California’s Scandal-Plagued Unemployment Agency

The number of Californians certified for unemployment insurance is now at 1.6 million compared to October last year before the pandemic, when just 260,000 Californians received unemployment checks. Going into the holidays, a heart-breaking one in 10 Californians are unemployed.  Even more anguishing, the state’s Employment Development Department (EDD), the government agency that processes claims, disclosed that a staggering 600,000 workers are still waiting for their first check or a resolution to their issues.

And they may be the lucky ones.

About 350,000 Californians who receive unemployment funds through their Bank of America EDD debit cards have become the victims of fraud. The cards didn’t have the anti-fraud security chips now standard on most credit and debit cards.  Hundreds of thousands of Californians saw their accounts drained, then frozen by the bank. The EDD apparently considered anti-fraud chip technology too new and didn’t include it in its current contract with Bank of America.  But what can you expect from an agency that still uses the decades-old Cobol programming language understood by a few of the Baby Boomer generation?

San Francisco’s KPIX, the first to expose the fraud, received emails from many Californians pleading for help, including Tatiana Solorzano who told KPIX, “It was the little bit of money that I did have left, that I was saving, it’s all that I have.”

But it gets worse.

Now, state prosecutors found that at least 21,000 unemployment claims were fraudulently filed on behalf of prison inmates, costing the state $400 million in paid out benefits.  Sacramento County District Attorney Anne Schubert called the scam “one of the biggest fraud of taxpayer dollars in California history.”  Unlike most other states, the California EDD doesn’t check unemployment claims against lists of prison inmates, so the fraudsters went to town on the taxpayers’ dime. Compounding the problem was the EDD’s slow response to the fraud which continued to make payments until formal criminal charges were filed. Prosecutors believe the money is probably gone for good.

Some inmates even used such obvious fake names like “poopy britches” and Joe Doe.  Of California’s 700 death row inmates, 133 names were used for fake filing.  The majority of the alleged fraud took advantage of the supplemental $600 per week unemployment benefits passed under the CARES Act.

Assemblyman David Chiu (D-San Francisco) rightly complained: “It’s egregious that my constituents make a single typo that holds up their EDD benefits for months,” while claims are being paid to death row inmates.  He squarely points to Gov. Newsom to make the problem go away: “He inherited it … it’s happening on his watch. . . . He and his administration are responsible for cleaning up the utter mess that is EDD.”

But there’s plenty of blame to go around. As the Riverside Press Democrat points out, “The Assembly hasn’t exactly stepped up to impose reforms on EDD and hold state workers who bungle this badly accountable. California’s problems with technology are chronic. Maybe this embarrassing and costly incident will focus both the governor and the Legislature on reforming the department.”

Like the Press Democrat, we hope Sacramento will follow through.  But catastrophes at the EDD and others like it are the result of years of unaccountability, lack of transparency, and unchecked, one-party dominance.  After 37 years at the EDD, director Sharon Hilliard, age 56,  announced she will be retiring at the end of the year.  By my math, she has been there since age 19.  The good news is that the EDD is on the lookout for a replacement.  The employment ad says that it’s looking for someone with “effective leadership,” “sound judgement,” and “quality decision-making skills.”  Let’s hope the Gov. Newsom can check those boxes for his next hire.

Rowena Itchon is senior vice president of the Pacific Research Institute.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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