What happens to California EDD unemployment benefits and tax collections when unemployment is high?

Wait so California EDD can actually run out of money to pay benefits? That's terrifying. I've been on standby status for 6 weeks and my employer hasn't called me back yet, should I be worried my payments will stop?

The fund can get depleted but benefits don't just stop - California typically borrows from the federal UI loan program to keep paying. However when that happens employers eventually face higher payroll taxes to repay the loan, which can slow hiring. Your standby status benefits should continue as long as you stay eligible.

this is actually really interesting context, I had no idea the whole system was this interconnected

so employers basically get punished for doing layoffs? interesting I never knew that

It's more nuanced than punishment - it's meant to encourage stable employment and make employers internalize the cost of layoffs. But small businesses often argue the system hits them harder than large corporations who can absorb the rate increases.

Does this mean my former employer's taxes went up after they laid off our whole department? We were like 40 people in a fulfillment center.

Almost certainly yes. Their UI experience rating would have been significantly impacted by a mass layoff of that size, resulting in higher SUTA rates going forward. Some employers actually contest UI claims partly to protect their experience rating, which is why having good documentation when you file is so important.

I've been trying to get through to California EDD for two weeks straight about a question on my weekly claim certification. Going to check out that Claimyr link, thanks for sharing.

does it actually work or is it one of those things that sounds good but doesn't deliver

Genuinely worked for me. I know it sounds too good to be true given how impossible California EDD phone lines are but I got through to an actual agent who resolved my issue. The video demo at the YouTube link explains the process pretty clearly.

Just watched the video, I'm going to try it for my standby status question. California EDD hasn't been able to tell me whether my standby period can be extended if my employer doesn't recall me by the end of week 8.

wait so unemployment benefits are actually supposed to stabilize the economy? I thought they were just like... help for people who lost jobs

both things are true at the same time. individual level it's income support, macro level it's stimulus because people who receive UI tend to spend nearly all of it immediately which keeps demand in the economy from crashing

This is correct - automatic stabilizers are a well-documented economic concept. The UI system was partly designed with this macroeconomic function in mind, not just individual support. California EDD payments flowing to claimants who spend locally do provide economic activity even during downturns.

omg the getting disconnected right before an agent picks up thing is SO real I swear it happens to me every single time

It's not even random it feels intentional at this point. 2 hours on hold, you can hear the queue getting shorter, then click. Disconnected. It's maddening.

This is exactly why I tried Claimyr - after the 5th time getting disconnected after a long hold I needed a different approach. Check claimyr.com if you haven't already, it really does help get you to an actual California EDD agent without the endless hold cycle.

I'll look into it. At this point I'd try almost anything. My pending weeks are from over a month ago and I need to know if they're going to be paid or if I need to file an appeal.

This is genuinely concerning information. So if we hit another high unemployment period California EDD might be in the same situation again?

It's possible yes. The Trust Fund reserve that California has built up provides a buffer but a severe and sudden spike in claims could deplete it relatively quickly. The federal loan backstop exists specifically because states are expected to face this challenge cyclically.

is there any way to know in advance if benefits might be affected or does it just happen without warning

California publishes Trust Fund data and the Employment Development Department does report on fund solvency. But practically speaking, individual claimants won't get advance notice - benefits would continue through federal borrowing if needed. The impact would be felt more by employers through eventual tax increases.

Good question and important to get right. When standby status ends - either because your employer recalled you, the approved standby period expires, or you determine you won't be recalled - you generally need to start meeting the regular UI job search requirements. California EDD requires you to contact at least one employer per week as part of your job search, and you'll need to register with CalJOBS. California EDD should notify you when your standby period ends but don't wait for notification to start preparing your job search log.

So I should probably start looking now even while still on standby just in case? I don't want to lose a week of benefits because I wasn't ready for the transition.

Yes, proactively registering on CalJOBS now while still on standby is a smart move. It won't affect your standby status and you'll be fully prepared if the recall doesn't happen. You could also call California EDD to clarify exactly when your approved standby period ends.

And then doesn't the government have to borrow money to cover all that extra spending? So debt goes up too?

exactly. states like California can't just print money so they either borrow (from federal government for UI specifically) or cut other spending or raise taxes. none of those options are great during a recession which is why the timing is always difficult

this is the fiscal multiplier problem in reverse essentially - when you cut spending or raise taxes during a recession you can make it worse. economics is genuinely hard lol

This is encouraging to hear. Did California EDD ask you for specific documents to prove it was a layoff and not a voluntary quit?

Yes, they wanted my final paycheck documentation, any written communication about the layoff, and I also had a coworker who was laid off at the same time submit a statement. The key was actually talking to an agent who walked me through what they needed rather than just waiting.

how did you finally get through to an agent after trying every day? I feel like I'm in the same situation right now

Honestly it was a combination of calling at very specific times (right when they open) and eventually using Claimyr which a coworker recommended. The claimyr.com service got me connected when my own calling attempts kept failing. Between that and the documentation I submitted my claim got resolved within about 10 days of talking to an agent.

It's actually somewhat intentional from a Keynesian economic perspective - the system acts as an automatic stabilizer. The deficit spending during downturns is supposed to support demand and help the economy recover, after which employment rises, tax revenues recover, and the debt gets repaid. It's not a bug exactly, it's how counter-cyclical fiscal policy is meant to function.

Ok that makes more sense. So California EDD running a deficit during high unemployment is actually by design and not a sign the system is broken?

