California is billions in debt.
Tens of billions of debt.
Hundreds of billions of debt if you include state employee
unfunded pension liabilities and health care costs. California has
borrowed billions from the federal government in order to pay
unemployment benefits in the state, because the state’s own fund
became insolvent in 2009, which makes this news from a state
auditor particularly enraging.
A couple of years back, the Treasury Department expanded an
offset program to help states recover unemployment overpayments.
The Department of Labor calculated that more than
$7 billion in unemployment benefits were inappropriately paid
across the country in 2013, often times due to fraudulent claims.
One might think, given California’s dire financial situation, the
state would jump at a program that would help them recover this
money that should not have been paid out in the first place.
One would be wrong. An audit inspired by a whistleblower
at California’s Employment Development Department (EDD) determined
that the state did not make much more than a superficial effort to
try to participate in this recovery program. As a result, the state
failed to recover hundreds of millions of dollars it had improperly
paid. The state auditor calculated that California could have
recovered $516 million between 2011 and 2013 through this
program.
The audit notes that the state estimated participating in the
program would have cost $322,000 to make modifications to
participate in the program – but the program would have brought in
around $100 million in the first year, more than covering the costs
and helping the state pay down its unemployment debt.
And it wasn’t like the state didn’t know this program was
available. It knew and apparently didn’t feel particularly moved to
push forward at getting this money back. The state auditor
notes:
After being contacted by our investigators regarding EDD’s lack
of participation in the expanded program, EDD officials developed a
plan for participating in the Offset Program to collect
unemployment benefit overpayments by May 2014. However, in February
2014, EDD reported that it would not complete the information
technology modifications necessary to participate in the expanded
program until September 2014.
But at the same time as the EDD is overpaying unemployment
claims, they’re also accused of improperly denying claims. Another
audit has been ordered to figure out why half of the agency’s
rejections are being overruled by administrative judges. The agency
has a terrible reputation for delayed payments and not even
answering phone calls. As the Associated Press
notes, a recent software upgrade that was supposed to help
improve the system did the exact opposite, and temporarily left
150,000 claims unpaid.
Read the auditor’s full report here
(PDF).
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