California’s other $20 billion budget deficit

The California budget deficit meets the unemployment insurance deficit

Unbelievably, California is not only facing a $20 billion deficit for the 2010-2011 budget, the state Employment Development Department just forecasted a $20 billion deficit in the Unemployment Insurance Fund by the end of 2011, up from $6.2 billion in 2009.

The official unemployment rate for California (PDF) is a steep 11.9%, with Imperial County at a depression-like 27.5%. Remember, these are the official rates, and don’t count those who are no longer counted or the under-employed. California has been borrowing from the federal government since Jan. 2009 to pay UI benefits. Interest on the loans begins accruing in Jan. 2011 and must be paid by Sept. 2011 according to the EDD May 2010 UI Fund Forecast (PDF). California is expected to pay out $11.4 billion in UI benefits in 2010, yet contributions from employers, their primary source of income in normal times, is just $4.4 billion,

Who could have ever conceived that high unemployment and obligations that vastly exceed income could ever lead to a gaping unemployment insurance budget deficit?

It seems the State of California consistently produces overly optimistic budgets and financial projections that then need to be revised downward, often sharply. This is no way to run a government.

This happens with California budget estimates and with CalPERS pension funding estimates too. Reality doesn’t seem to intrude in their calculations. Is this accidental, wishful thinking, or deliberate? Inquiring minds want to know.


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