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Employment Development Department
Employment Development Department

California Receiving $839 Million to Help Enhance Unemployment Program

California is receiving $838.7 million in unemployment insurance (UI) modernization incentive funds made available through the American Recovery and Reinvestment Act (ARRA). To become eligible for the funds, the state had to adopt an alternate base period (ABP). Approved by the state legislature, the California Employment Development Department (EDD) will implement the new ABP process in April 2012.

The ABP provides for review of the most recent wages earned by a UI applicant in determining eligibility for benefits. Currently, only wages earned in the first four of the last five completed quarters are accessible for determining eligibility.

It’s estimated an additional 26,000 unemployed workers a year who were new entrants to the labor force could become eligible for unemployment benefits with the implementation of ABP.

As required by federal law, most of the money California receives in incentive funds will be deposited into the state’s UI Trust Fund since it’s operating under a deficit. As demand for unemployment benefits soared during the recession, California had to rely on a federal loan to help pay regular unemployment benefits to unemployed workers. The loan balance now totals more than $10 billion.

The ARRA Incentive Funds

The ARRA incentive funds will help offset that deficit, reducing the amount California employers will have to pay to eliminate the loan obligation. Employers pay contributions to the state Trust Fund on behalf of each employee to cover the cost of regular unemployment benefits but more has been paid in benefits over the last few years than received from employers.

While the majority of the ARRA funds will offset the deficit, the state legislature has approved of using $48 million to fund three years of ongoing costs associated with implementing the new alternate base period. The measure now awaits the Governor’s approval.