California’s attempt to claw back more than $20 billion in unemployment insurance (UI) payments from those who didn’t qualify for benefits has flopped, with 80 percent of the 1.4 million recipients contacted failing to respond to the government’s request to prove their eligibility.
The federally funded Pandemic Unemployment Assistance (PUA) program was designed to help people, such as small business owners and self-employed independent contractors, who wouldn’t normally qualify for Employment Development Department (EDD) benefits.
The PUA program expired last fall, but many of the 2.9 million Californians who received the benefits weren’t qualified to receive them.
Only about 280,000 PUA recipients have provided proof. Of those who did respond, about nine out of every 10 were deemed eligible to receive the benefits, according to the Sacramento Bee.
The state has reported about $20 billion in suspected EDD fraud and appealed to PUA recipients in November to prove they had legitimately applied for and received benefits. Recipients were warned that in some cases, the money might have to be repaid—with a 30 percent penalty if the state found recipients intentionally “gave false information or withheld information” to get the money.
In December, state Sen. Patricia Bates (R-Laguna Niguel) told California Insider host Siyamak Khorrami the actual level of fraud could cost California businesses and taxpayers as much as $30 billion to bail out EDD.
“This is an employer tax, essentially,” Bates said. “It’s a huge amount. The taxpayers have probably the lowest burden but our employers have a huge burden, and this is really, really impactful to our small businesses, when they are just recovering.”
Initially, federal law required only that EDD obtain documentation from PUA applicants who sought more than the minimum benefit amount of $167 a week. Those who did not ask for more were not required to provide proof or work or documentation verifying their income.
A press release issued by the California Governor’s Office of Emergency Services on April 28, 2020, stated applicants did not need to submit any documents to EDD with PUA applications.
The federal government has since asked for more proof from recipients that they had either worked or planned to work as they had indicated in their applications for PUA benefits.
According to the California State Auditor, “EDD’s data show that out of a total $111 billion paid during the pandemic, from March 2020 through December 2020, it paid about $10.4 billion for claims that it has since determined could be fraudulent.”
The fraud happened despite warnings from the U.S. Department of Labor to states “at least twice in the early months of the pandemic that it had not relaxed its expectations related to fraud prevention in light of the pandemic,” according to the auditor’s report.
The labor department issued the two warnings in April and May of 2020.
“Despite these repeated warnings, EDD did not take prompt action to enhance safeguards against illegitimate benefit payments,” the report states.
Data shows that EDD responded slowly to increased risk of fraud as claims surged. According to the report, “EDD did not make any substantive changes to its fraud detection practices until late July 2020—four months after the pandemic-related shutdowns led to a surge in UI claims.”
Meanwhile, district attorneys in Sacramento, Kern, El Dorado, and San Mateo counties and the U.S. Attorney of the Eastern District of California have reported widespread unemployment fraud within county jails and prisons in the state.
“When will the madness end?” California Assemblyman Vince Fong posted on Facebook on Nov. 24: “EDD sending unemployment benefits to convicted murderers, rapists, and death row inmates. The clown car of mismanagement and fraud continues at the EDD. California needs a new direction!”