California unemployment benefits fund billions in debt

The San Francisco Chronicle reports:

California's now-resolved $19 billion budget shortfall got plenty of attention in recent months, but a state report released Wednesday highlights the state's other massive deficit - in the unemployment insurance fund, which will be $10.3 billion in the hole by year's end.

The report by the nonpartisan Legislative Analyst's Office warns of dire consequences if California's leaders do not tackle the fund's insolvency: The federal government could impose steep taxes on California businesses beginning in 2012, and the state could lose $400 million in federal dollars annually.

The deficit is the result of the state paying out more in unemployment benefits than it collects. The shortfall is offset by federal loans, but the state must begin paying interest on those loans next year.

Great moments in Bismark's Welfare State.