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Tough love plan could end California's unemployment insurance stalemate

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Tough love plan could end California's unemployment insurance stalemate

When the Great Recession struck California 17 years ago and hundreds of thousands of workers lost their jobs, the state’s unemployment insurance system crashed.

The employer-financed program quickly exhausted its thin reserves, due to a short-sighted political decision six years earlier.

In 2001, the Unemployment Insurance Fund had a $6.5 billion positive balance. But the governor at the time, Democrat Gray Davis, owed big political debts to unions that financed his 1998 campaign. He repaid them by doubling unemployment insurance benefits, contending that the seemingly hefty reserve could cover them without raising payroll taxes on employers.

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When recession struck, the insurance fund soon leaked red ink and the state borrowed about $10 billion from the federal government to maintain cash payments. When the state didn’t repay the loan, the feds raised payroll taxes for nearly a decade to retire the loan.

It should have been a lesson for political policymakers about instant gratification and financial responsibility, but it wasn’t.

Shortly after the $10 billion loan was paid off, California was hammered by the COVID-19 pandemic, and upwards of 3 million workers lost their jobs as the state ordered workplace closures.

Once again, the unemployment insurance program had virtually no reserves to cover the sharp increase in claims. Once again it borrowed from the federal government, this time for $20 billion, and once again its failure to repay forced the feds to increase payroll taxes.

In addition to a double dose of financial problems, the Employment Development Department has also experienced managerial failures.

In 2011 Elaine Howle, the state auditor, laid out the department’s shortcomings in a sharply worded report, but when the pandemic hit, they once again became evident. There were massive glitches in responding to legitimate claims for insurance benefits, while the department gave tens of billions of dollars to fraudsters.

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Meanwhile employers are still repaying the last loan, and the state’s insurance fund is continuing to run deficits, unable to cover current benefits of nearly $7 billion a year.

With that history in mind, another watchdog agency, the Legislative Analyst’s Office, is urging a complete overhaul of unemployment insurance, declaring the system “is broken.”

Noting that the current state payroll tax cannot fully cover current benefits, much less build reserves, the LAO report projects a “perpetually outstanding federal loan” to keep payments flowing that must be repaid with interest.

The report proposes a four-part tough love approach to a crisis that has been building for more than two decades and cannot solve itself, to wit it advises the state to:

  • Increase the taxable wage base from $7,000 per worker to $46,800, tying it to the actual benefits of up to $450 a week. It “would place California among the ten states with taxable wages bases above $40,000 and all other Western states.”
  • Adopt two payroll tax rates, one to cover current benefits and another to rebuild reserves. The combined rate of 1.9% would be applied to the $46,800 wage base.
  • Base employers’ tax rates on their changes in employment, thus imposing higher costs on employers that reduce their number of workers.
  • Refinance the federal loan with a bond backed by payroll taxes and state loans from its internal sources to reduce overall interest costs.

There may be other alternatives, perhaps affecting benefits, but the main thing is that doing nothing will just perpetuate this crisis — even though the politics of the issue are daunting.

It’s been a political stalemate for nearly a quarter-century, pitting unions seeking to protect, or even increase, benefits against employers who don’t want to shoulder increased taxes. Successive governors and legislative leaders have shunned engagement, preferring to kick the can down the road.

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California

AIR7 video offers aerial view of wildfires' destruction in LA County: WATCH LIVE

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AIR7 video offers aerial view of wildfires' destruction in LA County: WATCH LIVE


LOS ANGELES (KABC) — Aerial video from AIR7 on Wednesday morning offered one of the first overhead glimpses at the devastation caused by multiple wildfires in Los Angeles County.

Footage from the helicopter showed the destructive path of the Eaton Fire near Altadena, which resulted in at least two fatalities while destroying more than 100 structures and burning more than 2,200 acres.

Shortly after 9:30 a.m., the aircraft’s perspective showed several two-story homes burning in the area of Lilac Canyon Lane, located in a residential neighborhood near the north end of Lincoln Avenue. Many nearby houses were smoldering.

Meanwhile, another ABC7 helicopter was over Pacific Palisades, where massive plumes of smoke continued to rise above burning homes in the foothills. Other structures were completely destroyed.

