California received a loan from the federal government of 20.5 billion dollars to pay for unemployment benefits. The California Legislative Analyst’s Office (LAO) issued a report on May 26th which showed the amount the state of California received from the federal government. California was one of seventeen states to receive loans from the federal government and received the most money. The federal government doled out over $51 billion in these loans and California received 40 percent of the money. The second state was New York, which only received $9 billion.
In November, multiple District Attorneys across the state of California exposed the fraud going on with unemployment benefits when it was revealed that prisoners were receiving unemployment benefits calling it, “the biggest fraud on taxpayers in California history.” The California EDD admitted to having paid almost $31 billion to criminals in EDD benefits. Many people who were eligible for benefits had their applications put on hold or did not receive their benefits until weeks after approval.
The LAO explained how the state of California will pay back the loan:
“To illustrate state and employer costs to repay the federal UI loans, our office produced a low-cost and a high-cost forecast of the state’s UI system based on different underlying economic scenarios. Under the low-cost scenario, employment quickly returns to pre-pandemic levels and interest rates remain historically low for the entire period. In this scenario, the state’s unemployment rate settles at a low 4.5 percent and the federal interest rates on UI loans averages 2.5 percent for the repayment period. Under the high-cost scenario, the state’s economic recovery is delayed several years, with unemployment remaining above 6 percent until 2025, and interest rates paid on the UI loans increase gradually to 4.5 percent after the recovery has taken hold.”
The LAO explains that it will take many years to repay the loan under any scenario and that they will use other federal grants, such as the 1.1 billion dollars from the American Rescue Plan Act funds to pay back the loan.