We are almost a year into the pandemic, and Californians continue to struggle.
Small businesses, especially restaurants, have suffered steep losses; many have permanently closed. An estimated 1.7 million Californians remain unemployed and over 150,000 Californians remain homeless.
Even before the pandemic, roughly one-third of California residents lived at or near the poverty line.
Job losses due to the lockdown have only swelled the ranks of those struggling to pay bills for housing and utilities and who now must rely on food banks just to survive.
Meanwhile, under Gov. Gavin Newsom’s watch, the Employment Development Department (EDD) failed to process a backlog of claims for hundreds of thousands of unemployed Californians while sending out between $11 billion and $31 billion in unemployment benefits for phony claims that included payments to organized crime rings in Nigeria, China, and Russia.
The agency even paid fraudulent claims to death row inmates.
Given California’s feckless political leadership, combined with breathtaking incompetence at the EDD, it is no wonder that international criminals seized the opportunity to steal billions of dollars in unemployment benefits meant for struggling Californians.
As the crisis grew, EDD shuttered its doors and left phones unanswered. The agency called it a “reset” in September when it refused to accept new claims for two weeks.
The state government had plenty of forewarning about the problems. In May 2020, the United States Secret Service alerted EDD that organized criminals were exploiting weaknesses in their systems to steal taxpayer monies. But despite additional warnings from the FBI, the U.S. Department of Labor, the Beverly Hills Police, local district attorneys, and thousands of citizens who filed reports of suspected fraud at the EDD’s online portal, Gavin Newsom did nothing to tackle the widespread vulnerabilities.
This was far from a victimless crime. Thieves stole the identities of unsuspecting Californians to file fake claims. Newsom’s EDD even paid a fraudulent claim made in the name of California Sen. Dianne Feinstein.
This month, EDD generated nearly 8,000,000 tax forms associated with unemployment payments. But EDD cannot determine which of these represent victims of fraud. These innocent individuals may be re-victimized by being forced to pay taxes on benefits they never received.
Historians will debate for years whether California’s response to the COVID-19 pandemic was an overreach or whether it needlessly inflicted harm. But the negative impacts on employers, employees, school children, working parents, and, indeed, our entire social fabric cannot be overstated.
That damage is immeasurably worse because of the troubling mishandling of unemployment insurance benefits, a critical safety-net program that other large states facing the similar challenges of the pandemic managed without similar problems.
In California, it is obvious that Gov. Newsom’s mismanagement and inaction failed to protect against fraud that cost taxpayers billions of dollars, funds that should have gone to households in desperate need of help.
We don’t expect government to be perfect. But the EDD scandal must now be added to the seemingly endless list of dysfunctional actions by our political leadership — especially at the top.
Jon Coupal is the president of Howard Jarvis Taxpayers Association and Kevin Faulconer is the former mayor of San Diego (2014-2020).
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