A federal strike team is descending upon California amid mounting concern that the states Unemployment Insurance program has become a breeding ground for fraud, waste and mismanagement.
According to Western Journal, the Department of Labor is now moving aggressively to scrutinize Californias troubled system after years of warnings and a staggering buildup of debt. Financial issues and potential fraud in Californias unemployment insurance program will be fully examined. The previous administration turned a blind eye toward failing Labor programs: This ends now, Secretary of Labor Lori Chavez-DeRemer said in a Labor Department news release.
The secretary framed the intervention as a necessary step to protect both workers and taxpayers who have been forced to underwrite Sacramentos failures. Immediately, we are engaging a specialized strike team to uncover any potential fraud or abuse and quickly moving to protect the American worker and taxpayer, she said.
Chavez-DeRemer also signaled that Washington expects a fundamental overhaul of how California manages unemployment benefits. I look forward to restoring the California UI programs integrity and financial health, she said.
Californias Employment Development Department, which administers unemployment benefits, has already been cited by the Labor Department for poor performance and systemic weaknesses. In addition to operational failures, the state has repeatedly tapped the Unemployment Insurance trust fund financed by state payroll taxes to cover its share of benefits.
Because Californias political leadership refused to reform the system or curb abuse, the state has been forced to borrow $21 billion from the federal government to keep the program afloat. That borrowing now triggers higher federal unemployment taxes on California employers, effectively punishing businesses and workers for the states mismanagement.
The state auditor has formally designated the Employment Development Department as a high?risk agency, underscoring the depth of the problem. A recent audit report concluded that EDDs fraud prevention approach during the pandemic was marked by significant missteps and inaction that led to billions of dollars in unemployment benefit payments that EDD later determined may have been fraudulent.
The same report acknowledged that the department still cannot get a firm handle on the scale of the damage. Further, we also reported that EDD has been unable to accurately quantify its inappropriate UI payments, the report said.
The auditors office did not mince words in its assessment of the agencys stewardship of taxpayer funds. EDD is a high-risk agency because of its mismanagement of the UI program, the audit said.
The report stressed that the departments inability to track improper payments has broader fiscal and oversight implications. Specifically, EDD is unable to reliably estimate improper payments under the UI program, thus adversely affecting the States financial statements as well as impairing efforts to independently evaluate the efficacy of EDDs own fraud prevention activities, the auditor wrote.
In a stark warning, the audit concluded that Substantial Fraud Risk Exists in EDDs UI Program. It detailed basic safeguards that were either ignored or dismantled during the pandemic surge in claims.
For example, the program did not block addresses used to file unusually high numbers of claims, and it removed a safeguard preventing payment to individuals who had unconfirmed identities, the report said. As a result, the department allowed the payments of potentially fraudulent claims, estimated at tens of billions of dollars, most of which have yet to be recovered.
All of this unfolded even as California collected roughly $290 billion in federal COVID relief, according to Fox News, a windfall that was supposed to stabilize the state and protect workers. Instead, loose oversight and progressive governance appear to have created fertile ground for fraudsters while leaving honest taxpayers on the hook.
The problem is not confined to California, though the state stands out as an extreme case of bureaucratic failure. Inspector General Anthony DEsposito warned that nearly $1 billion in taxpayer funds is at risk nationwide due to COVID-related unemployment insurance fraud, pointing out that prepaid debit cards issued for pandemic-era benefits still hold $720 million in unspent funds.
My office has warned that, absent swift action, U.S. taxpayers risk losing nearly a billion dollars in fraudulently obtained benefits, DEsposito said in a statement. This is taxpayer money and it demands immediate attention.
For conservatives who have long argued that expansive welfare bureaucracies invite abuse and erode accountability, the unfolding scandal in Californias unemployment system offers a sobering case study in what happens when government grows larger, less accountable, and increasingly detached from fiscal reality.
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