Houses were also on fire near Topanga Canyon Boulevard, the major artery that stretches from the San Fernando Valley to Pacific Coast Highway.

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Media and fire department aircraft were mostly grounded Tuesday due to dangerous conditions caused by a powerful windstorm in the region.

Copyright © 2025 KABC Television, LLC. All rights reserved.



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What to know about the wildfires spreading through Southern California

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What to know about the wildfires spreading through Southern California


Two persons ride by on motorcycles as the Palisades Fire destroys a neighborhood in the Pacific Palisades neighborhood of Los Angeles on Tuesday, Jan. 7, 2025.

Etienne Laurent/AP


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Etienne Laurent/AP

More than 4,000 acres of land are burning in Southern California from three wildfires, forcing tens of thousands of people to evacuate.

With firefighters having not contained any portion of the fires and high winds forecast overnight, anxiety grew over what conditions residents and officials will face as Wednesday breaks.

Here’s what we know so far.

The scopes of the fires

The Palisades fire started Tuesday at about 10:30 a.m. local time, and has burned nearly 3,000 acres of land in Los Angeles County.

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The Eaton and Hurst fires both started later Tuesday, with the Eaton fire first reported at about 10:30 p.m. local time, also in Los Angeles County. Late Tuesday night, the Hurst fire was reported in the Sylmar neighborhood north of Los Angeles, leading the L.A. Fire Department to issue evacuation orders near where Interstate 5 meets the 14 and 210 freeways.

By early Wednesday morning Eaton had burned 1,000 acres of land, while the Hurst fire had burned 500 acres of land.


A screenshot from Cal Fire as of 3:53 a.m. Eastern on Wednesday shows the location of three fires burning in southern California: Palisades, Eaton and Hurst.

A screenshot from Cal Fire as of 3:53 a.m. Eastern on Wednesday shows the location of three fires burning in southern California: Palisades, Eaton and Hurst.

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Cal Fire

The causes of all three fires are being investigated, and they were all at 0% containment early Wednesday morning.

Evacuation orders and warnings have been issued in association with the fires.

Danger posed to neighboring counties

An evacuation order signals the fire poses an “immediate threat to life” and mandates evacuations, while an evacuation warning carries a “potential threat to life and/or property” and suggests that those with pets and livestock, and those who would need more time to evacuate, do so, according to the California Department of Forestry and Fire Protection, better known as Cal Fire.

The fires could spread to neighboring areas, such as Orange, San Bernardino and Riverside counties, according to the National Weather Service.

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Wildfire season in Southern California typically runs from the late spring to the fall, according to the National Wildfire Coordinating Group.

“This time of year traditionally has not been fire season, but now we disabuse any notion that there is a season,” California Gov. Gavin Newsom said in a video posted to X. “It’s year-round in the state of California.”

Local, state and federal government responses

Newsom declared a state of emergency Tuesday, as did Los Angeles Mayor Karen Bass.

Additionally, five Los Angeles schools will be closed Wednesday, and a sixth school has temporarily relocated and joined with another. The district said it is waiting to make a decision about whether to close the impacted schools Thursday.

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Flames reached two schools, the structure of Palisades Charter Elementary, and the playing fields of Palisades Charter High School, according to The Los Angeles Times. The latter school “is currently not in session,” the district said.

More than 200,000 customers in Los Angeles and Ventura counties were without power early Wednesday morning. Firefighting authorities will typically turn off power lines, as a downed line can cause sparks that escalate to flames.

“This is a highly dangerous windstorm that’s creating extreme fire risk – and we’re not out of the woods,” Newsom said. “We’re already seeing the destructive impacts with this fire in Pacific Palisades that grew rapidly in a matter of minutes.”

He said Tuesday that California had secured a grant from the Federal Emergency Management Agency, or FEMA, which will reimburse up to 75% of eligible costs authorities have taken on to suppress the fires.

President Biden said his team is in touch with state and local officials in California and that he is receiving frequent updates.

“My Administration will do everything it can to support the response,” he said. “I urge the residents of the Pacific Palisades and the surrounding areas of Los Angeles to stay vigilant and listen to local officials.”

