Thursday, January 6, 2011

California UI Fund Balance update

The California unemployment insurance fund ran out of money in 2009 and the state started borrowing money from the Federal government to pay unemployment insurance claims. Money borrowed was interest free until January 1, 2011 and all money borrowed is due, with interest, on September 30, 2011.


The red line in the chart shows the actual balance, the latest data for October, 2010. The black line is a simple extension of the 2010 experience. If 2011 unemployment claims are similar to 2010, the ending balance on September 30, 2011 will be about -$12 billion.

The state employment development department estimates the interest due on September 20, 2011 will be $362.3 million. Worse, the state is forecasting a worse experience and a fund balance of -$26 billion at the end of 2012. Details here.
Posted by tekewin at 16:44

4 comments:

  1. AnonymousJanuary 7, 2011 at 12:33 AM

    Can Kalifornia print money, too?

    ReplyDelete
  2. Mr SlipperyJanuary 7, 2011 at 5:42 AM

    No, but California did print IOUs when it ran out of money in 2008. The banks accepted them last time, but may not in the future.

    ReplyDelete
  3. AnonymousJanuary 9, 2011 at 12:30 PM

    Thanks for posting. Can CA just keep borrowing more forever, as long as it pays the interest. Seems like another can-kicking opportunity.

    ReplyDelete
  4. Mr SlpperyJanuary 9, 2011 at 12:49 PM

    Well, it is up to the federal government to decide if they will keep lending funds for CA unemployment benefits. If not, something has to give. Either benefits get severely cut (or stopped) or state unemployment insurance goes way up.

    ReplyDelete

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