The system, which helps 525,000 jobless Californians, is more than $10 billion in the red. A fix would involve raising employer costs, cutting benefits or both.

By Marc Lifsher, Los Angeles Times
April 19, 2013

SACRAMENTO — A rescue effort is underway for the state’s financially troubled unemployment insurance program, an economic lifeline that currently provides weekly monetary support for 525,000 jobless Californians.

More than $10 billion in the red, the unemployment insurance fund has been spiraling toward bankruptcy in recent years, even as it continues to provide weekly jobless benefits of as much as $450 for job seekers.

Unemployment, as it’s best known, is a primary element of the state’s economic safety net. Funded by employer taxes, it’s been providing jobless benefits since 1935. The assistance, both from the state’s basic 26-week program and a number of federal extensions, has been a big help for the long-term jobless and a boon for businesses where they buy gas, groceries and other staples.

But in recent years, California’s unemployment insurance fund has been hammered by the worst economic hard times since the Great Depression.

Fixing the fund requires some politically difficult, but mathematically straightforward, choices by policymakers: raise employer contributions, cut benefits, or both.

None of those options is popular, but major stakeholders agree that an overhaul is inevitable. So top aides to Gov. Jerry Brown are meeting with business and labor representatives in what some participants say is the most serious effort since the early 2000s to stabilize the system and keep benefits flowing.

“We certainly are going to put forth a full-court effort to make some progress,” said Marty Morgenstern, secretary of the California Labor and Workforce Development Agency. “Everyone we’ve met with so far seems to recognize this is a serious problem…. We’ve got to bring in enough money to pay the benefits, pay off the deficit and have a little rainy-day fund so we don’t fall into this problem again.”

Morgenstern declined to say who’s involved in the early talks, other than to describe them as “the usual suspects.” But people with knowledge of the meetings, who asked not to be identified, said they include the California Chamber of Commerce, the California Grocers Assn., the California Retailers Assn., small-business advocates and the California Labor Federation.

In addition to the state jobless benefits that last for 26 weeks, there are additional benefits paid for by the federal government that kick in for an additional 47 weeks. Those extended federal benefits are being trimmed 17.7% starting April 28.

Any reduction in either program could be a disaster for Jesus Mendiola, 36, of West Covina. Laid off in November when the Hostess Brands Inc. bakery in Los Angeles closed, he said he’s struggling to feed his family.

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