Three Republican bills in state senate to change EDD

Grove (R-Bakersfield), Wilk (R-Santa Clarita) and Nielsen (R-Tehama) all pen bills to bring change to EDD mired in fraud; governor pledges $305 to EDD fix in May budget revision

SACRAMENTO – Three republican state senators have penned three bills to combat the rampant fraud that mired California’s Employment Development Department (EDD) during periods of heightened unemployment in 2020 from the impacts of the coronavirus pandemic.

Governor Gavin Newsom has also pledged $305 million to clear EDD’s backlog, implement a direct deposit system and improve access for foreign language speakers in the May budget revise showing California’s $75.7 billion surplus, most of which has been awarded to taxpayers. Newsom has also indicated $35 million will be used to assist local governments in piloting basic income programs, popularized by former Stockton mayor and current Newsom adviser Michael Tubbs.

Progress has been made in reducing the number of unemployment insurance claims. Pending action from EDD for more than 21 days is down from over 1 million claims in February to 225,525 as of May 30. But there is still more progress to be done as 905,884 claims were still awaiting claimant certification before being paid out as of May 22. That is up 2,682 from the week prior.

The latest bill to hit the state senate floor is Sen. Scott Wilk’s (R-Santa Clarita) SB-58, which aims to prevent fraud by not allowing EDD to use full social security numbers in its correspondence.

“I was shocked to learn that EDD still includes full social security numbers on its correspondence, despite being warned by the state’s Auditor in 2019 that this practice increases the risk of fraud,” said Wilk in a press release on the state senate approving SB-58.

A Jan. 2021 State Auditor report claimed that of the $111 billion paid out in unemployment insurance (UI) during the pandemic in 2020, EDD data shows that about $10.4 billion was paid for claims that it has since determined fraudulent.

The state auditor report claims that under normal circumstances, some of EDD’s benefit fraud detection efforts might have allowed it to detect impostor fraud. EDD performs daily reviews using California employer data and weekly reviews using nationwide employer data, using Social Security numbers to identify overlap between EDD’s benefit data and employer databases to attempt to determine if individuals are continuing to receive benefits by failing to report that they have returned to work.

During the pandemic, this system was quickly overwhelmed. More than 840,000 matches were generated between March and November 2020, illustrating that hundreds of thousands of claimants were either collecting UI benefits while working or had their identities stolen and impostors were using those identities to collect benefits.

By the time EDD began addressing fraud in late July, the state had already received 7.7 million claims, according to the state auditor report. The move was to automate the process to stop payment on certain suspicious claims, a responsibility previously carried out manually by only two staff members reviewing daily reports. The auditor report claims that since daily reports could contain more than a thousand claims a day, EDD may have allowed many more fraudulent claims to collect payments without being checked before it automated this process.

Sitting in the State Assembly is Senator Shannon Grove’s (R-Bakersfield) SB-39, which would require EDD to cross check unemployment insurance claims with state prison rolls, a demographic thought to be responsible for a significant portion of the billions paid out in fraudulent claims.

“The State Auditor has made it clear that EDD was both poorly managed and vulnerable to fraud especially when the COVID-19 pandemic hit,” Grove said in a press release. “Given the department’s historic failure and continued unwillingness to implement audit recommendations, it is critical that the Legislature hold EDD’s feet to the fire to better serve unemployed Californians.”

In November 2020, nine county district attorneys signed a letter announcing UI fraud involving tens of thousands of inmates and hundreds of millions of dollars. In December, EDD and the California Department of Corrections and Rehabilitation (CDCR) signed a data sharing agreement for CDCR to share names and social security numbers of current inmates to EDD. Grove’s SB-39 would require the Director of Employment Development to cross-check CDCR data to verify that a UI benefits applicant is not an inmate currently incarcerated in state prison before making any payments.

SB-232, penned by Senator Jim Nielsen (R-Tehama), still making its way through the senate appropriations committee, has yet to see the senate floor. The bill would give 2022 deadlines to EDD to identify and implement fixes to its systems, improve call center operations with trained staff, and develop multiple contingency plans for recessions and fraud.

To receive and assess fraud reports, EDD had dedicated only one staff position, which became vacant in July, according to the state auditor report. Having only received 6,000 UI fraud reports in 2019, EDD started consistently receiving more than 1,000 a day by September 2020, topping out at 1,800 in a single day. EDD had yet to address more than 77,000 fraud reports as of last November.

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