A message to the voters of Santa Clarita ahead of the June 2 election:
Not long ago, California was sitting on the largest state budget surplus in American history. In May 2022, Gov. Gavin Newsom stood before the cameras and announced a $97.5 billion surplus while declaring that “no other state in American history has ever experienced a surplus as large as this.”
It was a remarkable moment. A $300 billion budget. Nearly $100 billion in extra money. The kind of windfall most governments only dream about.
So here is a fair and reasonable question every working family, small business owner and local employer in our community deserves an answer to: Where did it go?
Today, California is the only state in the entire country still carrying unpaid debt from pandemic-era federal borrowing. As of late 2024, California stands alone among all 50 states in carrying unpaid federal unemployment insurance loan debt from the COVID-19 pandemic, with an outstanding balance hovering around $20-21 billion.
More than 20 states borrowed from the federal government during 2020-2021. All other borrowing states have since repaid their loans. Every one of them. Except California.
California began borrowing from the federal government on June 3, 2020, because of the COVID-19 crisis, and the loan balance is expected to be about $21.3 billion by the end of 2027. That is not a rounding error. That is a generational burden — and it is being quietly transferred onto the backs of the very people who kept this economy running: local employers.
Here is how the penalty works.
Under federal law, when a state fails to repay its unemployment insurance loan, the federal government automatically reduces the tax credit given to that state’s employers.
According to the Employment Development Department website, California employers are now paying an extra $84 per employee for the 2025 tax year because of the state’s failure to act — and that number grows every year the debt remains unpaid.
Now, some may ask: Isn’t that the federal government’s fault for imposing the penalty? That framing deserves a clear-eyed response.
The federal mechanism exists in law precisely to ensure states do not indefinitely push debt onto the next generation of taxpayers and job creators. It is an accountability structure, not a punitive one.
The federal government loaned California billions of dollars in good faith during a genuine emergency. California received the money, distributed it — and then, when it came time to pay it back, chose not to.
California’s nearly $100 billion state budget surplus could have easily been used to repay the debt. The state also received $27 billion in federal COVID aid it could have used.
Even after defaulting, according to the Hoover Institute, the state could have resumed its payments and offset the tax burden on businesses.
The state had the resources. It made a choice.
In a normal year, employers pay $42 per employee for the unemployment insurance fund. Now, assuming no federal or state relief, California employers will likely face increased taxes through the year 2031.
For a small business with 20 employees, that is real money — money that does not go toward hiring, raises, or expansion. It is a quiet tax on job creation, and it compounds every year.
This is not a partisan talking point. The California Chamber of Commerce, business owners across the political spectrum and independent economists have all raised the alarm.
The National Federation of Independent Businesses and other small business advocates warn that rising unemployment tax burdens are squeezing hiring, wage growth, and expansion decisions, especially for small and midsize employers already facing high operating costs.
The question for voters in Santa Clarita on June 2 is straightforward: Do we want representation that holds Sacramento accountable for decisions that affect our employers, our neighbors and our finances — or do we continue to accept the status quo?
Elections send a signal about whether working families and local businesses have a voice — or whether Sacramento’s choices are simply handed down to us without consequence.
On June 2, you have a vote. Please use it.
Denise Lite is a Santa Clarita resident. “Right Here, Right Now” appears Saturdays and rotates among local Republicans.
