Irate California lawmakers on Wednesday shared heartbreaking stories of constituents living out of of their cars while trying in vain to get their unemployment benefits approved by the state, questioning top officials from Gov. Gavin Newsom's administration about why they blocked legitimate claims while approving billions of dollars in payments to fraudsters.
Employment Development Director Rita Saenz, who took over last month after the previous director retired, repeatedly said she could not answer questions about what happened before she was hired. But she vowed to lawmakers: “This will never happen again.”
Lawmakers held a marathon public hearing on Wednesday to review two scathing audits of California's unemployment agency that highlighted the state's slow response to the mountain of claims that came in during the pandemic and the multiple mistakes it made in a ill-planned effort to catch up. Those mistakes, California State Auditor Elaine Howle said, made it much easier for criminals to get paid from fake claims.
Howle said the problem is with management, noting the department, like a lot of state agencies, is “just entrenched in their traditional processes.”
State lawmakers repeatedly asked Saenz and other top officials at the department to say what their plan was to fix the problems and to make sure they never happen again. But Saenz was light on details, saying “we will be prepared next time.”
“I'm not big on a lot of plans. I'm big on getting action,” Saenz said, adding she would use the audit as a “blueprint” to make changes at the department.
Her response angered some lawmakers, who noted the audit criticized the agency for not having a plan to ramp up operations during a recession, despite having more than a decade to plan for it since the last one.
“I don't accept that this is the blueprint. This is correcting what should have been corrected before,” said Assemblywoman Tasha Boerner Horvath, a Democrat from Encinitas. “When I hear that, I get very, very concerned.”
California had a historically low unemployment rate of 3.9% at the start of 2020 after 10 years of economic growth coming out of the Great Recession. But that changed quickly in March and April when the state lost 2.6 million jobs after Gov. Gavin Newsom issued the nation's first stay-at-home order because of the pandemic.
Since then, the Employment Development Department has processed more than 19 million claims and paid more than $114 billion in benefits. The department wasn't prepared to handle that surge, since it relied mostly on a manual process of reviewing claims. Yet the audit shows the agency waited four months before it automated that system. And in the rush to approve backlogged claims, the department relaxed a key fraud prevention safeguard because leaders did not understand how it worked.
State officials say the state has paid at least $11 billion to people it has been unable to verify their identities, which the department says is likely fraud. Millions of other people might have to pay back some of their benefits because the agency overpaid them, sometimes through no fault of their own.
“Should people be pissed off because they did everything right and then what happened was EDD screwed up and, you know, of course they should be. You can't blame them for that," Saenz said.
The agency has made some changes. Federal guidelines say people filing legitimate unemployment claims should receive their first payment within 14 to 21 days of their application. In October, California met this timeline just 40% of the time. By Dec. 31, however, the state met the timeline 76% of the time. The goal is to get above 87%.
“It is encouraging to see that we are at least going in the right direction,” said Carol Williams, the department's chief deputy director of operations.
The state installed a new identity verification software system called ID.me in October, and since then the department said it has stopped 357,000 fraudulent attempts to file unemployment claims. But after the department froze benefits for 1.4 million people at the end of December for suspicion of fraud, the ID.me system has been slow to verify the legitimate claims that were suspended by mistake.
Assemblyman Marc Berman, a Democrat from Palo Alto, said one of his constituents who lost his benefits has been forced to sleep in his car, a similar story shared by multiple other lawmakers.
Williams said it was a “data-driven decision” to suspend those claims. but conceded “the net was too wide.”
“We promise to continue to work on those filters so that we are only identifying those that have the absolute, highest level of risk of fraud,” she said.
