Though some indicators suggested the possibility of a legislative reform proposal being introduced by the Brown administration that would bring California’s Unemployment Insurance (UI) Trust Fund out of insolvency, no deal was reached for the 2013 legislative session.
Discussions had focused on achieving solvency while considering the financial consequences on employers and the economy, creating a solvent fund with a reserve that can withstand future downturns, avoid borrowing and federal tax increases, establish a system that provides a more equitable cost-sharing ratio among employers based on usage of the program and improve the integrity of the program through eligibility reforms.
The Labor and Workforce Development Agency held a series of meetings with stakeholders representing both the business and labor communities to identify alternatives to pay the federal interest, repay the loan and reform the UI financing structure to return the UI Trust Fund to solvency.
Over the past few months, a number of reform proposals were circulated that considered increasing the taxable wage base of each employee and a combination of an increased taxable wage base and an increase in the minimum UI tax rate. However, both scenarios presented earlier this year did little to address fraud, overpayments and benefit eligibility.
For any increases in the taxable wage base or a change in the tax rate to occur, a two-thirds vote of the Assembly and Senate must be reached. With no agreement for the 2013 legislative session, discussions will continue into the fall as business and labor groups seek equitable solutions that will preserve the integrity of the system without saddling the employer community with drastic tax increases.