What the Recall Candidates are Saying About the State’s Most Dysfunctional Agency

One of the hot button issues of the entire recall effort has been California’s Employment Development Department’s disastrous handling of the massive unemployment increase, a result of the pandemic and its concomitant state-ordered business lockdowns.

The mishandling – which managed to combine both the preventable loss to fraud of an estimated $30 billion and the failure to properly pay benefits to hundreds of thousands of qualified and deserving Californians – has been cited as one of the top three or four issues why the recall is on the ballot in the first place.

The litany of misdeeds by the state’s bumbling benefits bureaucrats stretches back 16 months, including a complete lack of fraud prevention tools, the failure to communicate coherently with the unemployed, the inexplicable suspension of benefits to millions of people, and, well, you get the picture.

Due to the importance of the issue, the California Globe reached out to a number of gubernatorial candidates and recall organizations with a pair of questions about the EDD mess. 

Here are the candidates’ questions:

Question 1 – How would have handled and/or tried to prevent the massive fraud and terrible claimant service problems of the EDD?

Question 2 – If elected, what will you do to revamp the EDD?

And here, in no particular order, are the candidates’ answers:

Doug Ose:

Q1: The Employment Development Department (EDD) is broken. Decisions by the people in charge have made the problems worse.

The failure to process claims in a timely manner reflects that the Democrats have done nothing since 2009 to fix known system problems. No one made it a priority. Then, it blew up in March, 2020.

Two other decisions are at the heart of the massive fraud that occurred. The decision to waive the requirement for evidence supporting a claim for benefits is at the heart of the fraud that occurred, and then allowing claimants to back-date their claims only made the problem worse. Whoever made these decisions should be fired.

Q2: EDD has four main duties: intake of claims, verification of claimant identity, verification of claimant eligibility, and payment of valid claims. The current system for processing claims is not up to the task. The best way to solve the problems at EDD is to stop trying to fix the unfixable and instead create a replacement system that incorporates scalable processing capacity and fraud prevention measures. The creation of such a replacement system will probably take a year. If California had confronted the problem when it first arose, then we would now be seeing measurable improvement. Unfortunately, our leaders chose the easy path of maintaining the status quo in the face of unprecedented job losses.

Major employers across the country effectively use data processing systems every day without falling victim to fraud. The technology exists to process these claims in a timely manner without fraud. We need to phase out the old system that is not meeting California’s needs. We need to phase in a new system that can intake a claim in a timely fashion, identify the claimant, verify eligibility and issue a check for valid claims. This isn’t rocket science. Do it now so we can end everyone’s PTS(ED)D.

Michael Loebs:

Q1: The pandemic exposed the inherent failures of our complex bureaucratic social safety net. Rampant fraud, waste, and inefficiency are at least as common as actually helping human beings. As someone who earlier this year attempted (and failed) to register for unemployment–and as someone with friends who have spent months of their lives on the phone on indefinite hold–I know firsthand that this system does not work and must be completely replaced.

Q2: Instead, I and the California National Party believe that California should replace the current system with negative income tax and a monthly universal basic income payment that gets money to people who need it when they need it, rather than treating those facing already hard times as if they were criminals. Combined with automatic Medi-Cal enrollment for all Californians, much of the human suffering, lost
time, and wasted money that affected so many of us, directly or indirectly, could have been avoided. And with the dismantling and replacing of the excessive government bloat required of the present
bureaucratic system, we could likely do so for a fraction of the cost.

Ted Gaines:

Q1: First and most important: I would not have pushed the business-crushing shutdowns that tore the California economy apart and forced hundreds of thousands of employees into the unemployment system. It’s doubly bad that the government created a surge and were then unequipped to handle.

And it’s tragic that at a time of such tremendous need, vulnerable Californians have been left to deal with a system so rife with preventable fraud, abuse, and mismanagement.

Years of inadequate verification measures and executive failures left our system clogged and vulnerable to all types of manipulation.

Instead of providing a safety net, we have a system in place that sends convicts unemployment checks right to their jail cells while struggling families are left on hold, unable to get the help they need for weeks or months – and all the while the taxpayer is left to foot the bill.

I would have not ignored the clear warning signs and recommendations over the past several years regarding California’s vulnerabilities at EDD. As the damning EDD audit makes clear, this crisis is not something that snuck up on California but is the result of years of poor vision and execution from the state.

Q2: I would direct the legislature to implement the California Auditor’s recommendations for EDD.

Also, California has paid out billions in fraudulent claims and borrowed tens of billions from the federal government to pay unemployment claims. Businesses will pay higher unemployment costs for years – possibly decades – until that federal loan is repaid. I would use California’s massive budget surplus to repay the federal government, so businesses can get back on their feet and start to hire again without bearing the burden of the government’s failures.

By implementing the Auditor’s recommendations and paying back our loan, we can help families, help businesses, restore accountability, and build an unemployment department that’s worthy of the importance of its mission.

