California EDD is still struggling to deliver benefits, stop fraud

From CalMatters investigative reporter Lauren Hepler:

Money vanishing from EDD debit cards. Big-dollar bets on the technology that powers California’s job safety net. Billions in unemployment debt with no clear path forward.

No, this isn’t a pandemic flashback. 

It’s today’s unsettled reality for the California Employment Development Department and the workers and businesses who still rely on it. A year after CalMatters investigated the EDD’s unemployment crash, legislators have moved on but key issues remain unresolved.

When it comes to fraud, California was let off the hook after the federal government agreed to absorb billions in losses from scams targeting pandemic programs. But now, workers are reporting newer issues with debit card fraud, even after ex-EDD payment contractor Bank of America bowed out early this year.

Lea Bitton was navigating a high-risk pregnancy when $4,000 disappeared from her debit card managed by new EDD contractor Money Network — an ordeal that made her one of at least 74 Californians who have filed lawsuits or complaints this year about Money Network and its government debit cards to the federal Consumer Financial Protection Bureau. 

Financial regulators haven’t yet analyzed more recent fraud reports. The EDD and Money Network say the fraud is more limited in scale, and that claimants should report all concerns.

• Matthew Loker, fraud attorney: “It’s deja vu a little bit. It’s a difficult problem, but it shouldn’t be the consumers who are left holding the bag.”

While workers play whack-a-mole with fraud, a new report warns that the state is approaching a bigger financial breaking point. 

California is still more than $20 billion in debt to the federal government after taking on loans to cover pandemic unemployment benefits, costing taxpayers $1 billion in annual interest. Now, as the dust settles and people are back at work, the system is on track to keep losing $2 billion a year as it fails to bring in enough revenue to cover expenses, according to the report by the California Legislative Analyst’s Office.

• Chas Alamo, LAO principal fiscal and policy analyst: “If we had a UI tax financing system that wasn’t broken, these costs wouldn’t exist. This is entirely avoidable.”

To dig out of the financial hole, the LAO recommends simplifying the state’s 1980s-era tax system and raising California’s lowest-in-the-nation unemployment tax base — a pitch that could finally force a reckoning for legislators torn between anti-tax business groups and labor advocates who want to expand the safety net.

Read more on the state of EDD in the story.

California prisons are no longer deducting money they give to prisoners upon release, reports CalMatters local news fellow Cayla Mihalovich.

As a small but crucial lifeline during their first few days of freedom, former prisoners are given a $200 stipend, known as gate money, to buy basic necessities. But until this fall, prisons took some of the cash if people did not have civilian clothes or transportation. And some prisoners never received payment at all.

Two developments helped push the policy change, issued in a memo to top prison officials obtained by CalMatters. In September, a class-action lawsuit was filed against the California Department of Corrections and Rehabilitation alleging that it unlawfully docked fees from over a million people since 1994. 

That same month, the new state budget gave the corrections department $1.8 million for clothing and transportation costs for the next year. The measure also directed the department to stop withholding cash from formerly incarcerated people. 

The memo does not address whether people who had money taken can get it back. One was John Vaesau, a lead plaintiff in the lawsuit, who says he did not receive any gate money when he was released from Folsom State Prison in June 2023.

• Vaesau: “We don’t want them to think they got away with anything. We want them to at least pay for what they got coming, not only for us but for everybody who came before us and after us.”

Learn more about gate money for prisoners in Cayla’s story.

For all the talk of bipartisan unity and the good vibes as the new Legislature was sworn in Monday, California legislators didn’t avoid infighting entirely.

Sen. Marie Alvarado-Gil, a Modesto Republican, rankled Democrats when she switched parties in August, and ripped her old party on the way out. The Latino Legislative Caucus immediately booted her as a member because she has “chosen to affiliate with an extremist, right-wing political party that constantly attacks and scapegoats our Latino community.”

Monday, Alvarado-Gil had a run-in with the Senate’s No. 2 Democrat Lena Gonzalez, the Latino caucus chairperson. Alvarado-Gil later went online to accuse Gonzalez of trying to kick her out of the Senate break room. 

• Alvarado-Gil, on social media: “It looks like the grand wizard of the Latino KLAUCUS Gonzalez doesn’t like being called out on her shocking behavior. She even went as far as to ‘put me on notice’ and challenge me to ‘take it outside.’” 

Tuesday, Senate leader Mike McGuire made the tiff even more public by calling on Alvarado-Gil to apologize for her “online racist attack” and for Republicans to condemn her words.

• McGuire, in a statement: “There is absolutely no excuse for a member of the California Legislature to invoke one of the worst terror organizations in our nation’s history. … Senator Alvarado-Gil has enough troubles as it is and she has crossed yet another line, which will not be tolerated.”

Gonzalez responded later Tuesday on social media, thanking McGuire and asserting that “there was no ‘beef’ or ongoing disagreement.” She added: “This was unwarranted, inexcusable and hateful behavior.”

On Jan. 1, a new law will take effect creating a first-in-the-nation designation for California colleges that “excel at providing academic resources to Black and African American students.” To qualify as a Black-Serving Institution, colleges must dismantle barriers that prevent Black students from attending and graduating colleges at equal rates as their non-Black peers, report Lylah Schmedel-Permanna and Jasmin Shirazian of CalMatters’ College Journalism Network.

Colleges pursuing the designation must either have a Black student enrollment of at least 10% or have at least 1,500 Black students. The schools must also have established programs dedicated to Black student success; meet as yet-determined Black student retention and graduation rates; and have a five-year plan to increase those rates.

California State University established a new office to oversee the application process. Eligible colleges will be selected by a governing board.

Unlike Hispanic-Serving Institutions, the designation will not be recognized by the federal government or lead to more federal funding. According to the office of Steven Bradford, the former Democratic state senator of Inglewood who wrote the law, private nonprofit colleges are also allowed to apply for the designation.

• Bradford: “It’s going to be an environment that’s going to be welcoming, that’s going to be supportive. I only wish that had existed when I entered college over 40 years ago.”

Learn more about Black-Serving Institutions in Lylah and Jasmin’s story.