A powerful California union and Democratic lawmakers are pushing a bill to pay unemployment to striking workers, at a time when the state’s unemployment insurance fund is nearly $20 billion in the red.
The proposal, which will likely be introduced this week, could cost the state millions annually and add to the unemployment fund’s already heavy debt burden that is forecast to stretch through the next decade. California’s businesses would be on the hook for most of these costs, as they have been tasked with replenishing the bankrupt unemployment coffers.
The push to pass this legislation is infuriating business owners, who learned this year they will have to make up the unemployment fund’s $18 billion shortfall through higher payroll taxes—a deficit that resulted from the state losing $32 billion in unemployment payments to fraud during the COVID-19 pandemic. Many California business owners are still recovering after the state’s pandemic shutdowns, which led to nearly 40,000 small businesses closing down in the first several months of 2020.
"Adding more costs to an insolvent system will extend the [payroll] tax increases already underway from COVID-19," said Robert Moutrie, a lobbyist for the California Chamber of Commerce, which is spearheading opposition to the proposal. "These tax increases will hit all California employers—regardless of size—serving as a deterrent to hiring and future investment in the California economy."
A fiscal analysis of a 2019 version of the same proposal, which did not pass, estimated that the bill could cost up to $6 million annually. But business groups warn that the price tag could be far higher.
The high-profile strike in Hollywood, where more than 150,000 screenwriters and actors have been facing off against film studios for months, offers one example of the walk-offs California businesses would have to subsidize if the proposal becomes law.
"If we assume that 100,000 of the more than 150,000 members on strike as part of the [Hollywood effort] claim benefits for just two months, we’re still looking at a drain of the fund by $150 million by our estimates," Moutrie told the Washington Free Beacon. "Those costs are going to add to the unemployment insurance fund debt and increase taxes for employers all across California, even those with no involvement in any strikes."
The labor-friendly Democratic supermajority will likely pass the measure and leave Gov. Gavin Newsom (D.) with the final say. Newsom vetoed a previous version of the bill in 2020. Newsom said at the time the bill would force the state to borrow significantly from the federal government to pad the unemployment insurance fund and further pressure a budget "strained because of the pandemic."
A representative for the bill's author, Sen. Anthony Portantino, referred the Free Beacon to the prior version of the bill for details and a cost analysis. Its primary backer is one of the most powerful union heads, California Labor Federation chief Lorena Gonzalez Fletcher, who as a former assemblywoman authored the 2019 version of the proposal.