It’s ‘chaos’: California’s unemployment agency hired thousands, but didn’t fix core problems
Ten years and still a mess. Today’s loudly voiced criticisms of California’s unemployment insurance system have a familiar ring to those who have been around a while.
“The problems in the state unemployment insurance program are major,” said a state Assembly Insurance Committee report from 2010 describing a state agency overwhelmed by demand from jobless Californians.
Skip to 2020: “The State must deliver this benefit to those who qualify within a time frame that’s relevant to the well-being of the claimant, and it was failing to do that for too many Californians,” said a report by the strike team Gov. Gavin Newsom appointed to investigate recurring problems at California’s unemployment department.
Phone lines are jammed. Confusion persists over benefits and eligibility. The technology is a relic. Just like a decade ago.
Why can’t anyone fix the state’s Employment Development Department?
Ask those involved and they often cite others as the problem, or point to a broken political system that makes it difficult to get things done.
Newsom’s strike team brought fresh eyes to the old problems with a 109-page report published Sept. 19 that details a host of recommendations to expedite claims and prevent fraud. But the department’s past shows the innovation-minded governor will have to spend a lot more time, money and political capital to make a permanent fix.
Improving the unemployment department is like fixing “a 12-link chain where you’re trying to replace two links not related to each other,” said David Lanier, who led California’s labor agency during Gov. Jerry Brown’s administration.
Agency budget documents, which The Sacramento Bee obtained through a records request, show a pattern of short-term fixes for staffing and technology problems that cause backlogs and delays.
The department’s headcount swelled from 8,739 approved positions to 12,334 between 2009 and 2010 when the Great Recession sent the state’s unemployment rate past 12%.
History is repeating itself. The department expected to add 1,904 jobs by the end of September and 3,000 by the end of October, according to the strike team’s report. That’s on top of the 7,732 people the department employed a year ago.
Newsom’s strike team report outlines problems with the approach. Experienced employees with the skills to resolve problems spend their time training new employees instead of fixing claims.
“Productivity for key tasks had gone down despite adding staff,” the report states.
The department has been patching together technical fixes since the system was designed in the 1980s. Today, employees need to learn their way around an 800-page training manual to be able to resolve problems with claims.
Issues often go unresolved for months. The department’s backlog of unprocessed unemployment claims requiring manual attention grew by an average of 10,000 each day during the strike team’s investigation, despite its hiring spree. The department does not expect to work down the backlog until January.
“The system is in utter chaos,” said Assemblyman David Chiu, D-San Francisco, a frequent critic of the department.
The feeling is bipartisan. “EDD has known about this for years and did nothing. They ignored audits. They ignored concerns in hearings by members of the Legislature,” said Assemblyman Jim Patterson, R-Fresno, who has been involved in unemployment issues.
There are four key reasons EDD has been unable to function smoothly all these years:
Technology
The unemployment insurance system has a confusing user interface, and since key processes aren’t automated, mistakes send users into a purgatory where they must wait for one of the trained employees to address their claim.
Piecemeal updates, many performed by contractor Deloitte, have only made the system more difficult for employees to use, according to Newsom’s strike team.
“Since each new system depends on everything that came before, each successive layer tends to become more constrained, less capable, and more fragile,” the strike team wrote in its report.
“Meanwhile, since old systems have multiple new systems that depend on them, they have become difficult and expensive to modify.”
Turnover in the Capitol
From the late 1990s until 2012, Assembly members were limited to six years in office and state senators to eight. That meant not only a loss of expertise, but new members who lacked the outrage of previous officeholders.
Chairmen would come and go quickly, meaning that there were few if any longer-serving committee chairmen who would know how to put more pressure on an agency to perform, said Rep. Mark DeSaulnier, D-Calif.
He was a state senator from 2008 to 2015 and chaired its Labor and Industrial Relations Committee.
Throughout government, he found, agencies “don’t have a large political constituency. They think time will just pass on.”
No political pressure
Unemployment insurance is “an issue without a permanent constituency,” said Kathryn Edwards, economist and unemployment expert at the RAND Corp.
Most unemployed workers eventually get jobs, and those with jobs “don’t readily identify with being potentially unemployed in the future. Who is advocating for these changes when the unemployment rate is 4%?” she asked, other than policy experts.
Unemployment issues face other political problems. When a recession ends, many states have to repay federal loans they used to pay benefits when their own funds ran out. That could mean higher taxes on business, Edwards explained, hardly a step politicians want to publicize.
Erratic federal funding and regulations
Unemployment insurance is generally a federal-state partnership. Washington pays administration costs, and state benefits are usually funded by a tax on employers.
But federal programs have endured years of budget cuts, or have had to live with temporary funding, which makes it hard to plan and pay for improvements.
The state also has to deal with often vague federal regulations to explain eligibility and other matters.
Gov. Brown’s administration often provided funding for more personnel and more efficient technology. But counting on federal help became unreliable.
“We ran into money problems, and decided to do partial fixes,” Lanier said.
State officials seemed confused at times. A 2014 California State Auditor’s report found that in 2012, EDD delayed participation in a U.S. Treasury Department program.
Because of that delay, “EDD missed an opportunity to collect an estimated $516 million owed to the state in unemployment benefit overpayments made to claimants,” the auditor said.
Can Newsom get it right?
Democratic lawmakers say they have some optimism that the strike force recommendations will finally lead to a strong fix.
“The recommendations are solid,” said Chiu.
Michele Evermore, senior researcher and policy analyst at the National Employment Law Project, praised its report for being transparent about the department’s shortcomings.
“The administration actually requested the strike force, and they’re doing it all in public,” she said.
Newsom reiterated Sept. 21 his full support.
“We inherited an old, dilapidated system, not dissimilar to many other states in this country. It’s a wake up call ... for this nation, not just the state of California to substantially make progress in terms of large scale IT procurement,” Newsom told reporters.
Patterson was less certain the latest fix would work. “This (previous fixes) have been a large failure and now we’re in a fire drill,” he said.
The department has been pointing to a broader overhaul that has been in planning phases for the last three years as the way forward.
The strike team recommended a “reboot” for the project, suggesting the department pause it so employees can focus on getting benefits to jobless Californians who need immediate help.
Then, when the department manages its backlog, the strike team says “EDD must begin the process of truly transforming claimants’ experiences.”
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