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California employers could be hit with big tax bill for jobless benefits

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  • California employers could be hit with big tax bill for jobless benefits

    Increased UI taxes should keep employers out of California.

    http://www.latimes.com/news/la-fi-ed...ntent=My+Yahoo

    California's debt to the U.S. for covering its unemployment checks the last two years could reach $13.4 billion by the end of the year. If the loans aren't repaid by November, a payroll tax will kick in. It starts at $325 million next year and could rise to $6 billion.

    California employers could face an annual payroll tax increase of as much as $6 billion if California's unemployment insurance program fails to repay a federal government loan that has kept benefits flowing.

    The warning came in a critical state audit of the California Employment Development Department, which distributed $22.9 billion in unemployment benefits last year.

    The report concludes that for a decade, the EDD "has consistently failed to perform" at a level the U.S. Labor Department "considers acceptable regarding its timely delivery of unemployment benefits," State Auditor Elaine M. Howle wrote in a letter to the governor and legislators.

    The unemployment insurance fund, insolvent since January 2009, relies on federal loans to pay jobless benefits. The debt is expected to hit $13.4 billion by the end of this year unless state lawmakers and the governor agree to raise payroll taxes, cut benefits or do some combination of both. An interest bill of $362 million is due in September.

    By law, the state, which faces a $26-billion general budget deficit, must repay the federal loans to the EDD by November.

    EDD's failure to repay its loans by then would trigger a $325-million federal tax hike next year on employers. That payroll tax bite would rise incrementally to a maximum of about $6 billion if the loan goes unpaid and the state misses interest payments over several years.

    Information about the growing deficit in the agency's funding first arose in 2004, but it hasn't been high on the Legislature's or the governor's priority lists.

    "At this point, we can only deal with one deficit at a time," said Mark Hedlund, a spokesman for state Senate President Pro Tem Darrell Steinberg (D-Sacramento).

    The funding shortfall was caused by an unprecedented demand for benefits by Californians who lost their jobs in the worst economic downturn since the Great Depression of the 1930s. The number of initial claims for benefits received by the EDD grew 148% from July 2007 to June 2010, the auditor said.

    Meanwhile, California's unemployment rate increased to 12.3% in June 2010 from 5.3% three years earlier.

    California's unemployment rate stood at 12.4% in January. February's number, to be released Friday, is expected to be slightly lower.

    EDD, which has been without a director for 15 months, acknowledged that it has faced unparalleled challenges.

    "EDD made tremendous strides in a time of historic demand for unemployment benefits," spokeswoman Loree Levy said. "We've hired more people and put some automation projects in place," principally an upgraded telephone service.

    Not all of EDD's difficulties can be blamed on the recession, said Maurice Emsellem, policy co-director of the National Employment Law Project, which advocates for the rights of low-wage workers.

    "EDD's problems seriously predate the recession, but now the agency is trying to play catch-up in the middle of a devastated economy," he said. "More scrutiny by federal and state officials and maximum transparency is critical to turning the situation around."

    The audit basically agreed with Emsellem.

    "The department has struggled to meet certain core performance measures," the audit said.

    The Labor Department last April classified the state as being "at risk" in its ability to fulfill federal requirements for handling unemployment claims in a timely manner.

    California is one of only five "at risk" states this year. The others are Indiana, Louisiana, Massachusetts and Rhode Island.

    California's situation could become more dire.

    It faces the loss of $839 million in federal stimulus money if it does not meet new legal requirements for calculating benefits for low-wage and part-time workers. EDD said the effort to comply has been hampered by its 30-year-old computer system, which is scheduled to be updated by April 2012, four months ahead of a federal deadline.

    The department's efforts to speed claims processing have been somewhat successful, the audit said. EDD hired and trained 1,000 more workers and authorized more overtime. The number of processed claims rose to 429,000 last June from 173,000 in July 2007, the audit said.

    However, "the results of the department's other efforts to improve its performance have been mixed," the audit said.

    A change in a scheduling system designed to make timely eligibility decisions "appears negligible," the audit said.

    Despite upgrades that increased telephone call volume six-fold, almost 9 in 10 callers could not get through to an agent in the fiscal year ended June 30, 2009, the audit said. That percentage remained high through last May.

    To fix the system, the auditor recommended that EDD develop specific goals and milestones for speeding response times on claims. The upgraded phone system, for instance, should limit the need for callers to speak to agents by providing basic information in automated responses.

    The new system, in fact, began spurring better performance late last year after the auditor had finished its field work, the EDD's Levy said.

    The number of callers failing to get through to live agents or automated information is down more than 90% from a year ago, she said.
    Facts do not cease to exist because they are ignored. -- Aldous Huxley
    Two things are infinite: the universe and human stupidity. -- Albert Einstein

  • #2
    Well, what do you expect when California taxes and regulates businesses right out of the state? If the jobs leave and the people stay, where is the money gonna come from? The working class...that's who. You and me. I have a feeling that step raise I'm getting in a couple months will be eaten up in tax, and then some.
    sigpic
    Originally posted by Smurfette
    Lord have mercy. You're about as slick as the business side of duct tape.
    Originally posted by DAL
    You are without doubt a void surrounded by a sphincter muscle.

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    • #3
      I have given up working. It is too expensive.
      Facts do not cease to exist because they are ignored. -- Aldous Huxley
      Two things are infinite: the universe and human stupidity. -- Albert Einstein

      Comment


      • #4
        post deleted
        Last edited by avalon42; 03-13-2015, 06:00 PM.

