Federal unemployment insurance surcharge looming
California has borrowed $11 billion from the federal government to prop up its insolvent unemployment insurance fund. Thirty-four states have borrowed $39 billion to pay unemployment benefits that have mounted during the worst downturn since the Great Depression of the 1930s.
Absent action by the federal government by January, California employers will be hit with a mandatory surcharge of about $25 per employee to begin paying down the principle on the federal loan. Federal loans are available when states run short of tax money to pay benefits. The federal government automatically raises employers’ tax rates if states can’t repay. A 0.3 percent hike, being described as a surcharge, will take effect in January. President Obama has proposed a compromise: The federal government would grant a two-year suspension of the state interest payments on the loan and employer tax surcharges.
It is unclear whether Washington lawmakers will approve another extension before January. If they don’t the federal government’s unemployment insurance surcharge will kick in Jan. 1