advocate for the California Chamber of Commerce.

But labor unions view unemployment checks as benefits that workers earn while on the job. If the government won’t let workers receive those benefits during a strike, then they are “putting their thumb on the scale on behalf of the employer” in a labor dispute, said Lorena Gonzalez Fletcher, chief officer of the California Labor Federation.

Fletcher, a former state assemblymember who tried in 2019 to pass a similar bill, said the Legislature ultimately will have to change how the state pays for unemployment benefits. But she said that the larger issue should not distract the Legislature from supporting striking workers.

“There is a problem, yes, with or without this (bill),” Fletcher said. “Making these set of workers run the risk of homelessness or food insecurity because the employers have not been part of the solution in fixing their underfunding is ridiculous.”

Raising taxes on businesses would be difficult, despite California’s reputation as a high-tax state. John Kabateck, state director for the National Federation of Independent Business, said business owners pay lots of others taxes in California.

“To allege that small business owners have not been paying their fair share is absurd and frankly insulting,” he said.

Cutting benefits would also be tough. California unemployment benefits cover about half of what a worker was previously earning, according to Anderson, the senior policy fellow at the California Budget and Policy Center.

“Many people can’t live on half their salary for very long,” she said.

The bill is authored by state Sen. Anthony Portantino, a Democrat from Southern California who is also running for Congress. Portantino said the health of the state’s unemployment insurance trust fund will be part of the conversation surrounding the bill. But he said it “shouldn’t be used as an excuse for one side or the other.”

“It’s hard to be on strike,” he said. “Some people have this romanticized view of it. There’s nothing romantic about it. This is a life-and-death family struggle for many people in California.”

National News

In this photo provided by the Morgan & Morgan law firm, utility contractors remove a charred Hawaii...

Associated Press

Takeaways from AP report on Maui fire investigation

Investigators are trying to solve a mystery about the origin of last month’s deadly Maui wildfire: How did a small, wind-whipped fire sparked by downed power lines and declared extinguished flare up again hours later into a devastating inferno that killed at least 97 people? Here are the key takeaways of an Associated Press investigation […]

3 hours ago

This photo provided by the Morgan & Morgan law firm shows a charred Hawaiian Electric utility pole ...

Associated Press

How did the Maui fire spread so quickly? Overgrown gully, stubborn embers may be key to probe

Melted remains of an old car tire. Heavily burned trees. A charred stump of an abandoned utility pole. Investigators are examining these and other pieces of evidence as they seek to solve the mystery of last month’s deadly Maui wildfire: How did a small, wind-whipped fire sparked by downed power lines and declared extinguished flare […]

4 hours ago

FILE - Damarra Atkins pays respect to George Floyd at a mural at George Floyd Square, Friday, April...

Associated Press

Black Americans express concerns about racist depictions in news media, lack of coverage efforts

NEW YORK (AP) — In a new study, Black Americans expressed broad concerns about how they are depicted in the news media, with majorities saying they see racist or negative depictions and a lack of effort to cover broad segments of their community. Four in five Black adults say they see racist or racially insensitive […]

4 hours ago

FILE - Ahmad Al Aliwi Alissa, accused of killing 10 people at a Colorado supermarket in March 2021,...

Associated Press

Expert ruling that Colorado supermarket shooting suspect is competent for trial set to be debated

BOULDER, Colo. (AP) — A hearing begins Wednesday to determine if the man accused of killing 10 people at a Colorado supermarket in 2021 is mentally competent to stand trial. Ahmad Al Aliwi Alissa, 24, was found mentally competent by experts at the state mental hospital in August, but his defense attorney Kathryn Herold asked […]

5 hours ago

FILE-Sen. Mitt Romney, R-Utah, speaks with Strider Technologies, an AI-powered strategic intelligen...

Associated Press

Race to replace Mitt Romney heats up as Republican Utah House speaker readies to enter

Republican Utah House Speaker Brad Wilson is poised to formally announce at a Wednesday night rally that he is running for the U.S. Senate seat being vacated by Mitt Romney, who recently announced he won’t run for reelection. Romney announced earlier this month that he won’t seek a second term, saying younger people needed to […]

6 hours ago

FILE - A map of a GOP proposal to redraw Alabama's congressional districts is displayed at the Alab...

Associated Press

In a win for Black voters in redistricting case, Alabama to get new congressional lines

MONTGOMERY, Ala. (AP) — Alabama is headed to the first significant revamp of its congressional map in three decades after the U.S. Supreme Court rejected the state’s bid to keep using a plan with a single majority-Black district. The decision on Tuesday sets the stage for a new map with greater representation for Black voters […]

6 hours ago

Sponsored Articles

Swedish Cyberknife...

September is Prostate Cancer Awareness Month

September is a busy month on the sports calendar and also holds a very special designation: Prostate Cancer Awareness Month.

Ziply Fiber...

Dan Miller

The truth about Gigs, Gs and other internet marketing jargon

If you’re confused by internet technologies and marketing jargon, you’re not alone. Here's how you can make an informed decision.

Education families...

Education that meets the needs of students, families

Washington Virtual Academies (WAVA) is a program of Omak School District that is a full-time online public school for students in grades K-12.

Emergency preparedness...

Emergency planning for the worst-case scenario

What would you do if you woke up in the middle of the night and heard an intruder in your kitchen? West Coast Armory North can help.

Innovative Education...

The Power of an Innovative Education

Parents and students in Washington state have the power to reimagine the K-12 educational experience through Insight School of Washington.

Medicare fraud...

If you’re on Medicare, you can help stop fraud!

Fraud costs Medicare an estimated $60 billion each year and ultimately raises the cost of health care for everyone.

California may pay unemployment to striking workers. But the fund to cover it is already insolvent