Exhibit 13 — In re Bank of America California Unemployment Benefits Litigation (Dkt. 350-14, S.D. Cal. No. 3:21-md-02992)

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U.S. District Court for the Southern District of California · No. 3:21-md-02992-GPC-MSB · Doc. 350-14 · 2024-10-24 · Docket on CourtListener

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EXHIBIT 13 
Case 3:21-md-02992-GPC-MSB     Document 350-14     Filed 10/24/24     PageID.11147 
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Assembly Budget Subcommittee No. 4 
On State Administration
Hon. Wendy Carrillo, Chair
P R E S E N T E D  T O :
L E G I S L A T I V E  A N A L Y S T ’ S  O F F I C E
Legislative Oversight of 
Ongoing Challenges at EDD
J A N U A R Y  2 6 ,  2 0 2 1
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L E G I S L AT I V E  A N A LY S T ’ S  O F F I C E
1
Demand for Unemployment Insurance 
Remains Very High
New Claims for Unemployment Insurance (UI) Have Slowed Since 
Peak… Since October, the amount of newly processed UI claims has been 
stable at about 200,000. This is much lower than the levels seen in the spring 
and summer, which were regularly above 400,000 new claims per week.
…But Remain About Five Times Higher Than Normal Levels. 
Although new UI claims have slowed in recent months, the number of claims 
from newly unemployed workers remains five times higher than normal. 
Regular State Benefits
Federal Benefits for Self-Employed
Weekly Processed Claims for Unemployment Insurance 
200,000
400,000
600,000
800,000
1,000,000
1,200,000
Feb
Mar
Apr
May
June
July
Aug
Sep
Oct
Nov
Dec
Jan
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L E G I S L AT I V E  A N A LY S T ’ S  O F F I C E
2
Time Line of Steps to 
Address Challenges at EDD
July—Governor Forms Strike Team to Address Delays at 
Employment Development Department (EDD). On July 29, the Governor 
announced the formation of a “strike team” to immediately modernize EDD’s 
UI technology and improve customer services. The strike team was overseen 
by the state’s Government Operations Agency.
September—Strike Team Issues Thorough Assessment and 
Recommended Actions. In mid-September, the strike team published 
an exhaustive, critical assessment of delays at EDD and issued key 
recommendations to address the delays. The strike team also made dozens 
of additional recommendations to improve EDD processes going forward.
September—EDD Implements Major Strike Team Recommendations. 
In response to the strike team recommendations, EDD took steps to adopt 
the report’s near-term recommendations:
„
„
Two week reset.
„
„
New identity verification software—ID.me.
September—Strike Team Calculates Size of UI Claims Backlog. In 
September, the strike team estimated that 1.6 million claims were backlogged 
(meaning more than three weeks late). Many claims had been delayed for 
much longer than three weeks, in many cases several months. 
September—to Limit Fraud, EDD Stops Automatically Approving 
Backdated Claims. During August and early September, new claims 
for the federal Pandemic Unemployment Assistance (PUA) program for 
self-employed workers spiked unexpectedly. In response, EDD took several 
steps to limit potentially fraudulent claims, including no longer automatically 
approving backdated PUA claims. 
 September—EDD Begins Tracking Size of UI Backlog. In late 
September, in response to the backlog calculated by the strike team, EDD 
began publishing weekly UI claims backlog reports.
October—EDD Begins Tracking Implementation of Strike Team 
Recommendations. After the committee’s last oversight hearing, EDD began 
tracking its progress to implement the strike team’s recommendations. The 
tracking document is publicly available. 
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L E G I S L AT I V E  A N A LY S T ’ S  O F F I C E
3
After Initial Success, 
UI Claims Backlog Growing Again
Initial Success in Addressing Backlog. Following the strike team 
report, EDD projected it would eliminate the backlog by January 27, 2021. On 
net, during the fall, the backlog fell from a high of 1.8 million claims to about 
500,000 claims by mid-November. As of now, EDD has addressed nearly all 
claims that were in the backlog as of September when the backlog was first 
calculated. However, thousands of claims have become newly backlogged 
since then. 
Despite Fewer Incoming Claims, Backlog Has Climbed Again in 
Recent Months. As of January 13, the backlog has inched upward to more 
than 800,000 claims. These claims have become newly backlogged since the 
strike team first estimated the size of the backlog in September. 
Half of Backlogged Claims Are Delayed Because Worker Needs 
to Provide EDD More Information. According to EDD, at least half of the 
backlog is cases where EDD needs more information from the claimant and is 
awaiting a response.
1.5
1.0
0.5
Unemployment Insurance Claims Backlog
October
(In Millions)
November
December
January
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L E G I S L AT I V E  A N A LY S T ’ S  O F F I C E
4
Implementing Recently Enacted Federal 
Extensions
On December 27, the federal government extended for 11 weeks the 
emergency federal UI benefits first provided under the Coronavirus Aid, 
Relief, and Economic Security (CARES) Act. Major provisions of the federally 
funded extension include:
„
„
$300 Weekly Add-On for All UI Claimants for 11 Weeks.
