The state has the ability to borrow up to $10 billion as the number of unemployment claims continue to rise, according to the Wall Street Journal. Since the pandemic stalled California’s economy in the middle of march, 3.7 million people have filed for unemployment in California.
There were only enough funds in California’s unemployment trust fund to cover unemployment benefits for two months in a yearlong recession. Over twenty states are in the same position.
California’s lack of preparedness to cover benefits is exemplified by how quickly its unemployment trust fund is being depleted. In February, the trust fund had a balance of $3.1 billion and as of mid-April that balance had dropped to $1.9 billion.
The unemployment trust fund was in the same position during the 2008 financial crash. $11 billion was borrowed from the federal government to replenish California’s unemployment trust fund and the borrowed money was not paid back until 2018. Additionally, the extended tax filing deadline and loss of jobs have led to a decrease in tax revenue, providing further challenges for the state to pay much needed benefits.