Prop Zero
The Starting Point for Commentary and Coverage of California Politics

Another State Deficit, Growing By $40 Million a Day

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If only the state budget deficit were the only deficit facing the state. But the deficit in the state's unemployment insurance fund is roughly as large as the budget deficit.

And it's growing at a rate of $40 million a day. The state is covering those costs by borrowing.

Why? The state is paying more in benefits to more people than it takes in in taxes and fees for unemployment insurance. Change is necessary -- either by paying out less or taxing more -- but politically impossible. Yep, sounds just like the budget deficit.

And the two deficits are related. The state is borrowing from the federal government to cover the cost of unemployment benefits. That money has to be paid back, and payments are beginning to come due. And guess what? The money spent paying back the feds comes out of other budget items.

The Los Angeles Times explains how this works in an excellent story here.

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