California’s unemployment insurance fund is facing structural insolvency, according to a report from the state’s Legislative Analyst’s Office. The debt to the federal government has reached $20 billion and regular tax collections, sourced from employers, often fail to cover the cost of benefits. This persistent issue was not caused by unemployment insurance fraud, but worsened by unprecedented levels of unemployment following the outbreak of the COVID-19 pandemic. If not addressed soon, the state will be forced to continue borrowing from the federal government, contributing to further taxpayer and business expense. Repeated questions regarding plans of action have largely gone unanswered by key state lawmakers. Suggestions for rectifying the problems include boosting the system’s tax revenue and diminishing losses. However, with California’s maximum weekly unemployment insurance benefit stagnating for years, some argue for more generosity in payments. Business groups such as the California Center for Jobs and the Economy and the California Chamber of Commerce agree on the need for reform but oppose increased taxation on employers. Proposed reforms include expanding eligibility criteria, raising the maximum weekly benefit amount, and making changes based on changes in a company’s workforce numbers.

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