Published: Thursday, Oct. 21, 2010 – 12:00 am | Page 4A

As Capitol politicians struggle with the state budget crisis, they’ve largely ignored California’s other big deficit, which in another year will be as large as the gap in the state budget.

The Legislature’s budget analyst reported Wednesday that the deficit in the recession-battered Unemployment Insurance Fund “is projected to increase to approximately $20 billion at the end of 2011.”

With nearly 2.5 million California workers jobless, the fund is paying out more than $11 billion a year in benefits while collecting just $4.5 billion in payroll taxes paid by employers, Legislative Analyst Mac Taylor reported. It dropped into deficit mode in January 2009 and has been sustained since then by loans from the federal government, Taylor said.

The loans have been interest-free, but the state, under current federal law, must begin paying interest next year – $500 million in September 2011 and “growing interest obligations in the out years.”

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