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Business and Labor

Newsom Offers A Rosy Outlook For California's Beleaguered Unemployment System

Employment development department.jpg
Andrew Nixon
/
CapRadio
The Employment Development Department office in downtown Sacramento.

Gov. Gavin Newsom said Monday the state’s outdated computer system for processing unemployment insurance claims needs to be “strewn to the wastebin,” after being inundated with applications during the pandemic.

But Newsom offered an optimistic outlook on proposed changes laid out in a report released late Saturday night by his Employment Development Department “strike team.”

“We’re making short-term commitments, and we have medium-term strategies,” he said. “But we’re here for the long-haul — we’re going to get this right.”

EDD faces an uphill climb. It has amassed a backlog of over 1.6 million claimants whose paperwork needs to be processed. The backlog has been growing by at least 10,000 applicants per day, according to the strike team report. The state estimates it will take four months to clear.

EDD also faces the threat of fraudsters filing imposter claims. While the report found only a small percentage of claims appear to be fraudulent, “the cost of finding that small number of imposters is extremely high.”

Starting Saturday, EDD stopped accepting new unemployment insurance applications for two weeks as the department takes steps to overhaul how it processes claims.

Newsom said the delay in accepting unemployment applications will ultimately expedite the review and approval process. He added that Californians who apply during the two-week “reset” should expect to receive payments within 3 weeks of applying.

The report also recommends technological upgrades to replace manual processing of applications, which increases turnaround time. And it lays out a plan to make EDD’s platform more accessible on mobile devices.

This isn’t the state’s first effort to revamp its outdated unemployment insurance system. Less than 10 years ago, California paid consulting firm Deloitte $110 million to make significant upgrades. The project cost substantially more than first estimated and was riddled with early glitches.

Nevertheless, Deloitte has received $16 million in no-bid contracts in recent months to help triage problems at EDD, in part due to the firm’s familiarity with the existing platform.

Since March, the department has processed over 13 million claims and paid out over $86 billion in benefits. The state unemployment rate remains above 11%.

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