The EDD crisis could have been avoided

Employment Development Department headquarters at the State Capitol complex in Sacramento. EDD headquarters. Google Maps

The action most emblematic of Governor Gavin Newsoms’ nearly five-year term in office is the descent into chaos of the California Department of Employment Development as a result of the Covid-19 virus outbreak in the spring of 2020.

Beginning with $20 billion in fraud in the system, a new year-long investigation by Calmatters reveals how the agency was prepared for disaster, with records and interviews showing that years of missed warning signs, failed reforms, fleeting financial fraud and inconsistent funding and oversight.

The California Budget and Policy Center reported at the time that when Newsom ordered mass business closures, 1.7 million workers found themselves in unemployment lines. A new CalMatters investigation, based on internal EDD documents, found that the number of unemployment claims submitted to the EDD increased by 2,300%. Of the unemployed who called EDD for benefits they paid for through taxes collected from each paycheck, only one in 1,000 arrived. State senators and assembly members were also flooded with requests for help. CalMatters added: “To this day, no one knows how much has been lost to fraud.

The state still owes $19 billion in debt to the federal government for unemployment insurance. Between now and 2031, it will cost an average of $945 per employee in higher UI taxes, according to the Legislative Analyst’s Office. Incompetence has its price.

The silver lining of the UI crisis is that Newsom vetoed Senate Bill 799, which would have paid unemployment benefits to striking workers. In his Sept. 30 veto message, Newsom wrote that the bill could increase California’s outstanding federal debt, projected at nearly $20 billion, significantly increasing taxes on employers.

Finally, this is another example of how in California, which is still a world leader in computers and the Internet, the government fails to properly configure its systems. Just last April, a report by State Auditor Grant Parks criticized the California Department of Technology for failing to properly oversee state IT projects. He found that this led to delays, cost overruns, and systems malfunctioning.

Instead of taking garbage to China, Newsom should make fixing perennial problems like EDD his top priority.