Millions may have to repay California jobless aid

Millions of people might have to repay some or all of the jobless benefits they got during the coronavirus pandemic because California’s unemployment agency stopped enforcing some eligibility rules so it could process claims quicker, according to an audit released Tuesday.

As millions of people filed for unemployment benefits during multiple government-ordered business shutdowns, state officials decided to stop doing some of the time-consuming work necessary to ensure those who applied for benefits were eligible to get them.

Those decisions helped the agency pay claims faster, but it still had to go back later and check that people were eligible. So 10 months after the pandemic began, the Employment Development Department has amassed a massive backlog of those checks. In that total, 2.4 million people might have been ineligible for benefits at all and 1.7 million might have been overpaid. It’s likely some people fall into both categories.

State Auditor Elaine Howle said Tuesday that California has “no clear plan” to address the backlog, saying it “represents a workload never before seen by the department.”

“That could have significant consequences for claimants,” the audit said.

Once people start getting benefits, they have to check in with the unemployment agency every other week to certify they are still eligible. The audit found the agency automatically paid people for eight weeks last spring without requiring those certifications, resulting in nearly 1.7 million people getting $5.5 billion in benefits.

From March to December, the agency also stopped enforcing some rules that would have made people ineligible for benefits, including making sure people did not voluntarily quit a job or had refused a suitable job without a good reason.

As of Dec. 3, the agency has flagged at least 12.7 million eligibility issues affecting 2.4 million people. Using the agency’s estimate of an average of 30 minutes to resolve each issue, it would require more than 3 million hours of work — or more than 342 years — to resolve even half of it.

California Labor Secretary Julie Su on Monday estimated the state has paid $11.4 billion in fraudulent claims during the pandemic, representing 10% of the more than $114 billion in benefits paid since March.

But that fraud is not associated with the eligibility issues identified in the audit, Employment Development Department spokeswoman Loree Levy said.

Department Director Rita Saenz, who was appointed last month after the previous director retired, told lawmakers Tuesday that the agency has not decided how it will handle these accounts.

Usually, people overpaid by the state have up to two years to pay it back. California can waive repayment under certain conditions if there is no fraud involved.

But the audit says it’s unclear how many people would qualify for waivers because the agency has not analyzed all of the claims. State law gives the agency two years to issue overpayment notices in cases that do not involve fraud.

Howle, the state auditor, said the decision to stop enforcing some eligibility rules to speed up payments was “drastic,” especially because the agency appears not to have adopted meaningful reforms in the 10 years since the last unemployment spike during the Great Recession.

Howle said previous audits of the agency have revealed its lack of planning for recessions, poor management of call centers and a laborious training program for new employees that hindered its ability to respond to any surge in claims.

Saenz told lawmakers that she didn’t know how the agency “would have prepared for something that has never happened and has never happened on this scale,” referring to the unprecedented size, speed and scope of the job losses during the pandemic.

She hinted in a response letter that the blame lies partly on the state Legislature, which usually only pays significant attention to the agency during a recession.

“We agree that in order to function in bad times, the government needs to make investments in good times in infrastructure, technology, funding, and staff training,” Saenz wrote.

Assemblyman Jim Patterson, a Republican who has been in the Legislature for eight years, said lawmakers did not give the agency more money or resources because it did not ask.

“We can only do our job if we have access to these individuals and that they tell us the truth,” he said. “They knew (the problems), they ignored it and they did not tell the Legislature the truth about the seriousness of what they knew.”

Assemblyman David Chiu, a San Francisco Democrat, noted that the agency got $260 million in the last decade to upgrade its computer system, “with obviously little to show for it.”

“You have in the Legislature very willing partners to work with you,” he said.

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