How California EDD failed to stop fraud and help the unemployed

From CalMatters investigative reporter Lauren Hepler:

You think you know the story: As pandemic shutdowns rocked California, the state’s unemployment system came unglued, delaying millions of payments and allowing massive fraud.

But now, as the California Employment Development Department begins an unprecedented five-year, $1.2 billion overhaul, a year-long CalMatters investigation uses internal documents to tell the story behind the state’s COVID unemployment crash — what went wrong, what the state’s trying to fix and whether any of it could happen again. 

Thousands of pages of emails, meeting notes and state contracts requested and analyzed by CalMatters reveal how the long-troubled EDD became the focal point — and then the punching bag — for state efforts to stave off economic collapse amid the biggest wave of fraud in U.S. history. The agency was primed for disaster, records and interviews show, by years of missed red flags, failed reforms, a fleeting anti-fraud effort and inconsistent funding and oversight. 

Then came a 2,300% surge in COVID jobless claims and, state reports have found, emergency application changes that in some cases made it easier for scammers to apply for benefits than real workers. Amid the chaos, as few as 1 in 1,000 people calling the EDD for help got through. To this day, no one knows how much was lost to fraud.

• Greg Williams, EDD’s former deputy director of Unemployment Insurance: “The best way I can describe it is like going to a gunfight with a squirt gun.” 

State contracts analyzed by CalMatters also show that debit card contractor Bank of America collected nearly $500 million in revenue during the pandemic, then kicked back $187 million to the EDD. The bank said it still lost money due to fraud and high expenses, and the EDD confirmed to CalMatters that it will be moving to a new payment contractor by 2025. Meanwhile, Deloitte — which the state previously paid more than $152 million to upgrade some unemployment systems — won another $118 million in emergency COVID contracts, bringing its total EDD earnings to more than $270 million.

With a familiar business-versus-labor fight underway over whether to shrink or expand the job safety net while California stares down $19 billion in unemployment debt, EDD officials are attempting to rebuild the system while contending with waning political interest.

EDD Director Nancy Farias said the agency has adopted a modular approach to reform that “leaves less room for a big failure.” It will only work, she told CalMatters in an interview, with parallel efforts to simplify the system.

• Farias: “You can have the best IT in the world, but if you don’t change your policies and procedures, it does not matter.”

Read more about what went wrong, the impact on real people and the possible fixes in the full series. And our engagement team has more on how this year-long investigation was done. 

I’m CalMatters politics reporter Yue Stella Yu subbing again for Lynn.

A pro-Florida Gov. Ron DeSantis ad in June slammed former President Donald Trump for supposedly supporting Anthony Fauci, showing images of Trump hugging the doctor who became the face of America’s response to COVID-19. 

Except the images were not real — they were deep fakes generated by artificial intelligence.

That ad — and an increasing use of AI-generated content in political campaigns — propelled California Common Cause to launch an institute today to combat AI-driven disinformation.

The California Institute for Technology and Democracy (or CITED) aims to gather input from political, civil rights and tech experts; educate voters on deep fakes and disinformation; and develop “unbiased, nonpartisan” regulatory policy recommendations, Jonathan Mehta Stein, California Common Cause executive director, told CalMatters Monday.

The institute is based in California for two reasons: The state is the tech hub of the nation, and it has often driven federal policy changes, he said. 

The group picked Election Day to launch the center because it wants to remind voters that they are a year out from an “enormous consequential presidential election,” Stein said.

• Stein, in the interview: “If you’re a conspiracy theorist who believes — for example — that the 2020 elections were stolen or that our elections are not secure, you can now create fake, but confirmatory evidence of your conspiracy. You can create a fake video of an elections official caught on tape, saying that vote-by-mail ballots are subject to fraud or voting machines are not secure. And you can substantiate any theory you want in a matter of moments.”

It’s Election Day in Shasta County — a county led by a Republican majority on the Board of Supervisors who, fueled by unfounded election fraud claims, abandoned the county’s Dominion voting machines and decided to hand count the ballots. Gov. Gavin Newsom signed a law last month limiting counties from hand counts, but the board chairperson said he believed the law did not apply to Shasta County.

Shasta County Clerk Cathy Darling Allen, a Democrat, disagrees, telling supervisors last week: “I am deeply disappointed by the chaos and division created by the actions of this Board. I will continue to serve our voters in a nonpartisan manner, but I reject efforts by members of this Board to berate me and my staff, who work tirelessly to facilitate effective democratic processes in this county.”

California Common Cause and other groups have called on Secretary of State Shirley Weber’s office to monitor today’s voting.

From CalMatters justice reporter Nigel Duara: 

A U.S. Supreme Court case that could decide the future of a California law banning people under domestic violence restraining orders from owning guns begins today, and the law’s supporters are girding for the conservative-majority court to rule against them. 

The 5th U.S. Circuit Court of Appeals sided with gun rights supporters in a Texas case earlier this year when it declared unconstitutional a federal law forbidding firearm possession by people under a variety of restraining orders. 

“This Supreme Court has presented some very difficult rulings for the people of this nation,” Attorney General Rob Bonta said at a press conference on Monday. “They changed the analysis with which we look at Second Amendment cases.”

California has more gun laws than any other state. In 2021, the Supreme Court struck down a New York gun law on concealed carry permits and sent California’s Democratic legislative supermajority scrambling to draft new gun control legislation that conformed with the ruling. 

As part of a campaign to gin up support for the federal and California gun laws, Bonta on Monday signed onto an amicus brief with 24 other state attorneys general and held a press conference with gun control advocates to introduce a new report on the connection between guns and domestic violence in California.  

• Bonta, in a statement: “The data is clear: Domestic violence abusers should not have firearms. When an abuser has access to a firearm, it endangers the safety and lives of those around them.”

Among the report’s findings: 

• While California’s count of domestic violence-related homicides dropped by 61% from 1993 to 2019, the number of domestic violence calls involving firearms increased by 80% between 2019 and 2021. 
• The majority of people killed in domestic violence related gun homicides between 2013 and 2022 were women, 83% of whom were killed by a current or former intimate partner.
• Consistent with its ranking of the most homicides per capita in California, Kern County also had the highest per-capita rates of domestic violence calls, and “a uniquely large percentage of those calls involved reported use or threatened use of firearms.” 

You wouldn’t think people would pass up free money, but a lot of students don’t apply for all their financial aid for college.  

But a California law requiring all high school seniors to apply for — or opt out of — financial aid is boosting the number of applications, report Haydee Barahona and Li Khan of CalMatters’ College Journalism Network.

Last year, the law led to a 9% increase in the Free Application for Federal Student Aid at 1,400 public schools, including smaller schools in rural areas such as Borrego Springs High School in northeastern San Diego County, which saw a 20-percentage point increase.

Challenges remain: Some families may not know they qualify for financial aid, and some schools lack the personnel necessary to keep them informed.

• Andrea Urquidez, who teaches a senior class at Borrego Springs High School: “It was something very eye-opening for them to see and know that this is money that they don’t have to pay back.”

And as the federal government streamlines the financial aid program, delays will give students one less month to apply and school counselors less time to help them complete the applications.

That said, the federal overhaul could simplify the application process and reduce confusion over how much aid an eligible student can receive. To account for the delays, the application priority deadline to submit financial aid applications has been extended through April 2, 2024. Read more in Haydee and Li’s story.