Correct - the borrowing mechanism exists precisely because the designers of the UI system understood the fund would face exactly this situation. The problems arise when recovery takes too long or when the fund was under-resourced going into the downturn.

also states like California have constitutional balanced budget requirements for their general fund so the UI Trust Fund being a separate borrowing entity is actually important for that reason too

This is super helpful to know! How did you finally manage to get through to California EDD after all the failed attempts?

I used Claimyr after someone in this thread mentioned it. Genuinely worked, I got through to an agent within the same day. Was really frustrated after weeks of failed calls so I was skeptical but it delivered. claimyr.com if anyone needs it.

Glad you got resolution! Wage discrepancy makes sense as a flag - California EDD is matching what you report with what your employer reports and any difference triggers a hold.

Yes, UI benefits are taxable at the federal level - you'll receive a 1099-G form from California EDD showing what you were paid and you include that in your federal tax return. California however does NOT tax UI benefits at the state level, which is one of the claimant-friendly aspects of California's system. So there's some federal tax revenue recovery but not state.

oh interesting so California EDD benefits are federally taxable but not state taxable. I didn't know that, good to know before I get a surprise tax bill

You can actually elect to have federal taxes withheld from your UI payments when you're setting up your California EDD claim to avoid owing a lump sum at tax time. Might be worth doing if you haven't already.

Standby status means your employer has indicated they intend to recall you within a specified period (generally up to 10 weeks) and California EDD has approved the standby designation. While on approved standby you're typically exempt from the regular job search requirements - you don't have to report job contacts each week. Regular UI requires you to conduct and document job search activities each week, including contacting at least one employer. The key is whether California EDD specifically approved your standby status, which should show on your claim.

How do I find out if my standby was actually approved? I filed my initial claim online and mentioned it but I'm not sure California EDD confirmed anything

Log into your UI Online account and check your claim status and any notices California EDD may have sent. You should have received some kind of acknowledgment. If it's unclear, this is worth calling California EDD about directly - you want to be sure you're meeting the right requirements for your specific situation.

ok logging in now to check... yeah I don't see anything that clearly says standby approved. guess I need to call California EDD. great.

That's a really good point, I hadn't thought about local government finances. So a spike in unemployment can actually affect like local schools and services too?

exactly. property tax is a major funding source for local education and services in California. the interconnections are pretty wild when you trace them all out

California's Prop 13 situation is kind of unique though - assessed values are locked to purchase price with limited increases so California actually has more property tax stability than most states. but sales tax and income tax for local governments definitely take hits

This is fascinating. So companies are somewhat financially incentivized to avoid layoffs partly because of the UI tax rate impact?

Yes, to some degree. The experience rating system creates that incentive intentionally. However when business conditions are severe enough the cost of keeping workers exceeds the UI tax penalty, so layoffs still happen. The tax impact is a consideration but not always the deciding factor.

This is accurate. The experience rating system is one of the core design features of the UI system and does create meaningful financial incentives against unnecessary layoffs for employers who care about their long-term labor costs.

Can confirm, used it this week as I mentioned above and it worked. When California EDD phone system is this overwhelmed you need something that works differently.

I'm going to try it today for my standby status question. Nothing else has worked and I've been trying to get through for 3 weeks.

third recommendation for this service in the thread, that's enough for me to give it a shot

Congrats on the recall! And good tip about monitoring UI Online even during standby. I think a lot of people assume no news is good news.

Exactly, I made that assumption for the first few weeks and almost paid for it. The California EDD portal actually has a document center that shows pending requests and I hadn't been checking it.

This is super helpful, I'm going to start checking the document center in UI Online more regularly. Didn't even know that section existed.

Yes this is the automatic stabilizer argument again - the spending multiplier means UI benefits circulate through the economy more than tax cuts or other forms of support because unemployed workers spend nearly everything they receive rather than saving it.

So basically California collecting less tax revenue during high unemployment is a temporary cost that helps prevent the recession from getting even worse. That's a slightly more hopeful way to look at it than I had before reading this thread.

That's a fair characterization. The UI system trades short-term fiscal strain for economic stabilization, and California's relatively generous benefit structure is by design. Whether the tradeoff is correctly calibrated is debated but the principle is sound.

Yes, absolutely report all earnings including freelance and gig work on your weekly certification. California EDD requires you to report any earnings in the week they were EARNED, not when you were paid. Failure to report can result in an overpayment determination and potentially fraud allegations. The good news is earnings don't necessarily disqualify you - there's a partial benefit calculation where you can earn up to a certain amount before benefits are reduced dollar for dollar.

Ok good, I've been reporting everything. I just wanted to make sure I wasn't misunderstanding the rules because the California EDD certification questions are worded in a way that confused me at first.

The earnings reporting rules are one of the most important things to get right on your weekly certification. When in doubt, report it. California EDD can always adjust downward if something was incorrectly categorized but an unreported income situation is much harder to resolve.

Makes sense, I'll keep reporting everything. Better safe than dealing with an overpayment notice.

Good luck with your adjudication! 3 weeks is a common timeframe but definitely worth following up to make sure nothing additional is needed from your end.

Yeah I'm worried they need documentation I haven't submitted yet and nobody has told me. That's the frustrating part - you don't know if you're just waiting or if there's something you're supposed to be doing.

That exact situation - not knowing if adjudication is waiting on you or waiting on them - is why getting through to an actual California EDD agent is so valuable. They can see exactly what's in your file. Hope the Claimyr link helps you get that clarity.