California won't be giving unemployment checks to workers on strike, with Democratic Gov. Gavin Newsom vetoing a bill Saturday that had been inspired by high-profile work stoppages in Hollywood and the hotel industry.
Newsom, a Democrat, says he supports workers and often benefits from campaign contributions from labor unions. But he said he vetoed this bill because the fund the state uses to pay unemployment benefits will be nearly $20 billion in debt by the end of the year.
“Now is not the time to increase costs or incur this sizable debt,” Newsom wrote in a veto message.
The fund the state uses to pay unemployment benefits is already more than $18 billion in debt. That’s because the fund ran out of money and had to borrow from the federal government during the pandemic, when Newsom ordered most businesses to close and caused a massive spike in unemployment. The fund was also beset by massive amounts of fraud that cost the state billions of dollars.
Plus, labor unions said unemployment benefits are good for the economy, allowing workers on strike to still spend money and support local businesses.
“That money is going to corner stores, to restaurants, to caterers, to nail salons, to the small businesses that are also struggling along with workers who are on strike,” Sarah Flocks, legislative and strategic campaign director for the California Labor Federation, told lawmakers during a public hearing earlier this month.
The bill would have let workers who were on strike for at least two weeks receive unemployment checks from the state, which can be as much as $450 per week. Normally, only workers who lost their job through no fault of their own are eligible for those benefits.
Labor unions had argued the amount of workers on strike for more than two weeks is so small it would not have had a significant impact on the state’s unemployment trust fund. Of the 56 strikes in California over the past decade, only two lasted longer than two weeks, according to Democratic state Sen. Anthony Portantino, the author of the bill.
The legislation was an attempt by Democratic state lawmakers to support Southern California hotel workers and Hollywood actors and writers who have been on strike for much of this year. The writers strike ended Sept. 26, but the other two are ongoing — meaning many workers have gone months without pay.
Beyond the debt, the Newsom administration has said the fund is not collecting enough money to pay all of the benefits owed. The money comes from a tax businesses must pay on each worker. But that tax only applies to the first $7,000 of workers' wages, a figure that has not changed since 1984 and is the lowest amount allowed under federal law.
Meanwhile, unemployment benefits have increased. The Newsom administration has predicted benefit payments will exceed tax collections by $1.1 billion this year. It’s the first time this has happened during a period of job growth, according to the nonpartisan Legislative Analyst’s Office.
Lawmakers could attempt to pass the law anyway, but it’s been decades since a governor’s veto was overruled in California.