        Comment


        • #5
          California seems to be getting scarier month after month..how many more taxes can this state impose? They already have the highest tax rates easily throughout the country..

          Comment


          • #6
            Originally posted by EricDel View Post
            California seems to be getting scarier month after month..how many more taxes can this state impose? They already have the highest tax rates easily throughout the country..
            In fact, several states are much worse. Ones that come to mind are Massachusetts, New York, Connecticut and New Jersey. According to Forbes, however, the top two are Vermont and Hawaii. These rankings are based on total tax receipts per capita, not on highest marginal income tax rates.

            California is heavily dependent on income tax receipts, and gets a disproportionately large amount from people with high incomes because of the high marginal tax rate at upper income levels.
            Facts do not cease to exist because they are ignored. -- Aldous Huxley
            Two things are infinite: the universe and human stupidity. -- Albert Einstein

            Comment


            • #7
              Originally posted by DAL View Post
              In fact, several states are much worse. Ones that come to mind are Massachusetts, New York, Connecticut and New Jersey. According to Forbes, however, the top two are Vermont and Hawaii. These rankings are based on total tax receipts per capita, not on highest marginal income tax rates.

              California is heavily dependent on income tax receipts, and gets a disproportionately large amount from people with high incomes because of the high marginal tax rate at upper income levels.
              I knew NY and NJ were bad would not have guessed Vermont though. I just don't see California ever recovering and prospering again, too much damage. I was set on coming to LAPD but I just read not only did they cut 20% of their salary, now they cut their retirement. California is an awesome state with lots too offer, but I think fewer and fewer people are going to come move there now days, and more will move out
              .

              Comment


              • #8
                Originally posted by EricDel View Post
                I knew NY and NJ were bad would not have guessed Vermont though. I just don't see California ever recovering and prospering again, too much damage. I was set on coming to LAPD but I just read not only did they cut 20% of their salary, now they cut their retirement. California is an awesome state with lots too offer, but I think fewer and fewer people are going to come move there now days, and more will move out
                .
                Now that I am retired, I have moved to Nevada. Why do I want to pay 9.75% of my taxable income to CA? I get very little in return. The highways are so congested that I can't drive where I have to go, and the hospital emergency rooms are unusable.
                Facts do not cease to exist because they are ignored. -- Aldous Huxley
                Two things are infinite: the universe and human stupidity. -- Albert Einstein

                Comment


                • #9
                  Originally posted by DAL View Post
                  Now that I am retired, I have moved to Nevada. Why do I want to pay 9.75% of my taxable income to CA? I get very little in return. The highways are so congested that I can't drive where I have to go, and the hospital emergency rooms are unusable.
                  Very true, looks like you retired at just the right time! How you liking Nevada? I always liked the desert climate.

                  Comment


                  • #10
                    I like it, but I still spend some time in California. Summers in Nevada are too hot. Public services are minimal, but that does not impact me.
                    Facts do not cease to exist because they are ignored. -- Aldous Huxley
                    Two things are infinite: the universe and human stupidity. -- Albert Einstein

                    Comment


                    • #11
                      And whenthe taxes go up even more employers leave the state so unemployment goes up. Vicious Cycle. Wasnt it just 4 years ago that everything was flush? Man we went into the crapper quick.
                      Originally posted by FJDave
                      GM, you have just set the bar that much higher for the rest of us in our witty, sarcastic responses. I yield to you! Good job, kind Sir!

                      District B13
                      "We are not cops nor Feds." yet he still poses as an officer Hmmmm


                      Grant us grace, fearlessly, to contend against evil and to make no peace with oppression.--WWII memorial

                      "I have loved justice and hated iniquity, therefore I die in exile."

                      Pope Gregory V II

                      Comment


                      • #12
                        What we need is for those who receive public assistance to move elsewhere, and employers to move to California. But our economic policies have just the opposite effect. California's long-term debt also means that taxes will be high for those who move here or remain here.
                        Facts do not cease to exist because they are ignored. -- Aldous Huxley
                        Two things are infinite: the universe and human stupidity. -- Albert Einstein

                        Comment


                        • #13
                          Until California stops giving a free ride to illegal aliens and their offspring the state will continue its decline.

                          Comment


                          • #14
                            Originally posted by ten08
                            Californias biggest problem was those Millionaires on the Pers Board sold the pension fund crap so they could drive up the price and sell the same crap out of their portfolios. I have yet to hear about any of them being investigated.
                            There have been several news articles about CalPERS trustees being investigated. They are likely to be prosecuted. http://www.pionline.com/article/2011...YREG/110319936
                            Facts do not cease to exist because they are ignored. -- Aldous Huxley
                            Two things are infinite: the universe and human stupidity. -- Albert Einstein

                            Comment


                            • #15
                              Originally posted by DAL View Post
                              There have been several news articles about CalPERS trustees being investigated. They are likely to be prosecuted. http://www.pionline.com/article/2011...YREG/110319936
                              I wonder if that's correlated with the CalPers and CalSters Chief Investment Officers canceling their Luncheon with the Sacramento Chartered Financial Analyst Society.

                              I have my exit plan folks.

                              If all goes as planned I ship out to basic training in several months for Army Reserves. In the event my job is down sized and I’m left high and dry when I get back I know that right now the Pentagon Credit Union has a comparable job to my level and skill level in Virginia.

                              Basically, I’ll be looking outside CA in the event I lose my current job.
                              _____________
                              "Corruptisima republica plurimae leges."

                              "The more corrupt the state, the more numerous the laws."
                              - Cornelius Tacitus

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