California’s unemployment program remains a hot mess

Kevin Kiley, a freshman Republican congressman who represents Sacramento suburbs and components of the Sierra foothills, posted a attribute swipe at Gov. Gavin Newsom final week on X, previously often called Twitter.

Reacting to information that California nonetheless owes the federal authorities $18 billion in loans taken out to pay unemployment insurance coverage advantages throughout the COVID-19 pandemic, Kiley mentioned, “For this reason Newsom is the Deadbeat Governor. After he and Julie Su squandered $30 billion in fraud, he took out a federal mortgage to make up for it — solely now to default on that mortgage. In consequence, California companies are being taxed to pay it again.”

The posting was about half reality and half falsehood, however the actual story is equally damning, not solely of Newsom and Su, the one-time Newsom administration official whose nomination as U.S. secretary of labor has been stalled within the Senate, however of California’s decades-long mismanagement of unemployment insurance coverage.

The Employment Growth Division, which was a part of Su’s managerial portfolio, imploded when thousands and thousands of Californians abruptly misplaced their jobs three years in the past after Newsom shut down a lot of the state’s financial system.

Naturally, these jobless employees filed for unemployment insurance coverage (UI) advantages however EDD botched the job, adversely affecting the lives of their households. To maintain state UI advantages flowing, nevertheless haphazardly, the state borrowed about $20 billion from the federal authorities.

EDD’s managerial breakdown, in the meantime, was compounded when it tried to manage one other pot of federal cash that expanded UI advantages to these not ordinarily entitled to them.

Distribution of federal advantages was wracked with tens of billions of {dollars} in fraud. EDD’s rapidly expanded, undertrained workers was underneath stress to ship cash and it mainly gave it away to anybody who requested — together with jail inmates.

EDD was left with an enormous mess on the federal advantages and an enormous debt to the feds for the state advantages. Kiley — and plenty of different critics — conflate the 2, claiming that the state borrowed cash to offset the fraud. That’s merely not true; they’re two distinct messes.

Many states borrowed cash to take care of UI fee throughout the pandemic, however none even near California’s whole, and all however California and New York have since repaid their loans. New York’s remaining debt is a couple of third of California’s $18 billion.

When states refuse to pay their UI money owed, the federal authorities raises payroll taxes on their employers to gather its cash, however one may argue that the present debt shouldn’t fall on employers as a result of the state induced it by shutting down the financial system.

When the state was having fun with big funds surpluses, it may have repaid the debt. It’s now dealing with funds deficits, so employers are on the hook, and Kiley’s “deadbeat governor” epithet could also be justified.

In the meantime, EDD’s managerial shortcomings additionally proceed. Final week, State Auditor Grant Parks issued an replace of points and companies that pose excessive dangers of failure and singled out EDD for a very harsh appraisal.

“EDD has not taken ample corrective motion to stop the substantial danger of great detriment to the state and its residents,” Parks declared. “Corrective motion is ample when it prevents a danger — equivalent to the chance of fraud — from presenting a considerable danger of great detriment. As a result of the possibly fraudulent funds have already occurred, haven’t been absolutely recognized, and have largely not been recovered, EDD’s corrective motion will not be ample.”

Kiley’s misguided posting undercut his personal credibility. He may have been correct and uttered the identical criticism of Newsom, whose efficiency on UI was and is shameful for somebody who aspires to nationwide political management.

Dan Walters is a CalMatters columnist.