August 24, 2023
Is California’s UI Trust Fund Now Open to Everyone?
December UI Surprise?
- “California has no shortage of debt now. 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,” reports CalMatters.
- “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 (EDD), “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? As reported in the June 19-23 edition of the Main Street Minute:
— According to a report by the state Legislative Analyst’s Office (LAO), “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.

NFIB is a member-driven organization advocating on behalf of small and independent businesses nationwide.
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