$139 Dollars A Second: That’s How Much the EDD Will Borrow TODAY…
…And how much it borrowed yesterday and has borrowed every day since May 8 when it paid the feds about $1.8 billion to cut its outstanding pandemic unemployment benefit debt by about 10%.
On May 8, the California Employment Development Department owed the feds $16,983,931,343.61 (plus about $182 million in interest) after making a series of payments over the previous week or so as late April/early May is when a large percentage of the unemployment insurance tax revenue is paid by businesses around the state.)
On May 25, the state owed the feds $17,187,908,569.73, plus $196,174,028.58 in interest. What that means is that the EDD has been borrowing an average of $12,073,083.89 a day to help it pay current unemployment benefits.
In recent weeks, the EDD has been paying out about $130 million in benefits per week. It has been borrowing about $84 million a week, or about two-thirds of the amount it paid out, to cover costs.
In other words, the EDD made a debt payment and then immediately started increasing the remaining debt.
Peter, meet Paul.
Taking a more granular look at the numbers, the current EDD borrowing is at a clip of about $503,045 an hour, $8,384 a minute, or $139 per second.
For reference, $139 is what your Amazon Prime subscription costs for a year.
Might as well get this over with now – no, the EDD did not respond to questions regarding the matter and, yes, the questions are at the bottom of the story.
The debt, which topped out a couple years ago at about $20 billion, was incurred during the pandemic when the EDD ran out of money to pay unemployment claims. Of course, if the EDD had literally done anything about the $40 or billion lost to fraud early on in the pandemic then it wouldn’t have had to borrow anything from the federal government and then unconscionably hit state businesses with an increased unemployment insurance surcharge totaling at least $400 per employee (emphasis on the at least) over the next few years to pay it back.
It cannot be overstressed that it does not appear any EDD employee has lost their job over the debacle and one of them – it’s ex-chief Julie Su, in fact – is poised to join President Biden’s cabinet as the next Labor Secretary.
Well, maybe not so fast:
For those hoping the issue could get weirder, you are in luck. The surcharge is collected through a California-only increase in the FUTA, or federal unemployment tax, that all businesses currently pay. One of the main purposes of the regular FUTA tax is, according to the EDD website, to help pay for “UI loans to insolvent states” – like California.
That means – because the EDD keeps borrowing – that tax money being paid by California businesses to pay down the EDD debt is being given to the EDD to increase the debt at the same time.
Whether that qualifies it as a triple tax or a circular tax or some type of pan-dimensional meta-tax is unclear.
Luckily for the EDD, the feds are a very very easy lender. Despite the existing debt, the agency can continue to borrow up to $600 million per month for, well, ever.
This debt is not like a mortgage which you have to qualify for and for which you can be turned down and which has a set payment timetable. The feds will keep the EDD solvent and able to cover its benefits costs no matter what and there does not appear to be any end date by which the debt has to be paid.
The feds sound like the perfect relative…
California is one of only three jurisdictions that still have any pandemic-related unemployment debt – New York owes about $8 billion and the Virgin Islands (that’s why I couldn’t write “states”) is still on the hook for about $90 million.
That means that California has more than two-thirds of the entire nation’s remaining pandemic unemployment debt.
As for the future, the following are currently unknown:
- When the EDD will repay the debt
- Exactly how much businesses are going to have to pay extra to cover for EDD incompetence
- When the EDD will be able to cover all current benefit costs with its own funds
- When the business FUTA surcharge will end.
Oh, and to put the cherry on the parfait, the EDD still has terrible customer service.
Maybe it wasn’t just the pandemic crush of “customers” after all; maybe the agency just has no idea what it is doing, has never had an idea of what it is doing, and – because it’s where state bureaucrat careers go to die and the legislature and Newsom have nothing but contempt for California workers and will not fix the damn thing – maybe it never will.
As promised, our questions of the EDD:
– A sizable payment towards the principal was made at the end of April. Exactly where did this money come from – reg UI taxes, the surcharge, etc.?
-Since that payment, the EDD has been borrowing fed funds at a clip of about $12 million per day. Why must the agency keep borrowing money? Is the EDD incapable of covering benefit payments with the funds it normally generates/has on hand?
– When does the EDD expect to clear the debt (and end the surcharge)?
– Did the EDD plan to continue borrowing even after making the payment? If so, why make the payment and not keep the funds to cover on-going costs instead?
– Can the surcharge revenue be used for anything other than paying down the debt?
PS – Here’s the federal website you can check daily to track the debt:
I warn you – do not make it a drinking game or you will die.
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