Gavin Newsom Has Run California’s Unemployment Program Into The Ground

With the highest unemployment rate in the United States, it’s no wonder why California’s unemployment insurance program is in shambles. And with the types of policies Gov. Gavin Newsom has enforced over the past few years, it’s no wonder why it’s showing no signs of improving anytime soon. Here’s what Californians need to know!

California’s Unemployment Insurance Trust Is Empty

According to the Colorado Springs Gazette, the state’s unemployment insurance fund has been ‘structurally insolvent’ for quite some time now – which the outlet credited to ‘$55 billion in fraud and overpayment during COVID-19 crisis.’

California currently has a $21 billion loan with the federal government, a number that continues to rise monthly. The state has already paid more than $650 million in interest, and they’re expected to pay another $550 million later this year.

Newsom’s Program Promises Way Too Much

So, why is Gov. Newsom’s unemployment insurance program failing? Well, for starters, it is one of the most generous programs in the country, with most applicants receiving just under $400 per week – which is higher than the national average.

Not only that, but Californians generally receive those benefits for several weeks longer compared to other states. Even then, it’s usually not enough because of how expensive California is – whether you have a quality job or not.

COVID-19 Brought Influx Of Unemployment Claims

California’s unemployment program usually costs more than it generates, which is a recipe for failure in its own right. Couple that with the sudden influx of unemployment claims as a result of the COVID-19 pandemic, and you can see why the trust is empty.

According to the Employment Development Department, California has seen more than 31.5 million new unemployment claims since March 2020 and has paid more than $194 billion to applicants. Unfortunately, things aren’t getting any better for the state.

Federal Government Stepped In To Help

California wasn’t alone. With unemployment claims rising across the nation, the government stepped in and provided some much-needed relief. For example, the federal government introduced low-interest loans during COVID-19 to help keep programs solvent.

The federal government also issued grants as part of the American Rescue Plan, which many states were using to pay off the low-interest loans for the unemployment crisis. Well, that’s what the smart states were doing, anyway.

Gov. Newsom Decides To Go A Different Route

Unfortunately for Californians, their state wasn’t one of those smart states. Instead of using the federal grants to pay off the federal loans, Gov. Newsom decided to use that money for something else – additional stimulus checks to residents.

Just like that, more than 23 million Californians received up to $1,050 in an effort to help residents overcome rising inflation rates and lack of work opportunities. The stimulus checks started rolling out in October 2022.

Now California Is In A Difficult Spot

At the time, residents were ecstatic at the extra money and it certainly helped provide temporary relief to families in need. In hindsight, the stimulus checks hurt the economy, increased inflation in the state, and put the state in even more debt than it already was.

Now, California is finding itself in a more difficult spot than necessary – especially when you consider how much higher interest rates are today. Interest rates were as low as 1.6% during the pandemic, but are now as high as 2.6%.

Unemployment Insurance Tax Could Triple

Gov. Newsom will have some difficult decisions to make if he wants to minimize the damage moving forward. While it’s certainly possible, some experts suggest that the state might have to triple its unemployment insurance tax.

As of right now, California’s unemployment insurance tax is 1.2% on the first $7,000 of wages. Experts think they’ll need to increase that percentage to 3.5% to make a difference – and even that might not be enough.

California Is Already An Expensive Place To Live

It’s no secret that the cost of living in California is far higher than in any other state – except Hawai’i. According to MERIC data, the cost of living in CA is more than $53,000 per year, or $4,400 per month – and that’s just to live.

Unfortunately, that will likely get worse if the unemployment insurance tax triples, as expected. More people are going to lose their jobs, businesses are going to have to raise prices, and Californians will be left to suffer.

Another Failure For Gavin Newsom

The unemployment program is yet another failure for Gov. Newsom, who has made a series of questionable and sometimes controversial decisions for his state over the past few years – including a high-speed train to nowhere and failing homeless housing programs.

This all comes after a statewide recall election that threatened to remove Newsom from office. Nearly 13 million registered voters turned out, and nearly eight million of them voted to keep Newsom in office – yet this is what Californians are getting as a result.

A $135 Billion High-Speed Train To Nowhere

In 2008, Californians were promised a high-speed train connecting San Francisco to Los Angeles. The project was supposed to be completed by 2020 and was expected to cost around $33 billion. It’s now 2024 – and it’s nowhere close to being finished.

In fact, not a single mile of track has been installed and they’ve already spent more than $12 billion of that $33 billion budget. They expect a small track between Merced and Bakersfield to be done by 2033 – and the overall project will cost about $100 billion more than expected.

President Biden Pledges $6 Billion To Help

As of right now, the rail authority has about $28 billion on hand – but the Merced-Bakersfield track is expected to cost $35 billion. In order to finish that part of the project, President Joe Biden has pledged $6 billion in relief.

Of course, that still leaves more than $100 billion left to pay – and most of that amount will be left for the taxpayers. With that said, it could be another several decades before Californians have their LA-SF high-speed train.

Homeless Housing Programs That Make Problem Worse

In addition to the unemployment insurance crisis and high-speed train to nowhere, Gov. Newsom has also done a poor job of curbing the state’s homelessness crisis – which is currently the worst in the nation.

In fact, a state auditor recently blasted state officials for spending more than $24 billion on homeless housing programs between 2018 and 2023, yet having no way of tracking whether or not those funds actually helped curb the crisis.