In a bold move to address fiscal responsibility, a Republican congressman from California is stepping up efforts to hold the state’s government accountable for a substantial $20 billion debt. This debt, which Governor Gavin Newsom and Democratic lawmakers have yet to settle, has sparked significant controversy.
Representative Vince Fong has introduced the Creating Accountability in Loan Repayment Act. This legislative proposal aims to compel California to prioritize repaying this debt before allocating certain additional federal funds. These funds could include future flexible financial aid, similar to the federal COVID-19 relief packages.
“Fraud and mismanagement in Gavin Newsom’s California are not just one-off issues; they have become systemic problems with tangible repercussions,” Fong stated, emphasizing the urgency of the situation.
The federal government has linked a payroll tax increase to California’s outstanding unemployment insurance (UI) debt. As a result, businesses in the state are now facing a hefty 5.2% payroll tax, which is nearly nine times higher than in other states that have managed to clear their debts, according to the California Business Roundtable.
Republicans have pointed out that California stands alone in its failure to address this debt issue. “Since we accumulated this debt, several states encountered similar challenges and accrued substantial debts to the federal government,” commented State Senator Roger Niello. “Yet, every single one of those states has completely paid off their debts. California, on the other hand, has simply refused to do so,” he told The California Post.
âSince we amassed this debt, a bunch of states ran into the same problem and worked up sizable debts to the federal government,” state Sen. Roger Niello (R) told The California Post. “Every single one of those other states fully paid off that debt. California just refused to.â
The debt comes from a COVID-19-era program that helped states finance a surge in claims for unemployment benefits with federal money.
“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,” Fong said. “Rather than using the stateâs past $98 billion budget surplus to pay down that debt, Sacramento shifted the burden onto employers through automatic payroll tax hikes.”
His bill, he added, would protect employers from the state’s mismanagement. If the state violates his proposed law, California would have to repay any misused funds.
Niello said the punishing payroll taxes due to the unpaid money will hurt the state’s economy.
“Itâs a real problem for the health of the economy, because we have a weak labor market as it is âone of the weakest in the country,” Niello said. “We’re burdening it further by increasing the cost to employers of every employee they hire.â
The California Post reached out to the Newsom administration for comment.
Newsom previously said he had âdifficult private conversations on this topic going back yearsâ with state lawmakers and tried to come to an agreement with them during the past budget negotiations when there was budget surpluses.
He said then he’s still working on this issue.
