GOP opposes raising taxes to pay unemployment insurance debt

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(The Center Square) – In the days after California Senate Republicans signed a resolution opposing raising taxes on businesses to pay off more than $20 billion of COVID-era unemployment insurance debt, Sen. Roger Niello, R-Fair Oaks, spoke out about the state’s outstanding debt.

“There have been a couple of budget cycles where the governor budgeted maybe a few hundred million dollars for that debt,” Niello, who was one of the resolution’s co-authors, said. “That doesn’t amount to a drop in the bucket. So that creates a huge burden on businesses, frankly, on smaller businesses."

Since that debt grows with every year that passes, Niello said, the debt ends up costing the state’s businesses and their employees more and more money.

“That debt has got to be paid,” Niello said. “California is the only state in the union that took on this debt during the pandemic shutdown and didn’t pay it back. We probably have to get creative because it’s such a large number, and it’s going to take a number of years.”

Senate Joint Resolution 15, which every Republican senator signed on to as a co-author, asks Congress to pass federal legislation to prevent an increase of federal unemployment taxes on businesses.

A May 2025 report from the California Employment Development Department shows that California initially took on $17.5 billion of unemployment insurance money through the federal Coronavirus Aid, Relief and Economic Security, or CARES Act of 2020, to help the state’s increasing number of unemployed residents who lost work at the beginning of the COVID-19 pandemic.

That initial $17.5 billion grew to a $20.5 billion loan balance by the end of 2023, which ballooned to $21.6 billion by the end of 2024, the Employment Development Department report shows.

According to research from Stanford University’s Institute on Economic Policy Research, California has the highest unemployment insurance debt, per capita, in the country. The debt ultimately imposes higher costs on small businesses and low-wage workers, that research shows, which also slows hiring and undermines state lawmakers’ efforts to craft a responsible state budget.

A 2024 report from the Legislative Analyst’s Office says the state’s unemployment insurance financing system is broken, mostly due to tax revenue not being enough to pay for the costs of unemployment insurance. Deficits resulting from the state’s unemployment insurance are projected to be $2 billion a year between 2022 and 2027, according to the report.

The Center Square called or emailed 19 state senators or Assembly members on both sides of the aisle on Friday to ask questions about the state’s unemployment insurance debt and any efforts to pay off that debt. Eighteen did not respond before press time.

Assemblymember Natasha Johnson, R-Corona, declined an interview through her chief of staff.

The California Chamber of Commerce, which has previously spoken out against unemployment insurance debt, declined to make anyone at the organization available to answer questions on Friday. Representatives from other groups that can speak to unemployment insurance debt, including California Business Roundtable, the National Employment Law Project, Kabateck Strategies, the Stanford University Institute for Economic Policy Research and The Century Foundation, did not respond to The Center Square. The Legislative Analyst’s Office also did not respond.