California Dilemma: Cut Unemployment or Raise Taxes
SAN FRANCISCO (KCBS) - So many Californians are collecting unemployment that the state's unemployment insurance fund is billions of dollars in the red.
The more than $11 billion California now pays out annually in jobless benefits means Sacramento will either have to cut benefits or raise taxes to address what will soon be a $20 billion deficit, according to a report issued Wednesday by the state legislative analyst.
"If you make the tax increases, you're raising the cost of employing people in California. That's not a great thing to do when you're trying to grow the economy and get more jobs. On the other hand, if you reduce benefits, you're taking money away from unemployed workers," director of social services at the Legislative Analyst's Office.
KCBS' Doug Sovern Reports:
The state collects only about $4.5 billion in payroll taxes from employers, with the balance paid for by a loan from the federal government.
That means a $6 billion deficit in the state fund in 2009 will reach $15 billion by the end of 2010. The shortfall could balloon to $20 billion in 2011 once the state starts paying $500 million of interest to Washington.
Some 2 million Californians now collect jobless benefits. The state's unemployment rate remains above 12 percent despite modest drops nationwide in new applications for unemployment.
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