Joel Ventresca  (answer is focused on question 2):

As governor, I would set up a criminal prosecution team outside EDD to aggressively pursue EDD fraud prioritizing the top 10 criminal rings involved. I will let individual criminals and criminal groups know that the State of California will be prosecuting EDD fraud and that the worst offenders will be sent to state prison. Part of the process would be to recover as much as possible of the stolen taxpayers’ money.

I will replace the top management of the department immediately. I will selectively replace middle managers as needed. The new department head will meet with me daily, including weekends and holidays, until the serious problems are addressed and solved.

I will keep the department open 24 hours-a-day and 7-days-a-week (including weekends and holidays) until the backlog disappears. I will increase staffing as needed. The qualified applicants intake process should be completed in 24 hours and qualified applicants should receive their first benefits within 72 hours.

I will eliminate all barriers (language, disability, and others) by making sure all applicants can get through the intake process quickly.

The Bank of America debit card system will be ended. Qualified applicants can receive their unemployment benefits by direct deposit, check-by-mail, or check pick-up by the applicant in-person.

Innocent minor errors by applicants will not lead to reduced payments.

Anyone who intentionally commits fraud will be cut off and prosecuted if appropriate.

Applicants will have a right to a face-to-face meeting within 72 hours of a request by an applicant.

As governor, I will halt government waste, fraud, abuse, inefficiency, mismanagement, and corruption.

I will conduct programmatic and financial audits of every section of EDD. The audits will be completed by outside auditors. I will implement all recommendations of audits if the changes make the department more efficient and customer service oriented. The audits and implementation of recommendations will be completed within 12 months.

Jenny Rae Le Roux:

Q1: I’m running for Governor to free Californians to live, work, and breathe again. The data doesn’t lie: Gavin Newsom has failed at managing the EDD.

I’m a leader who gets results – so I would have authorized spending for claims processing capacity in March 2020. A good leader mobilizes a team to plan ahead. In addition, instead of offering a no-bid contract for phone service to the same company that botched the 2013 computer upgrade, I would have opened a bidding war between providers to secure the best staffing support for the EDD at the best price.

I would have also mandated cybersecurity and identity verification systems for the EDD. Despite repeated fraud warnings from the federal government, the EDD waited 6 months and processed over 7 million claims before it began flagging addresses with unusually high numbers of claims. According to a recent audit, “the most egregious example” included 1,700 claims coming from a single address. Experts say fixes could have been implemented in as little as 4 days, but Gavin Newsom just didn’t seem to care.

Q2: I will take 5 steps to reform the EDD.

First, bring in a new leadership team with experience getting results. We must fix these issues.
Second, ensure the EDD institutes a training program so representatives know how to solve claims issues.
Third, update ancient computer systems that currently run on a 60-year-old programming language.
Fourth, implement state-of-the art cybersecurity, an ID verification system, and rapid employer notifications to eliminate fraud.
Fifth, reintroduce eligibility requirements for unemployment aid.

Jeff Hewitt:

Q1: In my experience, when you have a rush to service like we saw with the EDD claims you have to expand the number of processors. I would make sure we had accountants and auditors ready to preform basic due diligence, from the private sector, focused on outcomes and not on bureaucratic processes. It is my opinion that sending direct deposits to those in need is the fastest and cheapest way to provide for those who need relief monies. This brings up a question of “what happens to those without bank accounts, who are still entitled to relief?” The answer is simple, I would issue those people debit cards, or checks, but with a much higher threshold for security and identity checks. This plan would have saved Californian taxpayers billions of dollars in fraudulent claims.

Q2: This problem is systemic and widespread amongst just about every department in the state. We must focus on outcomes, not programs. I have seen this over and over again, state organizations not even looking at metrics. Often they act on some kind of faith that they are “doing the right thing”. I say NO! We must hold state departments accountable to metrics, and outcomes across the board. As Governor I would hold our department heads accountable, insisting that due diligence is not set aside in emergencies. Just like the math homework when we were kids, they will have to show their work

Kevin Kiley:

Q1: My team and I were on the front lines of the EDD crisis, working daily to help hundreds of my constituents get the benefits they so desperately needed. It was absolutely unconscionable that so many of the families I represent were not able to get benefits, while people in our state prisons were skimming off billions in taxpayer dollars.

I got to work immediately to demand an audit of the EDD and I coauthored a package of bills to make urgent reforms. These reforms sought to ensure individual data was protected, cross-check unemployment claims with correctional inmate data, and expedite the time in which qualified claimants received benefits. When the 2020 legislative session ended with no action on the issue, I called for a Special Session of the Legislature and asked my colleagues to keep working for the people of California.

Unfortunately, Governor Newsom failed to act with any sense of urgency. He refused to prioritize EDD reforms in his “historic” state budget, choosing instead to put Band-Aids on a broken system.

