Initial claims for the week of November 27 finally saw some movement within California towards pre-pandemic levels. Initial claims in California dropped by 8.7%, but were down more sharply in the other states by 18.4%. The seasonally adjusted number being reported for the US as a whole was up 14.4% but only as the result of the adjustment formulation over the past few weeks.

While improving, the results again indicate California’s recovery continues to lag the rest of the states. California accounted for 22.6% of all initial claims and 22.0% of insured unemployed (week of November 20). Both the state and national results were new pandemic period lows, but the US total was 2% below the pre-pandemic average in 2019—one of the first national economic indicators to show a return to pre-pandemic conditions—while California was still 18% above.

As reported for the week of November 13, the revised EDD backlog dropped 36.6%, while the backlog due to all sources dropped 28.5%. The backlog as currently defined by EDD now represents just over a week’s worth of processed claims.

However, procedures used to accelerate claims processing have since been revised, with EDD now revisiting about 1 million previously approved PUA claims. Recipients who were approved for more than base PUA weekly benefit must now submit new employment verification information, and if unable to do so are potentially liable for repayment of the full amount plus a 30% penalty if EDD determines a beneficiary intentionally gave false information or withheld information.

The related call center data shows only minor changes from the prior week. However, even though the number of unique callers showed a sharp drop of 20.5%, the number of calls required to reach EDD notched up to 4.3.

In the most recent data from EDD, California paid out a total of $178.6 billion in benefits under all the UI programs since the week of March 7, 2020 and through the week of November 13, 2021. The most current estimate from EDD is that $20 billion of unemployment benefits was paid out to fraudulent claims, much of which was from the federal pandemic enhancements but which also includes the base payments from the regular program that in the absence of budget action will be paid back through higher taxes on employers.

The most recent data from the US Department of Labor indicates California’s outstanding loans as of November 29 from the Federal Unemployment Account were $19.3 billion. EDD’s recently released October projections have lowered their previous estimates, but still show a $20.2 billion deficit by the end of 2021, $21.8 billion by the end of 2022, and $21.5 billion by the end of 2023. This continuing deficit projection is a clear indication that the state fund will be unable to recover quickly on its own even with the higher state and federal taxes imposed on employers during a period they will still be attempting to rebuild from the pandemic shutdowns.

Texas became the latest state to use their ARPA funds—in accordance with US Treasury guidance approving this use of the funds—to pay down their unemployment insurance debt. In all, Texas allocated most ($7.2 billion) of their remaining ARPA funds to pay off their federal debt ($5.9 billion), rebuild their state fund ($1.3 billion), and make additional improvements including computer upgrades to their state program in order to better position this critical social assistance program for the next economic downturn. Updating the recent Tax Foundation analysis, a total of 19 states have used $15.7 billion in ARPA funds to pay down their federal debts, while 23 states previously used $7.6 billion in CARES funds for debt payments and program operations, including California at only $6 million in spite of receiving the largest amounts of any state under both assistance bills.

As states have paid off their debts with ARPA funds, the latest federal debt data shows the debt issue is now limited to 9 states and one territory (Virgin Islands). California is responsible for 50% of the overall total.

As reported by the Department of Finance, general fund revenues through the end of October are already running $16.0 billion ahead of the levels projected in the current budget bill. In their just released Fiscal Outlook for the 2022-23 budget cycle, LAO projects a discretionary surplus of $31 billion in their mid-range forecast, and up to $60 billion in the high end. Operating surpluses are also expected to continue in the $3 billion to $8 billion range in the following years.