It’s doubtful whether more than a relative handful of Californians have heard of the Unemployment Insurance Fund. It is, however, one of state government’s largest activities – and a case study in political mismanagement. Currently, California employers pay about $6 billion in payroll taxes into the UIF each year. And currently, the state Employment Development Department annually pays almost that much to jobless workers. Superficially, that would appear to be a sustainable equation, but in reality, it’s not. During periods of high payrolls and low unemployment, such as this one, the UIF should be building reserves that could cope with an economic downturn, when claims for jobless benefits increase. That’s the way it used to work – until political expediency and recession undid it.
California’s Unemployment Insurance Fund is projected to have a positive balance by the end of 2018, marking the first time since 2008 that the employer-funded account will end in the black, the California Employment Development Department (EDD) reported October 31. California in 2009 began borrowing from the federal government to pay unemployment benefits, and in 2012 the debt triggered a reduction in California employers’ Federal Unemployment Tax Act (FUTA) credit. The FUTA credit reduction has carried over every year since then, costing employers approximately $9.5 billion in additional tax from 2012 through 2018 (as projected by the EDD).
The package, which also includes some extra automotive fees, is expected to raise more than $5 billion a year for transportation projects, most of which are aimed at catching up on long-delayed maintenance work.
That’s one of the tricky aspects of the situation. To build public support, backers of the package hinted—but did not promise—that it would do something about the state’s worst-in-the-nation roadway congestion, but in fact it will do little, if anything, to relieve traffic jams.
Most of the proposed improvements won’t be obvious, like expanding a freeway would be, and motorists may wonder whether they are getting something tangible for the extra money they are paying.
Medicaid pays for elderly and disabled individuals who need support with activities of daily living to receive support at home from a caregiver. But California and 10 other states deduct union dues from caregivers’ Medicaid payments, in many cases without the knowledge or approval of patients and their caregivers. Given the fact that many caregivers work in their own homes caring for loved ones and relatives, unions typically have little role to play in exchange for the dues they collect.
California no longer should give specific tax incentives to businesses and instead should provide broad-based tax relief, the state's nonpartisan Legislative Analyst's Office said in a new report.
The analyst's office examined California Competes, a program that began four years ago to give tax credits to businesses looking to move to the state or remain here, and found it puts existing companies that don't receive the awards at a disadvantage without clear benefits to the overall economy.
"Picking winners and losers inevitably leads to problems. In the case of California Competes, we are struck by how awarding benefits to a select group of businesses harms their competitors in California," the report said. "We also think the resources consumed by the program are not as focused as they should be on winning economic development competitions with other states to attract major employers that sell to customers around the country and the world."