Q2: The EDD has been working on a “modernization” of its software for 11 years and was woefully unprepared to respond to the surge in demand over the past year. The result has been devastating for millions of Californians who are still waiting for benefits.

Other states resolved similar issues in a matter of days by partnering with the private sector on cloud-based solutions. As governor, I would unleash the power of California innovation to fix our state’s most daunting technological problems. I would also put in place leadership that serves the people of California, not leaders who are simply biding their time until they get an opportunity to serve in a national administration.

Finally, it is high time that we reform our civil service system in California state government. It is far too difficult to incentivize and reward good performance, and it is even more difficult to let employees go when they are not meeting the demands of the organization. Until we address the root causes of our broken bureaucracy, we will continue to see the same failing results.

Larry Elder:

Q1: It is a disgrace that Gavin Newsom’s draconian coronavirus restrictions forced Californians out of their jobs and homes, while the EDD paid up to $31 billion to fraudsters and criminals.

I would have implemented better safeguards against fraud. The agency suspended determinations of eligibility for most claimants, not surprisingly sending money to those who should not have received it. While states across the country all faced a similar challenge of releasing unemployment funds quickly to residents who were hurting from the COVID lockdown, California under Gavin Newsom has distinguished itself by the magnitude of the fraud perpetrated on its taxpayers.

Q2: As governor, I would revamp the EDD’s antiquated IT system, which created an unprecedented backlog and the absurdity of the agency not being able to automatically process some half of its claims online at the height of the pandemic. Gavin Newsom wants to simply throw more money at the problem. I will implement structural reforms to remove roadblocks to efficiency in the EDD’s and other state agencies’ access to technology. That means promoting public-private partnerships and overhauling the state government’s cumbersome procurement process, which currently favors Sacramento insiders over efficiency and innovation.

I would also fundamentally change the culture of government bureaucracy, where bad service and incompetence are accepted as the norm. Californians should never have had to put up with long waits on the phone with EDD representatives simply to be hung up on or not have their questions addressed; yet that was an all-too-common complaint during the pandemic.

While Gavin Newsom believes that our state government can run—and ruin—Californians’ lives without accountability, I will make sure that government agencies exist to serve the public, not the other way around.

Kevin Faulconer:

Q1: EDD has no centralized approach to preventing fraud. I’m going to change that. Other states check claims against prison inmate databases but EDD only implemented this tool months into the pandemic. Additionally, because EDD relies on outdated technology, it is prone to easily break. During the height of the pandemic, EDD suspended a key fraud prevention measure to help relieve the strain of processing claims. The State Auditor said that decision resulted in over $10 billion potentially fraudulent claims. If the EDD was more prepared to prevent fraud and had a more modern system, it’s unlikely California would have lost the estimated $30 billion in fraudulent claims that we saw under the current system.

Q2: EDD has been ignored by Sacramento for too long. Under my administration, we will prioritize EDD and begin the change the department’s culture after years of neglect. I know how important it is to receive your unemployment benefits when you’re already facing a crisis of being out of work. For more information, visit my website to learn more about my plan to make this the number one technological priority for the state when I’m Governor here: www.EDDReform.com

But Wait! There’s More!

Neither the Cox nor the Jenner campaign acknowledged our request for comment.  The Paffrath campaign replied but, in the end, did not return a comment.

Mike Nutter of RecallGavin2020.com, the organization that qualified the recall for the ballot, was asked a pair of slightly different questions. 

Here are the questions and his replies:

How big a role do you think the problems at the EDD played in the successful signature gathering effort?

The EDD mess played an incredible role in the signature gathering and it continues to drive the recall to this day.  The EDD scandal exposed how inept the Governor is in handling the issues that matter to average Californians.  It was obvious last April that the criminals were better at working the EDD system than the agency itself was and he did nothing about it.  He handed out millions in pandemic contracts to his friends for practically everything and he couldn’t be bothered to take care of the EDD.  It’s unconscionable and it has, and will, cost him dearly.

What do you think the EDD situation says about the practices and mentality of our state government?

It shows that the government of California is completely hobbled by politicians who care more about their careers than the people.  And it’s not just the EDD; the state refuses to fix any type of infrastructure – electric grid, freeways, reservoirs, and, in EDD’s case, technology systems.  It is this indifference of the elites that have controlled California for decades that has put us in the state we are in today and the EDD is just the most glaring example of that toxic attitude.

The Globe did ask Governor Newsom’s anti-recall organization, Stop The Republican Recall for a comment (a bit surprising that they’re apparently against recalling Republicans, but what’s in a name?).

Here are the two questions they did not see fit to reply to:

• When it comes to the issues at the EDD, what would you have done differently – if anything – to address the twin problems of massive fraud and terrible claimant services?
• If you remain governor (or even before the September vote), what is your plan to fix the EDD?