Fong Introduces Bill to Address California’s Disastrous Mismanagement of Unemployment Insurance

WASHINGTON, D.C. - Today, Congressman Vince Fong (CA-20) introduced the Creating Accountability in Loan (CAL) Repayment Act to rein in pandemic-era unemployment mismanagement and fraud and protect taxpayer-funded public resources.

Specifically, this legislation would require states with outstanding federal unemployment insurance (UI) debt to repay that debt before spending eligible additional federal funds they receive on any other purpose. Eligible funds include future flexible federal funding, like the CARES Act or American Rescue Plan.

The CAL Repayment Act is a direct response to California's failure to pay back its outstanding UI loan to the federal government, a failure that is now costing California employers and taxpayers billions.

"Fraud and mismanagement aren't isolated incidents in Gavin Newsom's California - they've become systemic failures with real consequences," said Congressman Fong. "What was intended to be a lifeline for unemployed workers during the pandemic has now left California with more than $18 billion in unpaid federal unemployment insurance debt. Rather than using the state's past $98 billion budget surplus to pay down that debt, Sacramento shifted the burden onto employers through automatic payroll tax hikes. Enough is enough. My legislation restores accountability, protects our local small businesses and farmers, and prevents California job creators from being punished for Sacramento's negligence."

California remains the only state in the nation with an outstanding federal UI loan balance, now exceeding $18 billion. California has a history of mismanagement, such as the Newsom administration's "pay now, verify later" approach during the pandemic, which removed traditional eligibility safeguards and invited massive fraud, including:

• At least $32 billion in fraudulent payments from California's Employment Development Department.
• Thousands of inmates, including murderers, rapists, and death row inmates, received up to $1 billion in unemployment benefits.

The consequences of the Golden State's financial mismanagement have fallen on California's job creators. Federal payroll taxes on California employers automatically increase each year the debt remains unpaid, with businesses now potentially facing a 5.2% federal payroll tax rate, nearly nine times higher than what employers pay in debt-free states.

What the CAL Repayment Act Does:

• Requires states with outstanding federal UI advances to apply eligible future federal funds, like the CARES Act or American Rescue Plan, toward repayment within five business days before spending on any other purpose.
• Prohibits states from directing flexible federal funds elsewhere while UI debt remains outstanding.
• Establishes a strict enforcement mechanism: states that violate the requirement must repay the full amount of misused funds to the federal government within five business days.
• Applies prospectively to certain federal funds awarded on or after the date of enactment.

The introduction of the CAL Repayment Act comes on the heels of Rep. Fong authoring an op-ed in the California Post outlining the massive waste and fraud in California under Governor Gavin Newsom.

To read the text of the bill, click here.

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