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NFIB California Main Street Minute, May 8-12

NFIB California Main Street Minute, May 8-12

May 8, 2023

NFIB California Main Street Minute, May 8-12

Welcome to the May 8-12 edition of the NFIB California Main Street Minute from your NFIB small-business-advocacy team in Sacramento.
The Legislature
  • And so it narrows, and so it speeds. Friday (May 5) was the deadline for policy committees in both the Assembly and Senate to hear and report to the floor nonfiscal bills introduced in their chambers. The race for survival is on. By September 14, the day the Legislature breaks for the rest of the year, winners will be known. Losers will be known much sooner. Check out other upcoming legislative deadlines here.
Will the Budget Revise Tackle the UI Debt?
  • That’s the $434 per employee question.
  • Any day now, Gov. Gavin Newsom will be coming out with his May revise to his proposed 2023-2024 budget that he introduced in January. The Legislature must pass a new state budget no later than midnight June 15.
  • To whatever credit you want to give his administration, it did not hold out false hope that anything serious would be done to lower or eliminate the state’s obligation to the federal government.

“The 2022 Budget Act included $1billion ($250 million federal funds in 2022-23 and $750 million General Fund in 2023-24) to pay down a portion of the state’s approximately $18 billion Unemployment Insurance Trust Fund debt. The Budget [the new one] proposes to withdraw the $750 million one-time General Fund payment in 2023-24.

“Unemployment Insurance Small Business Relief—The Budget proposes to remove the $500 million one-time General Fund commitment made as part of the 2022 Budget Act to offset the anticipated rising federal unemployment insurance tax rates resulting from the Unemployment Insurance Trust Fund insolvency.”

  • This is not to say that not a single dime will be spent on the Trust Fund. Unavoidably, “Unemployment Insurance Trust Fund Loan Interest—$279 million one-time General Fund to pay the annual interest payment on the state’s Unemployment Insurance loan balance.”
  • The governor’s May revisions can be found in the ‘May Revision’ box on this webpage once they are announced.
  • Is all hope lost? Once the governor’s May revisions are announced, the Legislature will set in motion budget trailer bills that either approve, subtract from, or add to the budget items the governor is asking for. It’s at this stage, NFIB, working with such groups as CalTax and the Chamber, will lobby extensively for putting back the $750 million originally proposed to pay down the state’s UI debit and for reinstating the small business relief component.
  • How did we get in this mess? The COVID-19 pandemic whacked every state’s unemployment insurance trust fund, forcing 22 of them, in 2020, to go hat in hand to the federal government for loans to keep their trust funds solvent and – very important to stress – unemployment benefits going to those in need of them.
  • Since that time, however, all but four states have paid their UI loans off. Colorado was so hot to do so, it borrowed $33 million from BofA to be rid of their federal obligation. Not so, California, which, along with Connecticut, Illinois, and New York, still remains in hock to Uncle Sam—to the tune of $18 billion.
  • California exacerbated its COVID-fueled trust fund crisis by having an Employment Development Department (EDD) so rife with incompetency, it was like watching Mr. Magoo drive a Formula 1 race car.
  • “As we fast-forward to the end of the pandemic, we’ve learned that nearly $30 billion paid out of the Unemployment Insurance Fund (UI) by the Employment Development Department (EDD) were fraudulent claims, 70% of which are believed to have been filed by criminal organizations intent on doing harm to the country. It is a monetary and criminal debacle on a scale not seen in the United States,” wrote NFIB California State Director John Kabateck in a guest editorial.
  • Still, the money is owed. Reports the Associated Press, “California could have paid off the debt, or at least a sizeable portion of it, in the past two years when it had a combined general fund budget surplus of $119.4 billion. But state officials didn’t do that … That means businesses will have to pay an additional $21 per employee in federal unemployment insurance taxes this year. That tax will keep increasing by $21 every year over the next decade that the debt is not paid off. [$434 per employee maximum]. It could take at least 10 years for businesses to pay off the debt, according to the nonpartisan Legislative Analyst’s Office.
  • “They had a surplus. So why didn’t they use it?” asked Denise Duncan in the AP story. Duncan is an NFIB California Leadership Council member and owner of AT Industrial Products in Pomona. “We’re getting hit over the head with hammers every time we turn around with increased costs, whether it’s gas doubling, whether it’s insurance and utilities.”
  • No issue better illustrates how little regard Sacramento has for businesses than its lack of any regard at all for the solvency of the unemployment insurance trust fund.
National Highlights from NFIB Legislative Program Manager Caitlin Lanzara’s weekly report
  • NFIB sent a press release highlighting NFIB Manager of Federal Government Relations Josselin Castillo’s op-ed in The Hill. Castillo wrote, “Small business owners are being forced to make tough decisions in response to these skyrocketing costs. The percentage of small businesses offering health insurance has dropped dramatically in the last decade from roughly 40% in 2010 to 30% in 2021. Meanwhile, the businesses that do offer coverage have no choice but to pass rising costs on to their customers. Almost half of small employers (46%) report raising their prices. And half of small employers earn less due to health insurance premium increases over the last five years.”

NFIB’s health insurance survey is cited: “The problem is now exploding into a crisis, according to the latest survey from the National Federation of Independent Business, a stunning 97% of small businesses report that health care costs will become unsustainable for them within the next decade.”

  • On May 8, the Supreme Court agreed to review a case in which NFIB filed a brief, the question: “Whether the Court should overrule Chevron or at least clarify that statutory silence concerning controversial powers expressly but narrowly granted elsewhere in the statute does not constitute an ambiguity requiring deference to the agency.” The underlying dispute pertains to whether the National Marine Fisheries Services can require fishermen to pay for federal monitors on fishing boats. The case name is Loper Bright Enterprises v. Raimondo and you can read NFIB’s initial brief here.

Main Street Minute editor’s add: The massive Supreme Court case you’ve probably never heard of.

  • As of May 5, the Court has not announced its next opinion release day. Oral arguments concluded for the 2022-2023 term on April 26th. Decisions for cases heard between October 3 and April 26 (including Sackett v. EPA), will be released by the end of June. The Court has been extremely slow to issue decisions this term, as NBC legal analyst Lawrence Hurley writes about here.
  • If you missed Wednesday’s webinar on wage and hour issues, with attorney Scott Horton, you can listen to the recording and download Scott’s slides here.
Next Main Street Minute May 15.
Photo snip courtesy of the California State Senate website
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