SJR 15: The federal Unemployment Trust Fund: debt.

WHEREAS, The Federal Unemployment Tax Act levies a payroll tax on employers and provides a credit against this tax for contributions made to certified state unemployment compensation programs. The credit is reduced when a state has a debt to their account in the federal Unemployment Trust Fund for a specified number of years, thus requiring employers to pay more federal unemployment tax, and California’s debt currently exceeds $20 billion; and

WHEREAS, According to the California Business Roundtable, the state’s employers will soon pay a 5.2-percent payroll tax, nearly nine times as much as those in other states that are debt free, plus their state payroll taxes; and

WHEREAS, A January 25, 2021, press release from the Employment Development Department (EDD) confirmed that 9.7 percent of $114 billion distributed in 2020 in unemployment benefits were sent to fraudulent claims. The Employment Development Department also acknowledged that there was another 17 percent of payments that the department was investigating as potentially fraudulent; and

WHEREAS, The total amount of fraud is estimated to be at least $20 billion; and

WHEREAS, In 2021, the EDD estimated that 5 percent of the confirmed fraud was from the state’s Unemployment Insurance Fund; and

WHEREAS, Fraudulent claims can contribute to the insolvency of a state’s account in the federal Unemployment Trust Fund, which means employers in those states may have to pay increased taxes for decades to come as they slowly return the state’s account to solvency, which is not fair to businesses; now, therefore, be it

Resolved by the Senate and the Assembly of the State of California, jointly, That the Legislature urges the United States Congress to enact federal legislation that would ensure that federal unemployment taxes on businesses are not increased due to any debt to the federal Unemployment Trust Fund that was a direct result of a state’s decisions resulting in increased filings, including shutdowns, extensions of shutdowns, or lapses in fraud prevention programs; and be it further

Resolved, That the Secretary of the Senate transmit copies of this resolution to the President and Vice President of the United States, the Speaker of the House of Representatives, the Majority and Minority Leaders of the Senate, each Senator and Representative from California in the Congress of the United States, and to the author for appropriate distribution.