With recent unexpected difficulties, two bills that would’ve altered California’s unemployment insurance (UI) aren’t advancing this year.
California’s UI Background
The UI program was created as part of the Social Security Act of 1935. It’s a unique federal-state program that provides weekly benefits up to 26 weeks to unemployed (or underemployed) workers actively seeking work.
This program is financed by employers paying unemployment taxes on the first $7,000 in wages paid to each worker. The tax rates vary for each employer, with a maximum of 6.2%, and are designed to ensure employers who lay off their workers bear more costs.
Issues with the UI Fund
In addition to funding UI benefits, employers pay Federal Unemployment Tax Act taxes to help cover the program’s administrative costs.
And due to the impact of the 2020 COVID-19 pandemic, California started borrowing from the federal government to maintain the UI fund. As of June 18, 2024, California’s federal loan balance is more than $19 billion. With the state UI fund being in deficit for two consecutive years, federal law has imposed a tax increase on employers to repay the loan. So, instead of paying $21 per worker, employers will pay $84 to generate the funds for the loan.
The Proposed UI Bills: SB 1116 & SB 1434
SB 1116 proposed to allow individuals involved in strikes to collect UI benefits post a two-week waiting period. This reintroduces SB 799, a labor priority bill vetoed by Governor Newsom in 2023. SB 799 was vetoed because of UI federal debt; increasing benefits for striking workers would’ve caused significantly more taxes on employers. However, SB 1116 was introduced in hopes of achieving a better outcome.
SB 1434 was introduced in response to the UI fund insolvency issues. The solution was to increase taxes on employers. However, this bill wasn’t even heard in the first policy committee; therefore, it is effectively dead for the year.
Even though these bills are not making much of an impact now, they are likely to be reintroduced in 2025 due to ongoing concerns about the UI system.