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Weather conditions in the area

Critical fire conditions are expected in parts of Los Angeles and Ventura counties through Thursday. The fires are forecasted to be exacerbated by low humidity, dry vegetation and strong winds between 50 and 100 miles per hour, the National Weather Service said.

The agency has issued wind advisories for the area.

How to prepare

➡️ Trying to stay safe in a wildfire? There’s an app that can help

➡️ Evacuation terms can be confusing. Here’s what they mean and how to sign up for alerts

➡️ How to keep yourself safe from wildfire smoke

➡️ This is why fire officials don’t want you to stay and defend your home

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The California Newsroom is following the latest from across the region. Click through to LAist’s coverage for the latest.





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More than 13,000 structures under threat from Palisades fire, California authorities say – follow live

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More than 13,000 structures under threat from Palisades fire, California authorities say – follow live


As the sun sets in California, we’ve gathered photos of the Palisades fire that broke out this morning, around 10:30am local time. Officials have said that the worst of the high winds driving the fire are expected overnight Tuesday into Wednesday. Forecasters predicted the windstorm would last for days, producing isolated gusts that could top 100 mph (160 kph) in mountains and foothills — including in areas that haven’t seen substantial rain in months.

US-WEATHER-FIRE
Fire personnel respond to homes destroyed while a helicopter drops water as the Palisades Fire grows in Pacific Palisades, California on January 7, 2025. A fast-moving wildfire in a Los Angeles suburb burned buildings and sparked panic, with thousands ordered to evacuate January 7, 2025 as “life threatening” winds whipped the region. Frightened residents abandoned their cars on one of the only roads in and out of the upscale Pacific Palisades area, fleeing on foot from the 770-acre (310-hectare) blaze engulfing an area crammed with multi-million dollar homes in the Santa Monica Mountains. (Photo by David Swanson / AFP) (Photo by DAVID SWANSON/AFP via Getty Images)
Photograph: David Swanson/AFP/Getty Images

You can find more photographs capturing the extent of the damage here:

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Speaking at a press conference in Pacific Palisades this afternoon, California governor Gavin Newsom noted that he found “not a few — many structures already destroyed” and thanked President Joe Biden for issuing a Fire Management Assistance Grant.

“No politics, no hand-wringing, no kissing of the feet,” Newsom said. The Democratic governor was scheduled to speak at an event with Biden this afternoon that was rescheduled due to the inclement weather. “My message to the incoming administration, and I’m not here to play any politics, is please don’t play any politics.”

Newsom further urged residents to heed evacuation orders: “By no stretch of the imagination are we out of the woods.”

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About 15,000 utility customers in southern California have had their power shut off to reduce the risk of equipment sparking blaze. Half a million customers total were at risk of losing power preemptively, the Associated Press reported on Tuesday evening.

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Minutes after the J Paul Getty Trust issued a statement on the Palisades fire and efforts to protect the Getty Villa from wildfires, an unidentified official on LAFD radio said that the Getty Villa Museum was “catching on fire”, the Los Angeles Times reports. At this time, it’s not clear whether any structures have caught fire, but officials confirmed the grounds were on fire and that flames were approaching the museum buildings.

The Getty Villa, which is located in Pacific Palisades, displays a collection of Greek, Roman and Etruscan Art. It’s better-known sibling, the Getty Center, is located in Brentwood and contains a broad-ranging collection of European and North American art.

A spokesperson from the Getty Villa confirmed the Trust’s earlier statement to The Guardian, adding that there are “no structures currently on fire”.

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Universal Pictures and Amazon MGM Studios canceled two movie premieres scheduled to take place in Los Angeles on Tuesday evening as the city declared a state of emergency amid high winds and the Palisades fire.

Wolf Man had been scheduled to premier at the TCL Chinese Theater and Unstoppable would have shown at the DGA Theater.

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More than 13,000 structures under threat from the Palisades fires, according to LA fire department fire chief Kristin Crowley, with the Getty Villa being one of them. In a statement issued this afternoon, Katherine E Fleming, president and CEO of the J Paul Getty Trust, said the museum is closed to non-emergency staff and will remain closed at least through 13 January.

