Sacramento — Gov. Arnold Schwarzenegger moved Friday to bolster the financial health of California's nearly broke fund that pays unemployment benefits to the state's jobless.
The governor added the state's unemployment insurance fund to a growing to-do list for fixing California's faltering finances that he hopes lawmakers will tackle when he calls a special session of the Legislature next week.
With joblessness at a 12-year high and the economy falling into a recession, the 73-year-old Depression-era program soon will be in the red. The insurance fund, which is financed by taxes paid by employers, is projected to post a $1-billion deficit by the end of March.
If lawmakers and the governor don't come up with a solution, the fund will be in the hole by $2.4 billion at the end of 2009 and $4.9 billion at the end of 2010, according to a new forecast from the California Employment Development Department. The latest estimate is half again as bad as what the EDD projected as recently as May.
The growing deficits won't affect payments to out-of-work people. They're guaranteed by federal law, state labor officials say. But a shortfall would force the state to borrow money from Washington and run up interest charges estimated at $20 million in September 2009 and $133 million more in September 2010.
"Our current economic slowdown has led to unemployment rates in California much higher than economists had predicted," Schwarzenegger said, "and that has put an additional strain on our unemployment insurance system."
The fund's finances have been out of whack for at least the last two decades, the governor said. Sources of revenue -- mainly a tax based on a worker's first $7,000 of annual wages -- haven't been revised since 1984.
California's $7,000 threshold is the minimum amount allowed by federal law and is less than what's collected by 44 other states, the District of Columbia and the U.S. Virgin Islands.
Benefits were last hiked to a maximum of $450 a week in 2002. Generally, the unemployed are eligible for 26 weeks of benefits. However, some of the current jobless have received a 13-week extension, and Congress now is considering granting a second extension.
Schwarzenegger next week is expected to call a postelection, lame-duck Legislature into special session to deal with a $10-billion-plus budget deficit, a home foreclosure crisis and growing unemployment.
