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Economy

Unemployment Fund: Insolvent, Interest Coming Due

Unemployment Fund: Insolvent, Interest Coming Due
California’s unemployment insurance trust fund is eight-and-a-half billion dollars in the red – and state officials are calling for changes to the system.

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.

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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.