„
„
Additional 11 Week Extension for PUA Claims (Self-Employed 
Workers). Under the extension, PUA benefits will now be available for 
up to a total of 57 weeks.
„
„
Additional 11 Week Extension for Regular UI Claims. Under the 
extension, regular UI benefits will now be available for most claimants 
for up to a total of 59 weeks. 
„
„
Potential for Forthcoming Extensions Under New Administration.
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L E G I S L AT I V E  A N A LY S T ’ S  O F F I C E
5
Fraudulent Claims
Overwhelming Majority of Fraud Is Associated With Federal PUA 
Claims. Fraudulent activity related to the new federal benefit program 
for self-employed workers has been widespread, affecting UI systems 
throughout the country. In large part, this program has been the target of 
fraud due to federal policymakers’ decision to prioritize immediate assistance 
during the early days of the pandemic when the depth of the economic crisis 
was unknown. In prioritizing timely benefit issuance, the new federal law 
and regulations required claimants to submit a lower standard of identity 
and wage information than under the existing UI program. In California, EDD 
implemented the PUA program in line with this federal law and guidance. 
Benefits Provided Through PUA Claims Are 100 Percent Federally 
Funded. Benefits provided under the PUA program to self-employed workers 
are entirely federally funded. To date, nearly $45 billion in PUA benefits have 
gone to California workers. The share of these federally funded benefits that 
were claimed fraudulently is unknown.
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L E G I S L AT I V E  A N A LY S T ’ S  O F F I C E
6
Recent Steps to Address Fraud Raise 
Questions
EDD Recently Identified 1.4 Million PUA Claims as Potentially 
Fraudulent. Around January 1, EDD reviewed nearly 10 million PUA claims 
made during the pandemic for potentially fraudulent characteristics. During 
this review, EDD identified 1.4 million claims as potentially fraudulent and 
these accounts were suspended. What information the administration used 
to make this determination is not clear. Furthermore, to our knowledge, the 
Legislature was not consulted with or notified ahead of time of the decision to 
suspend claims.
Notifications About Suspended Claims Sent Out Earlier This Month. 
On January 6, EDD began sending out batch notifications to people whose 
claims have been suspended. To our knowledge, EDD did not notify claimants 
before their accounts were suspended.
Claims Flagged as Potentially Fraudulent Are Suspended Until 
Claimant’s Identity Is Verified. Claims identified as potentially fraudulent 
have been temporarily suspended until EDD receives additional information 
from the claimant. In most cases, the claimant must verify their identity using 
EDD’s new third-party software, ID.me. 
Too Soon to Tell How Many Legitimate Claims Were Flagged as 
Potentially Fraudulent. In the coming weeks, people whose claims were 
suspended will verify their identity via ID.me and regain access to EDD 
benefits. The state will then have a better sense of how many legitimate 
claims were inappropriately flagged as potentially fraudulent. That being said, 
some workers already have come forward to express frustration that their 
claims were unexpectedly suspended, suggesting that at least some portion 
of the flagged claims are legitimate.
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L E G I S L AT I V E  A N A LY S T ’ S  O F F I C E
7
(Continued)
Decision to Suspend Claims Raises Questions About EDD’s Progress 
Implementing Strike Team Recommendations. Few details are available 
to policymakers and workers about EDD’s decision to suspend claims. 
This lack of transparency raises questions about EDD’s stated progress 
in implementing strike team recommendations related to departmental 
culture. In particular, EDD has listed as “completed” the key strike team 
recommendation that “EDD culture must shift from reactivity to rationality as 
it relates to fraud.” To do so, the completed recommendation clarifies that: 
“[…] fraud prevention and detection practices must be supported by data 
and evidence and that justifications for new and existing anti-fraud practices 
include an analysis not only of their effectiveness, but also tradeoffs and 
unintended consequences of these practices, including adverse impact on 
the experience of all claimants.” As an example that appears more consistent 
with EDD’s cultural change recommendation, the department could instead 
have notified claimants that their claims had been flagged as potentially 
fraudulent and given them a three week grace period to verify their identity 
before suspending the account.
Recent Steps to Address Fraud Raise 
Questions
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L E G I S L AT I V E  A N A LY S T ’ S  O F F I C E
8
Key Questions to Help Guide Oversight
In light of ongoing concerns about the backlog of delayed UI claims 
and recent steps to identify and eliminate fraud, the Legislature may wish to 
consider asking the department the following questions:
„
„
How was the decision made to stop automatically approving 
backdated PUA claims? What effect did that action have on PUA 
claim activity?
„
„
Why has the backlog of delayed claims increased in recent months 
after declining significantly following the two-week reset in October?
„
„
Apart from the suspended accounts, what steps is EDD taking to 
contact claimants in the backlog who need to provide EDD with 
additional information before their claim can be restored? 
„
„
What criteria was used to identify the 1.4 million potentially fraudulent 
claims? Who made the decision to suspend the claims identified 
as potentially fraudulent? What share of these claims does EDD 
anticipate are fraudulent?
„
„
What trade-offs, unintended consequences, or adverse impacts were 
identified as part of the analysis leading to the decision to suspend 
potentially fraudulent claims? 
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