California's unemployment system flaws leave thousands in limbo

An understaffed, ill-equipped and unprepared state agency has led to fraud, failures, and an inability for thousands to receive unemployment benefits, one year after the coronavirus pandemic began.

The flaws facing California’s Employment Development Department (EDD) date back more than a decade. 

That’s when money was approved by the legislature to overhaul the outdated and what some lawmakers have described as a "dinosaur system." However, over three different administrations, no major investments or upgrades were made.

The pandemic and lockdown that began in March 2020 caused record unemployment claims to flow in by the hundreds of thousands each week. By April, there were three million claims.

Repeatedly, KTVU and lawmakers heard from unemployed people who were unable to reach the EDD for assistance.

"I’ve called over 300 times," Bettie Haywood who’s unemployed said. "I’ve sent numerous emails through their system."

Overwhelmed, the state blamed staggering call volume and technology limitations for the delays.

A large percentage of legitimate claimants went months without receiving any money and some said they could barely buy food, pay bills, or provide for their families.

Soon it was discovered rampant fraud was at play among sophisticated criminals, prison and jail inmates, and even a former EDD employee. In total, an estimated $31 billion has been syphoned off by suspected fraudsters so far.

Numerous cases involve unsuspecting Californians receiving dozens of EDD debit cards or documents with full Social Security numbers delivered to their mailboxes. In one case, a woman from Staten Island, New York received several debit cards.

The state developed newer, stricter, and securer policies including an enhanced verification process incorporating third-party, ID.me. While fraud was significantly cut back, it also stalled hundreds of legitimate claims from being processed and payments issued.

"These two issues, even a year later, remain the main issues," attorney and former EDD Director Michael Bernick said. "That is paying quickly and balancing that with the anti-fraud protocols."

As a result, there’s a significant backlog that even now is more than 930,000 claims.

Ariel Sides is one of those people whose claim is in limbo. She said she sent in verification documents six different times and is now forced to decide what bills to pay.

"The entire system needs a huge overhaul," Sides said. "I think the pandemic has been really eye-opening in terms of how terrible it is."

The agency’s weaknesses and rampant dysfunction were highlighted in a recent independent state auditor’s report.

The department, now under new director Rita Saenz, is undergoing restructuring and a rebuilding of its system, which could take a couple of years.

"I’m big on getting action," Saenz told lawmakers in a hearing. "Our current customer services are simply unacceptable."

Brooks Jarosz is an investigative reporter for KTVU. Email him at brooks.jarosz@fox.com and follow him on Facebook and Twitter: @BrooksKTVU