Why California Still Owes the Federal Government $8 Billion

California borrowed $10 billion from the federal government to shore up its recession-battered Unemployment Insurance Fund. Even though the state’s economy is now booming, it still owes the feds about $8 billion. California is paying interest on the loan, an estimated $174.5 million this year, according to a new report from the state Employment Development Department, and the balance is shrinking only because in lieu of direct payments, the Department of Labor has raised taxes on employers.

That tax hike – technically a “credit reduction” – has cost employers nearly $2 billion so far and will be $1.3 billion this year and $1.7 billion next year, EDD projects.

That’s on top of the nearly $6 billion in regular unemployment insurance taxes that they pay each year, which are roughly equal to the current level of benefits.