Could California Step Up To Replace Expiring Federal Unemployment Benefits?

A sign reading "Gone Fishing" is pictured on the window of a closed barber shop in Santa Monica on July 28, 2020. Many business owners and workers are relying on unemployment insurance as shops remain closed. (Valerie Macon/AFP via Getty Images)

Our news is free on LAist. To make sure you get our coverage: Sign up for our daily coronavirus newsletter. To support our nonprofit public service journalism: Donate now.

California lawmakers say if Congress does not renew federal unemployment benefits that are now expiring, the state could step in to fill the gap.

That extra $600 per week in unemployment benefits is thanks to federal legislation passed early in the coronavirus pandemic. Losing it would have massive ripple effects.

Millions of Californians have been getting those benefits. An unprecedented 8.7 million unemployment claims have been filed in California since the pandemic began.

And those federal payments have now pumped more than $26 billion into California's unemployment system. But the extra $600 is now expiring, and so far Congress hasn't come up with a plan to extend it.

STATE BENEFITS DON'T COVER CALIFORNIA'S HIGH COST OF LIVING

Without that federal money, Californians would receive a median weekly payment of just $339 in state unemployment insurance, according to a recent analysis from researchers with the California Policy Lab.

UCLA economist Till von Wachter, one of the researchers, said that without the federal $600 boost:

"About half of Californians would have weekly benefits that put them below the federal poverty line."

Congress is split on extending the federal benefits. Democrats in the House of Representatives have passed a bill that would maintain the $600 weekly benefit. But Republicans want to reduce the payments to $200 per week, arguing higher payments discourage people from going back to work.

Sacramento lawmakers — worried about the high cost of living in a state where many people were barely hanging on prior to the pandemic — say that if the federal benefits are eliminated or greatly reduced it could be catastrophic. They're now considering a plan to replace those benefits with state funds.

COULD THE STATE FILL THE VOID?

A group of state lawmakers tasked with developing California's economic stimulus plan has proposed taking action to make up for "shortfalls resulting from if the federal government does not extend the $600 per week payment."

California Assemblyman Phil Ting said without that help, cash-strapped Californians could end up facing eviction.

"At a time when we're telling everyone to stay at home, we want to make sure they have the ability to stay at home rather than be out on the street," Ting said.

Ting said the proposal is in nascent stages, but it would likely involve borrowing money from the federal government and paying it back with increased taxes on employers down the line.

"If we need to make up that difference so that people can stay in their homes, I think it'd be an investment that would be well spent," he said.

California has borrowed money from the federal government in the past when unemployment payments have gone up. It took the state more than seven years to repay the debts racked up during Great Recession.

Attorney Michael Bernick — a former director of the state department that runs California's unemployment office — said raising payroll taxes during a time of such great economic uncertainty could hurt the state's chances at economic recovery.

"Increasing payroll taxes on employers is probably the last thing we need now," Bernick said. "It's a disincentive to hire people. And what we need are incentives to hire people."

For now, nothing is set in stone. Before introducing any legislation, California lawmakers are waiting to see if Congress reaches a compromise to extend the federal benefits.