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Senate Committee OKs Job Killer Bill Increasing UI Taxes to Pay Striking Workers

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A California Chamber of Commerce job killer bill that will increase unemployment insurance (UI) taxes to subsidize striking workers passed a Senate committee this week.

SB 1116 (Portantino; D-Burbank) passed the Senate Labor, Public Employment and Retirement Committee on April 24 on a vote of 4-1.

The bill will allow striking workers to claim UI benefits when they choose to strike. Because the UI Fund is paid for entirely by employers, SB 1116 will effectively add more debt onto California employers. Moreover, SB 1116 will effectively force employers to subsidize strikes at completely unrelated businesses because the UI Fund’s debt adds taxes for all employers, regardless of whether they’ve had a strike.

SB 1116 is a repeat of last year’s SB 799 (Portantino; D-Burbank), which was tagged as a job killer and was vetoed by Governor Gavin Newsom because of the debt it would add to California’s UI Fund. This concern is even more pressing given this year’s budget troubles.

Coalition Opposition

More than 120 organizations have joined the CalChamber in a coalition to oppose SB 1116. In a letter sent to legislators, the coalition pointed out that the bill creates a fundamental unfairness by forcing employers with absolutely no involvement in any strikes to pay for labor disputes in which they have no involvement.

UI Fund loans from the federal government are paid off via tax increases on all employers across the state—not just employers who have striking workers.

Though individual strikes will have different facts, all strikes are part of a negotiation between two parties. Taking money from every other employer in the state (small employers included) and forcing those uninvolved parties to pay the costs of one side of a labor dispute is profoundly unfair, the coalition stressed.

The coalition also is concerned about SB 1116’s impact on California’s insolvent UI Fund.

The bill would give striking workers the ability to claim unemployment after two weeks of striking — and thereby add the cost of those benefits to California’s outstanding $10 billion in federal loans.

UI Fund Historic Debt

The California UI Fund is in historic debt — approximately $20 billion — due to the COVID-19 pandemic and subsequent statewide shutdown. As a result, California employers already are paying increased UI taxes pursuant to federal law and are likely to face ongoing tax increases until approximately 2032.

In addition to adding to employers’ tax burdens, SB 1116 will also add to the state’s General Fund obligation regarding the UI Fund. For example, in 2023–2024, the interest payment is expected to cost the state approximately $300 million — and similar payments will continue until the UI Fund returns to solvency. In the proposed 2024–2025 budget, the interest payment is estimated to rise to $331 million.

SB 1116 risks compounding UI’s insolvency, which will weigh heavily on the State, California’s employers, and California’s unemployed.

Key Vote

Senate Labor, Public Employment and Retirement approved SB 1116 on April 24, 4-1:

Ayes: Smallwood-Cuevas (D-Los Angeles), Cortese (D-San Jose), Durazo (D-Los Angeles), Laird (D-Santa Cruz).

No: Wilk (R-Santa Clarita).

The bill will be considered next by the Senate Appropriations Committee.

Staff Contact: Robert Moutrie

Robert Moutrie

This post was originally published on this site

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