California's unemployment insurance trust fund is $8.5 billion in the red - and state officials are calling for changes to the system.
The state is able to continue to pay benefits thanks to a federal loan.
But starting in September, California will have to start paying hundreds of millions of dollars in interest on that loan.
Loree Levy is with the Employment Development Department. She said the fund is chronically imbalanced and the deficit keeps growing.
"11.1 billion by the end of 2011. We forecast a deficit of 12.7 billion by the end of 2012 if we still have no solution. So it's a situation that can no longer recover on its own, no matter how strong the economy rebounds."
The first interest payment will be about $320 million.
She also said there have been unsuccessful proposals recently to both increase the amount of money that employers put into the system and decrease benefits.
