$171-Million Loan Sought for Drained State Disability Fund

SACRAMENTO —  The state’s disability insurance fund, at risk of insolvency, needs a $171-million loan to keep afloat through the end of June, 1993, state officials said Tuesday.

The fund, which is financed by payroll taxes on workers and pays benefits to employees who suffer extended illnesses, has been plagued by more claims for longer-lasting disabilities at a time when fewer people are paying into the pool because of the recession.

State Controller Gray Davis said that without the loan the fund would run out of money next week and be unable to pay benefits to disabled workers.

“This latest request, along with other recent developments, underscore the fragile nature of this year’s budget-balancing agreement,” Davis said in a statement released by his office.

The loan to the disability fund will come from the state’s general fund, which pays for most state programs from the receipts of personal income, sales and corporate taxes. If the loan cannot be repaid by the end of the fiscal year, it would add to a deficit already projected to reach $2 billion.

Anita McKenzie, spokeswoman for the state Employment Development Department, said the disability fund’s expenses have climbed 40% since 1989, but payments into the fund have grown just 34%.

Legislation enacted in 1989 increased benefits in 1990 and 1991. The maximum payment now is $336 a week.

McKenzie said the Wilson Administration would pursue administrative and legislative remedies to bring the fund into balance and prevent future shortfalls.