EDD failed for years to prepare for spike
State auditor report blasts agency for being unready to deal with recession-spawned claims surge
California’s labor agency was woefully unprepared for the recession-linked spike in jobless claims in 2020 and may continue to face a high backlog of unpaid unemployment claims, according to a scathing report released Tuesday by the state auditor.
The state auditor listed an array of failures and mishaps at the Employment Development Department, which has consistently faltered in its efforts to pay benefits to workers who lost their jobs in record numbers amid coronavirus-linked business shutdowns ordered by state and local government agencies.
The EDD’s problems during 2020 and so far in 2021 include a broken call center that can only handle a fraction of phone calls from jobless California workers, a computer page hobbled by glitches, a wave of fraudulent claims, and a mammoth backlog of unpaid unemployment claims. Yet these were not surprising new difficulties. “Key problems related to the EDD’s management of the unemployment insurance program in 2020 were also present during the Great Recession of 2008 and 2009,” the state audit determined. “Nonetheless, EDD did not take adequate steps to address these deficiencies.”
State lawmakers quickly pointed to the audit as evidence of the agency’s lack of preparation.
“EDD has known that they had these kinds of problems for over a decade,” said state Assemblymember Jim Patterson, a Republican whose district includes eastern Fresno County and parts of Tulare County. “They were repeatedly warned. They knew it and they got caught flat-footed.”
Among the primary findings in the state auditor’s report:
• Significant weaknesses in EDD’s claims processing and workload management leave the agency at risk of a continuing backlog of claims.
• The EDD responded to the surge in claims by
suspending certain eligibility requirements, and many Californians now are at risk of needing to repay benefits.
• The department took uninformed and inadequate steps to resolve its call center deficiencies.
• Despite multiple warnings, the agency failed to prepare for an economic downturn.
Adding to the woes at the EDD was the disclosure Monday that 9.7 percent of the payments it issued from early March 2020 through mid-January 2021 were fraudulent — amounting to a jaw-dropping $11 billion.
“EDD failed to act comprehensively to prepare for downturns and to address known deficiencies,” the state auditor reported on Tuesday. “In March 2020, EDD had no comprehensive plan for how it would respond if California experienced a recession and UI (unemployment insurance) claims increased correspondingly.”
The state agency’s broken call center also received a harsh assessment from the state auditor.
“The claim surge exacerbated EDD’s struggles at answering calls to the point at which the call center effectively stopped providing service to almost all callers,” according to the state auditor. “EDD answered an average of only 0.5 percent of total calls per week” in March and April when the biggest surge of layoffs occurred.
Increasing the number of workers taking phone calls last year, from 1,270 in January to 5,640 in October, didn’t make much of a difference.
“The number of calls EDD answered increased only marginally” despite the dramatic increases in staffing levels, according to the audit. “Hundreds of thousands of callers were unable to speak with an agent each week.”
Another nagging problem that has hounded the agency is the mammoth backlog of unpaid unemployment claims. Even worse, the EDD appears to have an incomplete grasp of just how many unpaid claims it must still pay.
“EDD has presented unclear and inconsistent information about the backlog,” the audit report said.
Some of the department’s short-term fixes to cope with the claims surge depend on the temporary suspension of certain critical requirements and procedures related to verification of a claimant. The auditor warned that the EDD’s short-term fixes won’t be available in the future. When that happens, processing could slow again, and claims could mount.
“EDD remains at risk of its backlog of claims continuing or increasing,” the auditor warned.
The state labor agency’s lack of preparation caused the EDD’s weaknesses to metastasize amid a tsunami of unemployment claims, according to the audit.
“The EDD’s areas of weakness became key deficiencies in its response to the claim surge, and these were a cause of serious frustration for unemployed Californians in need of assistance,” the audit stated.
Some state lawmakers are demanding immediate oversight hearings regarding the ongoing difficulties at the EDD.
“The release Tuesday of the State Auditor’s report on the EDD backlog confirms that it is past time for the Legislature to do what is needed to help resolve EDD’s chronic issues,” state Senate Republican leaders said in a letter to key legislative committees.