California is borrowing an average of $40 million a day from the federal government in order to help pay unemployment benefits, according to the Los Angeles Times. With interest, the amount may become more than the state can afford to pay back. 

The borrowed money is used to pay off unemployment insurance. It is estimated that California will owe the federal government $16 billion by 2012, an additional strain on the state's already-stressed budget.

The problem is not only the amount that the state is borrowing, but also the interest that is compounding. According to the LA Times, the state will need to pay the federal government $362 million by the end of next September.

Unemployment in the state is a major problem. It is estimated that 1 in 8 Californians are unemployed, a figure higher than the national average. In September, the national unemployment rate was 9.2% while California’s unemployment rate was 12.2%. 

The temporary solution to the problem is to increase unemployment taxes for employers. It is currently at $21 per each worker, but the rate will continue to rise if the state continues to borrow.

Governor-elect Jerry Brown has his work cut out for him when tackling the state budget crisis. With this report, his main challenge will be to control the spending without cutting back on unemployment benefits.