In stimulus, a lifeline to the jobless

Tucked deep inside President Obama’s $787-billion economic stimulus bill is a $2-billion lifeline for California’s unemployed along with improvements to the state’s bankrupt and broken system for paying benefits.

For starters, the state’s more than 800,000 jobless now drawing as much as $450 a week in benefits will get an extra $25 a week soon after the president signs the bill into law today. And the payments will no longer be subject to federal income tax.

The new maximum weekly check of $475 amounts to an estimated annual $981 million in benefits paid to Californians this year.

Another $844-million chunk of money is also available to the state -- but it comes with some controversial strings attached.

To get the additional money, the Legislature first must pass a law that broadens eligibility, allowing more low-wage earners, who otherwise wouldn’t qualify, to get a basic 26 weeks’ worth of unemployment checks.

Such legislation -- which is expected to be debated in the coming months once the Legislature passes a state budget -- is being opposed by business lobbyists, who fear that employers would be required to contribute more money to the state unemployment insurance fund. Last month, the fund ran out of money and had to borrow $1.8 billion from the federal government.

The bill, ABX3 23 by Assemblyman Joe Coto (D-San Jose), changes the way benefits are calculated, basing them on an unemployed person’s most recent, usually higher, pay rather than older, lower earnings. It also allows people who receive unemployment payments to earn as much as $200 a week from part-time jobs, instead of the current $25 limit, without having their benefits reduced.

“It’s money that we desperately need,” Coto said.

Ignoring the available pot of federal money “would be the utmost of irresponsibility” at a time when California’s 9.3% unemployment rate is at a 15-year high, said Angie Wei, a lobbyist with the California Federation of Labor.

The money would help both jobless individuals and the state as a whole, the labor federation stressed in a letter.

Every $1 spent on expanded unemployment benefits would spark $1.64 worth of economic activity that is “financially vital for struggling communities,” it said.

But business lobbyists aren’t buying the economic stimulus argument.

The California Chamber of Commerce, in its own letter of opposition to Coto’s bill, contends that broadening benefits to low-wage and part-time workers would add “a burden to the state’s UI [unemployment insurance] fund and the businesses that fund it.”

The cost, the chamber said, outweighs the one-time windfall from the $844 million available if the bill is passed.

The Schwarzenegger administration says it’s eager to get all the federal help available to backstop California’s beleaguered economy. But it said it wouldn’t take a position on the Coto bill until the governor’s staff made a full analysis of its effect on the state’s economy.

Advocates for the working poor contend that the pluses are considerable.

The Obama stimulus package offers California $60 million -- without conditions -- to upgrade its 3-decade-old unemployment insurance computer system and telephone call centers that are so jammed that claimants often spend the whole day dialing without getting through to an operator.

On top of that, about 500,000 people whose current benefits are running out would be eligible for extensions through the end of the year.

“This is a huge lift to California’s economy,” said Maurice Emsellem, policy co-director of the National Employment Law Project. “It will generate billions of dollars that will be spent in communities that are hardest hit by unemployment.”

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marc.lifsher@latimes.com