California borrowed approximately $20 billion from the federal government to cover unemployment benefits during the pandemic, and with Gov. Gavin Newsom's recent decision to not pay it back, employers are now saddled with the expense, according to experts.
"The state should have taken care of the loans with the COVID money it received from the government in 2021," Marc Joffe, policy analyst at the Cato Institute-a public policy think tank headquartered in Washington, D.C.-told The Epoch Times.
The decision leaves businesses in the state responsible for the loans-as mandated by federal regulations-so the federal unemployment tax rate of.6 percent is set to increase by.3 percent annually, starting in 2023, until the loan is extinguished.
Twenty-two states borrowed money for unemployment insurance from the federal government during the pandemic, with all but four-California, Colorado, Connecticut, and New York-paying back their debts.
California owes the most, by far, with approximately $18.6 billion outstanding as of May 2, followed by New York's $8 billion, Connecticut's $187 million, and Colorado's $77 million, according to U.S. Treasury Department data.
Initially, the state borrowed from its reserves to pay the benefits, but after exhausting its coffers borrowed to cover expenses, analysts said.
"The made a bad decision to not renew its lease for the fraud detection software, the state government took out a loan and chose to welch on the debt-which is outrageous-and now businesses are repaying more in taxes for the incredibly unwise decisions and mistakes of the state government."
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