Opinion: California had a $97.5 billion surplus – why are employers being forced to pay off the state’s defaulted loans?
California business owners received an unpleasant surprise in filing their taxes this year — the state of California has defaulted on its $18.5 billion federal unemployment insurance loans, and as a result, every employer in California is being forced to pay additional federal taxes to make up the difference until the loan is repaid in full.
Even more baffling is the fact that last year California declared a historic $97.5 billion budget surplus after passing a $300 billion budget in May. That budget surplus was enough money to repay the federal government loan more than five times over.
When a state fails to repay federal unemployment insurance loans it takes from the Federal Unemployment Trust for two or more consecutive years as California has done, the FUTA credit is reduced for that state, meaning every businesses in the state is forced to pay progressively more in FUTA taxes for each year the state remains delinquent on its loans.
Small and large companies in California alike are already reeling from economic instability, high interest rates, and skyrocketing inflation. They’re also still struggling with supply chain fluctuations and recovering from one of the longest state-mandated COVID-19 economic shutdowns in the country. Forcing a higher tax burden on our employers as a result of California’s gross fiscal mismanagement will undermine job creation and drive prices even higher.
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