Chaos in unemployment insurance

Jul 9, 2020 | Cal Matters

In summary

California’s unemployment insurance system, already weak, has been overwhelmed by a flood of claims for payments due to the COVID-19 recession.

Long before the COVID-19 shredded California’s economy, the state’s unemployment insurance program was deeply troubled.

Thanks to a decades-long political stalemate, the unemployment system, managed by the Employment Development Department (EDD), had scant reserves to handle a recession. The unemployment fund had been sharply depleted during the Great Recession and EDD officials had warned for years that the fund was deficient, but nothing was done.

Moreover, the Great Recession had exposed serious flaws in EDD’s outdated computer system, and while promises were made to upgrade it, little had been done when COVID-19 struck and hundreds of thousands — eventually millions — of laid-off workers applied for benefits.

During the first three months of the partial economic shutdown ordered by Gov. Gavin Newsom in March, “one in four Californian workers has filed (an unemployment) claim…reaching levels of the Great Depression,” according to a June study by the California Policy Laboratory, a multi-university think tank.

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The result has been chaos. EDD has struggled to keep up with the deluge of claims for benefits, both those financed by the state through payroll taxes and extra payments hastily authorized by Congress and President Donald Trump.

Those seeking unemployment benefits have complained of making dozens, even hundreds, of calls to check on their claims, only to be frustrated by an inability to get through and/or hangups mid-way through conversations with EDD workers, many of them newly hired.

“They told us to be patient and wait because they’ve been working so hard to get us paid in a timely manner,” Robert Good, who worked as a waiter for a Denny’s franchise and has been trying to get answers from EDD since March, told the Sacramento Bee. “It’s June 1. I have no money for food and bills. The EDD keeps adding new extensions and programs, but tells those of us stuck and waiting nothing.”

Not surprisingly, those in the same sinking boat as Good began pestering their state legislators for help and legislative staffers tried to work through EDD’s tangled bureaucracy. But when EDD clamped a lid on how many such cases it would handle — one a week per legislator — that didn’t sit well in the Capitol.

After legislators complained publicly, EDD quickly modified its one-a-week decree, telling legislators in an email that the agency “has implemented a recent recommendation from legislative staff to further expedite the resolution of your older cases.”

The blowup added another layer of tarnish to the EDD’s reputation.

Although reporters have only scant opportunities to question Gov. Gavin Newsom these days, some have tried to elicit a response about the unemployment claim crisis.

“We have been very aggressive on a daily basis to try to tackle the magnitude of the calls that have come in,” Newsom said in late April. “We are just dealing with an unprecedented call volume (and) we’ve got to figure this out.”

More than two months later, it apparently is still being figured out because claimants are still being frustrated and are even posting recordings of their unsuccessful calls on Twitter and Facebook. Nationwide data indicate that while California is not the slowest state in processing unemployment claims, it’s close to the bottom.

No one could have anticipated the sudden flood of unemployment claims from COVID-19, but given the experiences of the Great Recession, particularly the shortcomings in EDD’s computer system and the unemployment fund’s weak condition, much more should have been done to get ready for the inevitable next recession.

One wonders whether it will be figured out by the next recession.

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