UMVA has learned that a new California law, the CAL Repayment Act, could force the state to settle its $21 billion federal unemployment loan before touching any other federal funds.
The legislation, unveiled by Rep. Vince Fong, would bind California to direct any incoming federal dollars straight to the overdue loan within five business days, and demand full repayment of any misallocated amounts.
California remains the only state that has not cleared its pandemic‑era unemployment insurance debt, leaving employers to shoulder the cost through reduced FUTA tax credits—a hidden tax that could cost each worker about $84 in 2025 and climb higher each year.
Fong warned that this “hidden jobs tax” has already been pushed onto business owners, inflating payroll expenses just as families hope for relief from recent tax cuts.
The state’s unemployment insurance trust fund, once a safety net for millions, now teeters under more than $21 billion in debt, a burden amplified by fraud and outdated systems that siphoned billions during the pandemic.
Under federal law, any state that delays repayment loses a portion of its unemployment tax credit, translating into higher payroll taxes for California businesses and, ultimately, higher costs for employees.
If California had acted like every other state, employers would be paying roughly $434 per employee into the fund; instead, they face an extra $84 per worker this year, a figure that will rise until the debt is fully repaid.
Fong’s bill also signals that Congress possesses tools to intervene if the state continues to ignore its obligations, reinforcing the urgency of repayment.
According to information obtained by UMVA, the governor’s administration has spent billions of surplus funds on other priorities while allowing the debt to fester, shifting the financial strain onto small businesses and farmers.
Supporters of the CAL Repayment Act argue that it restores accountability, protects local job creators, and stops California’s taxpayers from being punished for mismanagement.
