Audit Slams California Employment Department Over Pandemic Failings

The myriad shortcomings at the California Employment Development Department have existed — and were audited — since at least the Great Recession, over a decade before the coronavirus pandemic washed California jobs away.

The California Employment Development Department. (Courthouse News photo / Nick Cahill)

SACRAMENTO, Calif. (CN) — Nearly a year into a pandemic that gobbled up millions of jobs and caused double-digit jobless rates, California is still languishing through one of the largest — and most costly — bureaucratic failures in state history.

Despite sweeping changes promised by the governor last summer, the state’s fractured Employment Development Department, which left hundreds of thousands of freshly unemployed residents in the dark while sending billions to inmates and fraudsters, is far from fixed.

Still carrying a massive backlog of unemployment claims, a state audit released Tuesday found many of the department’s problems were self-inflicted and predicted it will continue hassling Californians long after the pandemic.

“The department has not adequately planned how it will address this impending workload,” the audit said of the state’s ongoing attempt to weed out legitimate claims from fraudulent ones. “Claimants who applied in good faith may have to repay the benefits they received if the department finds them retroactively ineligible for some of all of those benefits.”

Swamped by a record number of unemployment claims, the department has buckled, leaving scores of Californians without an income over the course of the pandemic.

With their livelihoods erased by the coronavirus, millions of jobless Californians turned to a department that wasn’t even able to answer the phone. Once the claims surge began, the department answered fewer than 1% of calls made by desperate residents.

According to State Auditor Elaine Howle, the department’s call center deficiencies predate the pandemic.

“Despite knowing for years that it had problems in the call center, the department has not yet adopted best practices for managing the call center,” Howle says in the audit. “Leaving it less prepared to effectively assist the many Californians attempting to navigate the claim process for the first time.”

California appears to be working through a bout of déjà vu, as Howle says many of the same issues surfaced at the department during the Great Recession.

While the department received 6.5 million claims during the first half of 2020 alone — up from 3.8 million during 2008 and 2009 — the audit found it did little to prepare for the next major recession. The report says the department has been suffering from a shoddy claims process, staffing problems and a defective call center for nearly 10 years.

“We expected that the department would have a plan for scaling up its unemployment insurance program in response to a recession so that it could provide timely assistance to Californians,” the report states bluntly. “However, the department had no such plan ready.”

Aside from it being nearly impossible for Californians to find help over the phone, Howle says over 800,000 claimants that filed between April and September 2020 waited longer than 21 days to receive their first payment.

The department’s shortcomings have also made it an easy target for opportunistic criminals.

According to local and federal prosecutors, at least 35,000 California inmates filed for unemployment from March through August and the department paid out as much $30 billion in fraudulent benefits. They claim benefits were sent to applicants with names like “Poopy Britches” and even death row inmates. 

Of the $114 billion in unemployment benefits paid out since March 2020, the department acknowledges nearly 10% went to fraudsters and that it’s still investigating other claims.

“The department was clearly under-prepared for the type and magnitude of criminal attacks and the sheer quantity of claims,” said EDD director Rita Saenz on Monday. “We are focused on making the changes necessary to provide benefits to eligible Californians as quickly as possible and stopping fraud before it enters the system.”

Howle acknowledges the department was tossed a historic workload with little warning but says its decision to relax eligibility requirements made it an easy fraud target.

To get money to Californians more quickly, the department greenlighted applications without fully examining whether they met the main eligibility criteria — being able to and available for work. Criminals not only took advantage of the decision, but the department is also now faced with the mammoth task of going back through millions of fast-tracked claims. 

In fact, the department has already sent out retroactive notices to 1.7 million Californians who may have been overpaid.

“Because the department told claimants not to certify their continued eligibility, it faces another significant workload it must manage,” the report continues.

To increase transparency, Howle recommends the Legislature require the department to report publicly every six months on the amount of benefits it overpaid and has recouped. Lawmakers should also force the department to submit an operating plan for the next economic downturn, including how to better handle claim surges.

The bipartisan group of lawmakers who approved the emergency audit of the EDD last summer said the Legislature can’t wait for Governor Gavin Newsom to clean up the mess. In a letter, the group of state senators called for immediate oversight hearings in wake of Tuesday’s report.

“Since the pandemic began almost 11 months ago, we have heard horror stories from our constituents about unemployment claims being delayed, denied or just lost in the bureaucracy,” they wrote. “Unfortunately, we have also seen the governor’s past plans and initiatives fail to reform these problems, and the recently released governor’s budget offered no new proposals for strategic changes, systems investment, or management improvements.”

For the department specifically, Howle recommends it revise its public dashboard to show how many claims are actually waiting for payment and catalogue the reasons for each call it receives. The department responded it will implement all of the audit’s suggestions and noted it has greatly stepped up fraud prevention efforts, catching over 357,000 fraudulent claims in the last three months.

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