California is defaulting on its COVID-19 pandemic federal unemployment insurance loans, and California employers will bear the cost of the default.
California was one of twenty-two states that received federal unemployment insurance loans to cover claims during the COVID-19 pandemic. Four states, including California, have not yet repaid the debt. As of the beginning of 2023, California owed nearly two-thirds of the outstanding nearly $30 billion federal unemployment insurance debt.
When such federal unemployment insurance loans go unpaid, the federal government raises the unemployment insurance tax rate on each business within the state. Thus, it is California employers that will bear the cost of the state’s default.
The California Legislative Analyst Office details the payroll tax increase and repayment of the federal unemployment insurance loans here.
