Report: California UI Program's Problems 'Caused Hardship For Unemployed Workers'

By Madison Hirneisen | The Center Square, The Center Square California

August 9, 2022

(The Center Square) – California’s unemployment insurance program “faltered” during the two most recent economic downturns, resulting in "hardship for unemployed workers and their families,” according to a scathing report from the Legislative Analyst's Office on Monday.

"California’s unemployment insurance program, which provides temporary wages for unemployed workers, has become difficult to access due to the design of the UI’s program and policies by the Employment Development Department who oversees payments," the LAO’s in-depth report revealed.

By design, the state’s current UI program places “more emphasis” on minimizing costs to businesses and confronting fraud rather than “making sure eligible workers can easily get benefits,” the LAO found. As a result, containing costs for businesses – who finance the program – and pressure from the federal oversight agency to avoid errors led the department to focus on lowering costs and preventing fraud over ensuring workers have easier access to unemployment benefits.

"Failures of the current system were clear during the two most recent economic downturns, particularly during the pandemic when roughly 5 million workers had their payments delayed," according to the LAO. "During normal economic times, between 15-20% of workers who apply for UI experience delays," according to the report.

“These failures caused hardship for unemployed workers and their families, held back the economy and spurred frustration among Californians with their state government,” the report states.

"As unemployment claims surged during the early months of the pandemic, the department struggled to keep up, resulting in missing checks and workers spending hours on hold," CalMatters previously reported.

"Months later, the department admitted it had paid out at least $20 billion in fraudulent unemployment benefits," as reported by the Associated Press. Yet, despite this fraud during the pandemic, the LAO said that fraud in the state’s UI program is “historically uncommon,” accounting for less than 1% of claims.

The LAO’s report also found that recent actions by the state during the pandemic “suggest that getting payments to eligible workers is not a top priority.” The report notes several instances of this during the pandemic, including when the EDD denied 3.4 million workers benefits for not mailing in documents “when the department could not process its mail” and when the department froze benefits for over half a million workers that it flagged as fraudulent.

To address these issues, the LAO listed more than a dozen recommendations to improve the UI program. The recommendations include making the UI application easier by no longer asking workers to list detailed work history that the EDD already has, shortening the application and requiring employers to report layoffs to speed up the UI application process.

In a statement to The Center Square, the EDD said it agrees with the LAO's assertion that "EDD must balance the need to prevent fraud...with the priority to delivery payments in a timely and easy manner." The department also said many of the suggestions from the LAO, like reducing improper claim denials and limiting delays, "have been incorporated into the EDD's actions over the past year."

"EDD appreciates and will carefully review the LAO's ideas for further simplifying processes and speeding up the delivery of services to Californians," the department said in a statement.

This year's state budget includes $136 million for EDDnext, which the department says is a "major effort to modernize EDD and further improve the customer experience." The funding will be funneled toward improving call centers, developing additional tools to combat fraud and upgrading department training to increase the pace of application processing, according to EDD.

The focus of the work of The Center Square California is state and local-level government and economic reporting that approaches stories with a taxpayer sensibility.