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Is California’s beleaguered jobless benefits agency ready for a recession?

Is California’s beleaguered jobless benefits agency ready for a recession?

Another recent change addresses what happens if you start getting benefits, and then your eligibility is called into question. In the past if, in the course of filling out forms to prove your ongoing eligibility, you indicated that you worked one day, or were sick one day – two things that could disqualify you from receiving benefits – the department would stop sending payments until it determined whether you were still eligible, which could require an interview, said Urban.

“At the height of the pandemic, (the department) was so behind the determinations (that) people were waiting 15, 16, or more weeks for these determinations,” and in the meantime, they weren’t receiving any benefits, Urban said . Now, if the agency can’t determine whether you’re eligible within 14 days, it will keep paying benefits while they sort out the issue, Urban said.

There have been other customer service tweaks over the past couple of years, including adding a call-back feature on call center phone lines so that people don’t have to wait on hold, improving the mobile phone version of the website, and enabling claimants to upload documents, rather than physically mail them in, according to the department.

The department has also begun a multi-year modernization effort, dubbed EDDNext, aimed at improving customer service for unemployment benefits, paid family leave, and disability insurance, for which the department received $136 million this year. So far, the department has begun designing a new online login that will work for unemployment benefits as well as paid family leave and disability insurance, and designing forms that are easier to read and understand.

If there’s a recession, some workers can’t turn to unemployment benefits. That includes the self-employed, who generally aren’t covered by unemployment benefits, said Jenna Gerry, a senior staff attorney at the National Employment Law Project. The federal government created temporary benefits for self-employed workers and contractors during the pandemic, but that ended in 2021.

Another large group that will find itself without unemployment benefits if a recession hits is undocumented workers – despite a major push from advocates and a bill passed by the Legislature. Under federal law, undocumented workers cannot get traditional unemployment benefits, said Gerry.

This year, worker and immigrant advocates pushed for a new pilot program that would have provided unemployment-like benefits to non-citizen workers – an idea Colorado lawmakers embraced this year. But California legislators did not provide funding for the program in the state budget, said Sasha Feldstein, economic justice policy director for the California Immigrant Policy Center. Curiously, they then passed a bill that laid out how the program would work, but which did not include funding, and Gov. Gavin Newsom vetoed the bill, citing, in part, the absence of “a dedicated funding source.”

An $18 billion dollar problem

Another consequence of a recession could be growing California’s already massive unemployment debt.

The state’s unemployment insurance trust fund ran out of money during the pandemic, after so many laid-off Californians relied on the benefits. The federal government loaned California billions to keep benefits flowing, and the state is still on the hook to pay back about $18 billion.

California’s debt is uniquely large. While many states had to turn to the feds to pay out benefits during the pandemic, at this point only California, New York, Connecticut, Illinois and the Virgin Islands still have debt. California’s debt is roughly double the size of the other four combined.

This is not the first time the system has gone into debt. In the wake of the Great Recession, the debt grew to about $10 billion. California didn’t finish paying it off until the spring of 2018, according to HD Palmer, a spokesperson for the Finance Department, and the state spent about $1.4 billion on interest on the Great Recession era unemployment debt, according to Palmer.

Unemployment benefits are funded by employers, and in order to pay off the current debt, a federal tax on employers will automatically increase by $21 per employee in 2023, and ratchet up by an additional $21 per employee per year until the loan is repaid. This year state lawmakers also decided to kick in $250 million in state funds towards the loan principal and $342.4 million to cover the interest accrued so far.

But if the state goes into a recession, that debt could grow even larger.

“If there is a slowdown in the economy, we are totally and completely unprepared to be able to provide for California workers because of the deficit,” said Rob Lapsley, president of the California Business Roundtable, which represents major employers and has advocated for the state to contribute $10 billion to pay down the loan principal. “There may not be an interest in Congress to bail out California and New York,” Lapsley said.

But it would be unprecedented for the federal government to let a state’s unemployment system run out of money and stop providing benefits, said Gerry, with the National Employment Law Project. “That has never happened in the history of the unemployment insurance program since it was enacted in 1935.”

“I don’t think that there’s a real threat that no benefits will be available,” Gerry said. But having a system that repeatedly goes into debt means that taxpayers get stuck with an avoidable bill. And, Gerry said, “if we had more money in our trust fund, it would be easier to make the case that we could enhance benefits.”

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