Just how dysfunctional is California’s unemployment department?

Apparently so dysfunctional that Bank of America, which since 2010 has had an exclusive contract with the state to deliver unemployment benefits through prepaid debit cards, wants to end the contract — even though the Employment Development Department just renewed it for another two years.

The news, first reported by ABC 7 in San Francisco, comes about a month after a federal judge — as part of a class-action lawsuit first reported by CalMatters — ordered Bank of America to stop using an automated fraud filter that blocked tens of thousands of legitimate claimants from accessing their benefits after they reported suspicious account activity. The bank said it received 230,000 claims of debit card fraud from October 2020 through March 2021.

Bank of America’s desire to end the contract is striking, given that both the bank and the state rake in merchant fees whenever an unemployment debit card is swiped. EDD has pocketed millions in fees amid the pandemic: It earned more than $47 million from March 2020 through April 2021, even though the claims of more than 1.1 million jobless Californians remain in limbo.

However, Bank of America told state lawmakers it lost “hundreds of millions” of dollars on the contract last year as it scrambled to respond to California’s rampant unemployment fraud, which experts say could total upward of $31 billion.

  • Bank of America: “We have advised the state that we would like to exit this business as soon as possible.”

Ultimately, the cost of California’s unemployment fraud will likely fall on taxpayers. And businesses will likely shoulder the staggering weight of California’s unemployment insurance debt, which experts estimate could reach $26.7 billion by the end of the year.

Meanwhile, EDD is still struggling to answer the millions of calls it receives each week — so much so that California’s 80 state assemblymembers were just given the green light to hire two staffers each to handle EDD problems.

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The coronavirus bottom line: As of Wednesday, California had 3,721,006 confirmed cases (+0.04% from previous day) and 63,259 deaths (+0.03% from previous day), according to a CalMatters tracker.

California has administered 42,087,777 vaccine doses, and 59.8% of eligible Californians are fully vaccinated.

Plus: CalMatters regularly updates this pandemic timeline tracking the state’s daily actions. We’re also tracking the state’s coronavirus hospitalizations by county and lawsuits against COVID-19 restrictions.

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1. State prison rules upheld for now

Image via iStock

California can keep its rules that give 76,000 inmates the opportunity to shorten their prison sentences — for now, according to a superior court judge’s tentative Tuesday ruling. The order is a temporary rebuke to Sacramento County District Attorney Anne Marie Schubert, a 2022 attorney general contender who sued Gov. Gavin Newsom’s administration with 43 other district attorneys — though the judge said there is a “likelihood” the prosecutors will ultimately prevail. In challenging the new California Department of Corrections and Rehabilitation policy, which was quietly adopted in May, the prosecutors said it violated state law and endangered public safety. The Newsom administration said it encouraged good inmate behavior.

Meanwhile, Attorney General Rob Bonta on Wednesday established a team to investigate officer-involved shootings that result in the death of unarmed civilians and joined a coalition of 36 other states to sue Google for violating state and federal antitrust laws.

2. CA considers sterilization reparations

Stacy Cordova, whose aunt was a victim of California's forced sterilization program that began in 1909, holds a framed photo of her aunt Mary Franco on July 5, 2021, in Azusa, Calif. Franco was sterilized when she was 13 in 1934. Franco has since died, but Cordova has been advocating for reparations on her behalf. Photo by Jae C. Hong, AP Photo
Stacy Cordova holds a framed photo of her aunt Mary Franco on July 5, 2021, in Azusa. Photo by Jae C. Hong, AP Photo

Some of the thousands of women forcibly sterilized by California’s government could receive reparations payments of up to $25,000 each once Newsom signs into law the $263 billion budget recently passed by state lawmakers, the Associated Press reports. The budget sets aside $7.5 million for a reparations program that experts say could benefit around 600 women — of the more than 20,000 people California sterilized under a eugenics law deeming certain residents unfit to have children, the vast majority are dead. But even after the state repealed its eugenics law in 1979, sterilization continued in state prisons, where the Center for Investigative Reporting found at least 148 women were sterilized between 2006 and 2010 without required approvals.

Meanwhile, California on Friday will continue considering how the state might compensate African Americans for slavery and its lingering effects at the second meeting of its first-in-the-nation reparations task force.

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CalMatters events

July 13: How can California support its small businesses as they recover from a recession and global pandemic? Join a CalMatters and Milken Institute virtual conversation with leading policymakers, including Small Business Administration Administrator Isabel Casillas Guzman. Register here.

CalMatters commentary

CalMatters columnist Dan Walters: As California water interests joust over management of the state’s supply, two decrees from Washington change the game.

Water shouldn’t go to the highest bidder: California’s congressional delegation should co-sponsor the federal Water Act to make the state stop entrusting public water to corporate interests that fail to manage it responsibly, argues Alexandra Nagy of Food & Water Watch.

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Other things worth your time

Mask mandate back at California Capitol after outbreak of nine new COVID cases. // Sacramento Bee

Bay Area city may explore allowing undocumented residents to vote in local elections. // San Francisco Chronicle

California governor kicks off $1 billion statewide cleanup plan. // Associated Press

California Republicans feud over party direction ahead of high-stakes recall. // Politico

New California SEIU union leader vows to end political spending. // Sacramento Bee

Former Rep. Harley Rouda missed deadlines to report stock trades. // Orange County Register

New poll numbers indicate school board members in danger if recall election is held. // San Francisco Chronicle

Critical race theory stirs debate in Southern California schools. // Daily News

A family wellness check: How California invests in treating parents and children together. // California Healthline

How an abandoned Los Angeles building became an MS-13 ‘destroyer.’ // Los Angeles Times

Suburban police killings are more common yet face less scrutiny in Bay Area. // San Francisco Chronicle

Rural areas, counties ask for help as California fire season heats up. // Capitol Weekly

This California zoo is vaccinating its animals against COVID-19. // Travel + Leisure

See you tomorrow.

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Emily Hoeven wrote the daily WhatMatters newsletter for three years at CalMatters . Her reporting, essays, and opinion columns have been published in San Francisco Weekly, the Deseret News, the San Francisco...