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Many a California injured worker finds him or herself depending on unemployment at some point after the injury. Frequently this occurs when a worker is laid off after an injury. The worker may be unable to prove that the layoff was discriminatory (under Labor Code 132a or FEHA), and draws unemployment benefits as an alternative.

So it’s disturbing to see how far into the red California’s unemployment insurance fund has fallen.

Current projections are that the unemployment insurance fund will be $7.4 billion in the red by the end of 2009. The Federal government has already loaned $4.7 billion to California, a loan that is to be paid back by 2011.

You can add that to the list of nightmare scenarios in the financial train wreck we call the State of California. Current projections are that the legislature must deal with a $20.7 billion dollar shortfall in the 2010 budget cycle.

Do you realize how huge that is? California higher education funding in the 2009-2010 budget is $10.5 billion. Corrections (you know them as prisons) amount to $8.2 billion in the current California budget.Health and human services funding is $24.9 billion.

To balance the budget without revenue increases all higher education and prisons could be closed and we’d be almost there! Wahoo!

Or we could eliminate ALL state health and human services funding
and we’d be there, with a little money to spare! Yippee!

But back to the California unemployment insurance fund.

Possible solutions to the unemployment insurance fund shortfall are very few. They boil down to either cutting UI benefits or raising employer contributions, or both. One approach could be to raise the threshold on a worker’s pay on which the employer pays UI premiums (currently UI is based on the first $7,000 of a worker’s pay, which is lower than the portion on which some states base their UI assessments on employers).

Perhaps a “second stimulus” could include funds to help California and the other 24 states that are in arrears on their UI programs, but it’s not clear that there is the political will to pass more stimulus. Some liberal Democratic pundits, including Princeton’s Nobel prize winning economics prof Paul Krugman, are angry that the Obama administration is not fighting for more stimulus:
http://www.nytimes.com/2009/11/23/opini … amp;st=cse

Others counter that the U.S is on the verge of foundering on a sea of debt that we will be increasingly unable to service. They cite a falling dollar and a rush to gold in world markets as signs that our economy
lacks stability. Here’s “Wave of Debt Repayments Facing U.S. Government” by Edmund Andrews:
http://www.nytimes.com/2009/11/23/busin … amp;st=cse

All of this makes it difficult for Uncle Sam to keep coming to the rescue of our once Golden State.

This is the kind of issue that has the potential to affect workers’ comp in other ways, as well. The issue is so critical to labor interests and employers that it represents another bargaining chip-along with comp-in the legislative agendas. In a recent encounter with a seasoned insurance industry observer, I was advised to keep my eye on the UI fund issue.

Stay tuned.

Julius Young

Category: Political developments

Julius Young

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