What went wrong at EDD? An investigation of its managerial meltdown

This story appeared on Calmatters

The offices of the Employment Development Department in Sacramento on Jan. 10, 2022. Photo by Miguel Gutierrez Jr., CalMatters

In summary

Politicians love to promote new laws, programs and services but pay little attention to whether what they have wrought works as promised. The California Employment Development Department is a sad case in point, as a new CalMatters investigation details.

In theory, we humans practice politics as a pathway to governance – providing an array of laws, regulations and services to protect and otherwise enhance the lives of the governed.

In practice, politics often – too often – become all-consuming exercises that bear only the faintest relationship to governance. Case in point: the U.S. Congress.

An aspect of that disconnect is the eagerness of those in office to build their images by constantly offering up proposals for new laws, services and programs while ignoring whether earlier laws, services and programs that officialdom birthed are performing as promised.

Often they are not, but even when informed about the shortcomings of design and/or implementation, officials tend to minimize or brush aside the criticism, fearing that acknowledgement would be a sign of weakness. Management and oversight just don’t have the political sex appeal of some shiny new notion that promises boundless benefits.

Examples of the syndrome abound, particularly in a state as large and diverse as California.

The state’s bullet train project is certainly one. Billions of dollars have been consumed and various structures have been built but the project has become a zombie, something that’s neither alive nor dead.

Oroville Dam is another. It was poorly designed and shoddily constructed in the 1960s and those who managed it knew of its deficiencies, particularly spillways that couldn’t handle Feather River flows from extraordinary storms.

But the interest groups that provided financial support for the dam in return for water were evidently not willing to spend the money necessary to make it safe.

Officialdom didn’t make it a priority, even when safety issues were raised in 2005 during the dam’s relicensing. In 2017, it came extremely close to a collapse that could have killed thousands of people.

There are many others but the poster child for governmental dysfunction has to be the Employment Development Department, which imploded during the COVID-19 pandemic as millions of Californians lost their jobs and needed unemployment insurance benefits.

EDD managed to simultaneously deny countless unemployed workers of the life-sustaining benefits to which they were entitled and parcel out countless billions of dollars in benefits to clever fraudsters.

A preview of EDD’s dysfunctional tendencies was felt during the Great Recession a decade earlier and the state’s watchdogs, the state auditor’s office and the Legislature’s budget analyst, issued timely warnings of potential disaster. But three governors and hundreds of legislators couldn’t be bothered to fix them and the result was cruel chaos.

In the aftermath of the near-catastrophe at the Oroville Dam, an exhaustive and damning analysis of what went wrong was commissioned. EDD deserves similar scrutiny.

After a year of painstaking research and interviews, CalMatters investigative reporter Lauren Hepler has written a four-part series that delves into what happened and why. She also catalogs the pain that EDD’s managerial collapse imposed on people who needed unemployment insurance benefits when the state shut down their jobs.

“Once COVID hit,” the series’ foreword summarizes, “public records and interviews reveal that California’s system was initially friendlier to scammers than to many real workers – and then the state got so aggressive that many workers struggled to prove their own identities. New financial reports requested by CalMatters show that amid the chaos, the EDD and its unemployment payment contractor Bank of America split a half a billion dollars in revenue, though the bank says it ultimately spent more to cover fraud losses. Another large EDD contractor, Deloitte, made more than a quarter of a billion dollars on tech contracts and emergency contracts to build systems that state reports say buckled during the pandemic.”

Will it be fixed or will EDD melt down again when another recession hits?

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