Government Waste

Dear Sacramento: Tossing Away $500 Million Is Why Your State Is Screwed

Bureaucrats can't get act together enough to recover huge sums in overpaid unemployment benefits.

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The bear symbolizes the sounds people make when they read about behavior of state bureaucrats.
Free Grunge Textures—www.freestock.ca / Foter / CC BY

California is billions in debt. Tens of billions of debt. Hundreds of billions of debt if you include state employee unfunded pension liabilities and health care costs. California has borrowed billions from the federal government in order to pay unemployment benefits in the state, because the state's own fund became insolvent in 2009, which makes this news from a state auditor particularly enraging.

A couple of years back, the Treasury Department expanded an offset program to help states recover unemployment overpayments. The Department of Labor calculated that more than $7 billion in unemployment benefits were inappropriately paid across the country in 2013, often times due to fraudulent claims. One might think, given California's dire financial situation, the state would jump at a program that would help them recover this money that should not have been paid out in the first place.

One would be wrong. An audit inspired by a whistleblower at California's Employment Development Department (EDD) determined that the state did not make much more than a superficial effort to try to participate in this recovery program. As a result, the state failed to recover hundreds of millions of dollars it had improperly paid. The state auditor calculated that California could have recovered $516 million between 2011 and 2013 through this program.

The audit notes that the state estimated participating in the program would have cost $322,000 to make modifications to participate in the program – but the program would have brought in around $100 million in the first year, more than covering the costs and helping the state pay down its unemployment debt.

And it wasn't like the state didn't know this program was available. It knew and apparently didn't feel particularly moved to push forward at getting this money back. The state auditor notes:

After being contacted by our investigators regarding EDD's lack of participation in the expanded program, EDD officials developed a plan for participating in the Offset Program to collect unemployment benefit overpayments by May 2014. However, in February 2014, EDD reported that it would not complete the information technology modifications necessary to participate in the expanded program until September 2014.

But at the same time as the EDD is overpaying unemployment claims, they're also accused of improperly denying claims. Another audit has been ordered to figure out why half of the agency's rejections are being overruled by administrative judges. The agency has a terrible reputation for delayed payments and not even answering phone calls. As the Associated Press notes, a recent software upgrade that was supposed to help improve the system did the exact opposite, and temporarily left 150,000 claims unpaid.

Read the auditor's full report here (PDF).

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  1. in around $100 million in the first year

    A fart in a hailstorm when compared to the tsunami of California’s unfunded obligations.

    California will either have to declare bankruptcy at some point, or they’ll have to just become the federal government and start printing themselves dollars– the United States of California. Has a nice ring to it. We’re all Californians now.

  2. I can’t remember a single new computer system rollout in this state that turned out to be an actual improvement. CA has spent millions on new systems that were scrapped before they were fully deployed, and this is the home of Silicon Valley!

    Oh, but didn’t you know, Governor MoonBeam balanced the budget!

    1. The media often doesn’t know the difference between debt and deficit. And don’t get me started on unfunded liabilities.

  3. …the state did not make much more than a superficial effort to try to participate in this recovery program.

    Maybe they didn’t want to be a burden to the federal taxpayer.

  4. California is billions in debt. Tens of billions of debt. Hundreds of billions of debt if you include state employee unfunded pension liabilities and health care costs.

    Sorry Shackford. I have it on good authority that California is a model of fiscal discipline and efficiency. Those massive unfunded liabilities of which you speak are just dirty rethuglican lies. Also all the ice cream in the state is delivered by the magic bullet train after it comes straight out of Moonbeam’s ass.

    1. What, they were able to make their minimum payment on the credit card! Deficit handled, bitch!

      1. But we are getting a train!

        1. Because you made the minimum payment! Solvency!

    2. A bunch of libertarians with money should pool their resources and buy California after it declares bankruptcy.

      1. And sell it for scrap?

        1. Well, if you owned it and all that debt were cleared out by bankruptcy, I think it would be a pretty nice piece of real estate. I’d evict some people and maybe make some other changes, like repealing their entire constitution and legal code, but those are details.

          1. Ooh, then I’d be able to build my theme park.

            1. Exactly. And I can build mine, which I call Cimmerialand, which is like Disneyland, except with Conan instead of Mickey. And yes, Schwarzenegger will be involved.

              1. So instead of It’s a Small World, we can listen to the lamentation of the women?

                1. Yes, that’s in Great Sorrowland.

              2. Governor Schwarzenegger or actor Schwartzenegger?

                1. Conan the Barbarianegger.

  5. Just wait until we have our high speed train from Merced to Fresno built. It’ll be nothing but smooth sailing from there to fiscal soundness.

    1. They’ll need to upgrade the airports out there to handle all the people coming out to ride the train.

      Just think of the concession fees!

      1. That first leg will not be operational, so if they actually do get it built I’m going to do my best to get an old railroad handcar and offer rides.

  6. California is beautiful, and that’s part of the problem. The state gov’t feels entitled to see how much abuse the populace will put up with in exchange for the scenery and weather. It also means that a significant portion of the populace turns out to be people who like watching their gov’t heap on the abuse.

    1. “California is beautiful, and that’s part of the problem. The state gov’t feels entitled to see how much abuse the populace will put up with in exchange for the scenery and weather.”

      This is the same sort of process the Fed used on the housing market; ‘exactly how much can we fuck it up before it collapses?’
      And then they blame it on ‘the *free* market’.

  7. Jesus Christ, and my College Democrat friend just posted a picture on Instagram of the wall in her room: covered in posters and slogans for Jerry Brown, Nancy Pelosi, Gavin Newsom, and other dickheads from the Bay Area and Sac-town.

    Her caption: “You’re either a patriot or a Republican.”

    1. Fashion and social signalling.

    2. Welp, I’m not a Republican, so I must be a patriot!

      And, as a patriot, I declare that the likes of Jerry Brown, Nancy Pelose, et al. are an abomination and a pox on this once-great nation.

    3. People deeply underestimate how committed Democrats are. This is why Obama sailed to victory with record high gas prices, a shitty economy and high unemployment, when according to the Presidents’ Almanac, it wasn’t supposed to happen. Well, that and the GOP shoveling coal into the Democrats’ access.

      1. Access… ha! Furnace. I’m having a discussion at my desk about AD access. This is what happens when I work while I’m trying to do my job.

      2. Unfortunately Republicans are equally committed.

        “Democrats are extremely vulnerable on ACA and gun control. Let’s campaign on right-to-life, traditional marriage, immigration, and double down on the war on drugs.”

        1. Good point. Of course the Republicans are losing on those issues, where the Democrats are winning on $15 minimum wage. So the commitment of the voters may not be the same…

  8. It knew and apparently didn’t feel particularly moved to push forward at getting this money back.

    It probably would have required someone in state government to do some fucking work for a change.

    1. Or, “What a pain in the ass. First we have to jump through all the hoops to get the money back, then we’ll have to spend it again.”

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