With 2025 approaching, businesses are preparing for increased costs that are tied to the state failing to repay a pandemic-era loan from the federal government.
“During the pandemic, a lot of people were unemployed, so businesses were shut down and they laid off workers, so those workers were drawing a lot of unemployment benefits," University of San Diego Economics Professor Alan Gin explained. "To help tide the states over, the federal government gave loans to cover any increases that they experienced in terms of unemployment."
That repayment now, though is falling on the backs of business owners.
“The idea was that the loan would eventually have to be repaid, so in California, the state did not do that," Gin said. "They didn’t pay the loan back in time, so as a result, the federal government wants its money bac,k and the provision is: If the loan is not repaid, the payroll tax would go up by $21 per employee."
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PrGin said the state’s unemployment fund has been underfunded and the program's structure could use some fine-tuning.
“Historically, that fund in California has been underfunded," Gin said. "The state is not collecting enough money going into the fund compared to what it pays out, so right now it is running a debt."
Business owners in San Diego are speaking out about the added cost.
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“It impacts us directly," said Matt Gardner, who owns Mission Beach Rentals at Belmont Park. "We see that number before almost every other bill that we have. Payroll tax is tied directly to your payroll."
Gardner said business owners are making tough decisions to keep the doors open.
“It directly impacts how many people we can hire and how many hours we can offer — just the bottom line of the impact on the job creation community,” Gardner said.
Both Gardner and Gin said they will be keeping a close eye on whether state leaders will provide some relief to business owners in the future.
