California has refused to pay its $18.6 billion debt to the US federal government—it is a default!
The state was taking money to pay unemployment benefits.
Now California businesses will have to repay the debt.
When a federal unemployment insurance loan goes unpaid, the federal government immediately raises the unemployment insurance tax by 0.3% for every business in the state and an additional 0.3% each year thereafter until the loan is fully repaid. The normal federal unemployment insurance tax rate is 0.6% a year.
What makes this default even more egregious is that the state Employment and Development Department's (EDD) stone-age IT system opened the floodgates to miscreants, allowing fraudulent unemployment benefit claims worth over $30 billion during the pandemic. Among those who received the fraudulent payments were imprisoned criminals, a man posing as a one-year-old child and a man posing as Senator Dianne Feinstein. One residential address received Cheques for about 60 individual filers from that address.