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“Fortunately, Getty had made extensive efforts to clear brush from the surrounding area as part of its fire mitigation efforts throughout the year. Some trees and vegetation on site have burned, but staff and the collection remain safe,” she said. “Additional fire prevention measures in place at the villa include water storage on-site. Irrigation was immediately deployed throughout the grounds Tuesday morning. Museum galleries and library archives were sealed off from smoke by state-of-the-art air handling systems. The double-walled construction of the galleries also provides significant protection for the collections.”

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The city of Los Angeles has declared a state of emergency for the “wind event”, the city council president Marqueece Harris-Dawson announced during a press conference Tuesday afternoon.

“We want everybody to know that the city is well prepared and has a tremendous emergency management infrastructure,” said Harris-Dawson. “If you can stay off of our roads, please do so to allow emergency vehicles to go across the city.”

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Photos from the Palisades fire are beginning to be sent out, showing the destruction of homes and the billowing black smoke choking the sky.

A cyclist snaps a photo as the Palisades wildfire burns in the background. Photograph: Daniel Cole/Reuters
A property in the Pacific Palisades neighborhood of Los Angeles is engulfed in flames. Photograph: Étienne Laurent/AP
A surfer rides a wave in Santa Monica under a sunset blackened from the Palisades fire. Photograph: Richard Vogel/AP
Firefighters battle the blaze sweeping through the Pacific Palisades neighborhood of west Los Angeles. Photograph: Daniel Cole/Reuters
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As the Palisades fire reached the Malibu coast Tuesday afternoon, the California department of forestry and fire protection (CalFire) announced road closures and evacuation shelters.

An evacuation center has been established at the Westwood Recreation center on South Sepulveda Boulevard. Meanwhile, the southbound Pacific Coast Highway has been closed at Las Flores Canyon Road, Topanga Canyon Boulevard and Coastline Drive.

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The Palisades fire has consumed more than 1,200 acres since it broke out at about 10.30am on Tuesday morning, and destroyed several homes in an affluent community along the Pacific Ocean.

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Nearly 30,000 residents are under evacuation orders and more than 13,000 structures are under threat, said Kristin Crowley, fire chief of the LA fire department.

A brush fire burns near homes in Pacific Palisades, California on 7 January 2025. Photograph: David Swanson/AFP/Getty Images

Actor Eugene Levy, the honorary mayor of Pacific Palisades, who was forced to evacuate, told the Los Angeles Times while stuck in traffic: “The smoke looked pretty black and intense.” Other evacuees described harrowing escapes, one woman recounting to ABC7 how she abandoned her vehicle and fled with her cat in her arms: “I’m getting hit with palm leaves on fire … It’s terrifying. It feels like a horror movie. I’m screaming and crying walking down the street.”

The Los Angeles school district was also forced to relocate students from three campuses, and Joe Biden had to cancel plans for an event announcing two national monuments.

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Lois Beckett

By mid-afternoon, shoppers at a luxury outdoor mall in Century City, about 12 miles east of the Pacific Palisades, were still strolling around as usual. But outside the mall, billows of smoke were visible to the west, and the views in the distance were starting to look hazy.

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Lois Beckett

Lois Beckett

I’m currently driving east across Los Angeles, and am close to Beverly Hills at the moment. Ahead of me, looking towards downtown, the view is pretty clear and sunny, though the palm trees that line the streets are tossing pretty dramatically in the wind. But behind me, in my rearview mirror, I can see billows of smoke from the Pacific Palisades fire to the west. The most recent air quality readings across Los Angeles were in the healthy range, but I’m expecting that the air quality is going to worsen quickly as the smoke spreads across the city.

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As a fast-moving wildfire spreads near Los Angeles on Tuesday, we’re bringing you this live blog with the latest news on fires caused by a “life-threatening” windstorm that has hit southern California this week. The region is expected to see what could amount to the strongest winds in more than a decade, bringing extreme fire risk to areas that have been without significant rain for months.

A large swath of southern California, home to millions of people, is under what officials have described as “extreme risk” from the destructive storm. The weather service warned of downed trees and knocked over big rigs, trailers and motorhomes, and advised residents to stay indoors and away from windows. Powerful offshore gusts will also bring dangerous conditions off the coasts of Orange county and LA, including Catalina Island, and potential delays and turbulence could arise at local airports.

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