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California Becomes First State to Tap Into Federal Funding to Pay Rising Unemployment

People who lost their jobs wait in line to file for unemployment benefits, following an outbreak of the coronavirus, in Fort Smith, Ark., April 6, 2020. (Nick Oxford/Reuters)

California has borrowed nearly $350 million in federal funding to pay for surging unemployment claims amid the coronavirus pandemic, the first state to do so.

A Treasury Department spokesman told the Wall Street Journal on Monday that the state had already begun to access its pre-approved $10 billion loan for paying unemployment through the end of July. Loans of up to $12.6 billion for Illinois and up to $1.1 billion for Connecticut have also been approved, but neither state has begun to use the funding.

The loans are designed to help assist states pay rising numbers of regular unemployment benefits, while the extra $600 weekly payments that the Senate passed as part of its $2.2 trillion CARES Act in March are funded separately.

The Department of Labor reported last week that 3.8 million Americans filed new jobless claims, bringing the total since the start of the pandemic to 30 million, approximately 18 percent of the total work force. California has seen roughly 3.7 million new claims since mid-March, and its unemployment trust fund has spent over $1 billion since the end of February, when it had $3.1 billion on hand. The Journal found that nearly half of U.S. states had their unemployment-fund balance fall at twice the typical rate from February through mid-April.

This is not the first time that California has accessed federal funding, for which it does not need the approval of Congress, to survive economic downturns. The state borrowed nearly $11 billion in unemployment funding from the federal government after the 2007-2009 recession, and only finished paying it back in 2018.

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