NFIB asks: Is California’s Unemployment Insurance Trust Fund now open to everyone?

According to a statement from the National Federation of Independent Business, “SB 799 would appear to make it no longer the lifeline for the unintentionally unemployed.”

With the clock ticking toward the Sept. 14 adjournment date for the session, the legislature yesterday brought forth Senate Bill 799, which started its legislative life as something else but was gutted and amended to now extend unemployment benefits to workers who voluntarily leave their jobs. And the tab for it all will hit small businesses the hardest.

“The business community was expecting this to happen, so it wasn’t a complete surprise,” said John Kabateck, California state director for the National Federation of Independent Business, the nation’s largest small business association. “The most important thing everyone needs to know is the state’s unemployment insurance trust fund is fast approaching insolvency, and with it the ability to pay current unemployment benefits. This is due mainly to the state consciously refusing to use some of the money it received from the federal government to pay down or back the loans it took out from the feds to shore up its trust fund, which 22 of 24 states that also needed to borrow UI money wisely did. Also, the sieve-like nature of the Employment Development Department’s handling of benefits during the pandemic made it ripe for historic levels of fraud and abuse.

“The UI system was set up to help workers who lost their jobs through no fault of their own get through a brief period of unemployment, and now the legislature wants to add to the rolls workers who voluntarily quit their jobs to go out on strike and pay them from a fund that is going bankrupt.”

December UI surprise?
“California has no shortage of debt now,” according to CalMatters. “The state treasurer’s office says that as of July 1, the state was on the hook for $121 billion in principal and interest on bonds it already has issued. That doesn’t count the $18 billion owed to the feds for unemployment insurance, the $82 billion in unfunded liabilities for state employee health care or at least that much in unfunded liabilities for state worker pension obligations.

“One of those strategies [for dealing with the debt] emulates the federal government’s chronic addiction to borrowing money to cover operating deficits. The 2023-24 budget includes several examples, including directly tapping the state’s special funds for loans and indirectly borrowing from employers by forcing them to repay the state’s $18 billion debt to the federal government for unemployment insurance benefits during the COVID-19 pandemic.”

According to the state’s Employment Development Department, “UI is paid by the employer. Tax-rated employers pay a percentage on the first $7,000 in wages paid to each employee in a calendar year. The UI rate schedule and amount of taxable wages are determined annually. New employers pay 3.4 percent (.034) for a period of two to three years. We notify employers of their new rate each December. The maximum tax is $434 per employee per year (calculated at the highest UI tax rate of 6.2 percent x $7,000.).”

So, what awaits small business owners come this December?
According to a report by the state legislative Analyst’s Office, “To repay the federal loans, the federal UI payroll tax rate on employers will increase by 0.3 percent for tax year 2022. However, employers will not pay this higher rate until 2023 when employers remit their 2022 federal UI payroll taxes.”

The chart provided in the report pegs the 2023 UI payroll tax at $316 per employee per year: $253 for the state UI payroll tax; $42 for the base federal UI payroll tax; and $21 for a federal UI payroll tax add-on. By 2031, LAO estimates both the state and base UI payroll taxes to remain the same, but the federal UI add-on to rise to $189 for a total of $484 per employee per year – if nothing until then is done about reducing California’s federal UI loans.

When the pandemic surprised the nation, it was understandable California was one of 22 states and the Virgin Islands that needed to borrow from the federal government to keep its unemployment insurance trust fund solvent and benefits going to those in need. What is not understandable is why it remains one of only two states (New York, the other) that has not paid its UI loans back, unless, of course, it just doesn’t care about small business.

About the National Federation of Independent Business
For 80 years, NFIB has been advocating on behalf of America’s small and independent business owners, both in Washington, D.C., and in all 50 state capitals. NFIB is a nonprofit, nonpartisan, and member-driven association. Since its founding in 1943, NFIB has been exclusively dedicated to small and independent businesses and remains so today. For more information, visit