Governor's Letter to Congress

April 21, 2008

The Honorable Harry Reid                                     The Honorable Nancy Pelosi
Majority Leader                                                         Speaker of the House
United States Senate                                              U. S. House of Representatives
Washington, DC  20510                                          Washington, DC  20515

The Honorable Mitch McConnell                           The Honorable John A. Boehner
Minority Leader                                                        Minority Leader
United States Senate                                              U. S. House of Representatives
Washington, DC  20510                                          Washington, DC  20515

 
Dear Senator Reid, Senator McConnell, Madam Speaker, and Mr. Boehner,

I am asking for your leadership in enacting an emergency extension of unemployment insurance (UI) benefits for people who have lost their jobs in the economic downturn, as well as in securing additional funding for the administration of the UI program.

California has been hit especially hard by the national housing slump and subprime crisis.  In the past year alone, we have lost 131,000 jobs in the construction and financial services sectors.  California's unemployment rate now stands at 6.2 percent, and it is clear that states cannot fully address the consequences of the national housing downturn on their own.  It is critical that Congress enact an extension of unemployment benefits as soon as possible to mitigate the impact of the downturn and fully fund administrative expenses.  

For the 12-month period ending March 2008, more than 444,000 unemployed workers had exhausted their regular UI benefits in California.  Our state's benefits exhaustion rate is 45 percent, compared to the national rate of 35 percent.  Nationwide, the percentage of UI beneficiaries exhausting their benefits is already higher than at the beginning of the 2001 and 1990-91 recessions.

There is widespread agreement among economists that extending UI benefits is one of the most effective ways to stimulate a distressed economy.  The money will go into the hands of unemployed workers, who will spend it immediately to meet pressing needs.  If legislation extending UI benefits by 13 weeks were enacted today, those payments would infuse approximately $1.7 billion into California's economy.

While unemployment claims have soared, funding for administration of the UI program is at historic lows and no longer adequately supports the cost of program operations, including collecting taxes, paying benefits and adjudicating claims.  Workers, employers and states bear the burden of this federal funding shortfall through reduced access to services, higher taxes and delays in processing claims.      

Federal funding for unemployment insurance administration has not been adjusted for inflation since 1995.  For the last three years alone, the federal funding shortfall to states is approaching $1 billion.  For fiscal year 2008, the national UI administrative funding appropriation has been reduced by an estimated $110 million.  Roughly $30 million would have come to serve unemployed workers in California.

I am committed to working with Congress to ensure that unemployed workers receive assistance in a timely manner and for a sufficient period as reflected by the national and local employment picture.  Thank you in advance for your leadership, and please let us know how we can be of assistance.

Sincerely,

Arnold Schwarzenegger
 

cc:  The Honorable Robert C. Byrd
      The Honorable Thad Cochran
      The Honorable David R. Obey
      The Honorable Jerry Lewis
      Members of the California Congressional Delegation