COMMITMENT • INTEGRITY • LEADERSHIP	View PDF report View Fact Sheet View Selected Abbreviations
Employment Development Department EDD's Poor Planning and Ineffective Management Left It Unprepared to Assist Californians Unemployed by COVID‑19 Shutdowns Report Number: 2020-128/628.1

Introduction

Background

The Employment Development Department (EDD) provides billions of dollars in partial wage replacement benefits each year to Californians who need and seek such benefits (claimants). California's Labor and Workforce Development Agency, headed by an agency secretary, oversees EDD.

One of EDD's primary responsibilities is its administration of the unemployment insurance (UI) program. Funded through taxes on employers, the UI program provides temporary financial assistance to unemployed workers who meet the eligibility requirements summarized in the text box. EDD allows claimants to file a claim for benefits in three ways: online through its UI Online application system, on paper, or by phone. Most claimants file their claims using UI Online.

EDD has established a number of processes to ensure that it provides benefits only to eligible claimants. As Figure 1 shows, when a claimant submits an initial claim, EDD's benefits information system identifies any possible issues that might affect eligibility. If it does not identify such issues, it processes the claim. If it does identify such issues, EDD staff manually review the claim to determine whether it meets the eligibility requirements. Once EDD has determined that an initial claim is eligible, it takes steps to verify the claimant's continuing eligibility to receive benefits. Specifically, every two weeks, a claimant must answer a series of questions certifying continued eligibility. These certifications are known as continued claims.

The Federal Government Provided Additional UI Benefits to Mitigate the Economic Impact of the Pandemic

In March 2020, in response to the COVID‑19 pandemic, the federal government passed legislation providing additional UI benefits to supplement California's existing UI program. Table 1 provides an overview of existing and additional benefits. Under the regular UI program, not everyone who becomes unemployed is eligible for benefits. For example, self-employed workers and business owners are not usually eligible. To cover these individuals during the pandemic, the federal government created the Pandemic Unemployment Assistance (PUA) program. For those workers who are eligible under the regular UI program and received regular benefits, the federal government provided additional benefits. Programs providing these additional benefits include the Pandemic Emergency Unemployment Compensation (PEUC) program and what EDD terms the Federal-State Extended Duration (FED‑ED) program.

Figure 1

EDD's Online Claim Filing Process Involves Manual and Automated Filing

Source: EDD's procedure documents.

In addition, when the Governor's stay-at-home order went into effect in March 2020, EDD waived the requirement that claimants must seek work in order to maintain eligibility for benefits. Many other states implemented similar waivers in response to the economic repercussions resulting from the pandemic.

EDD Received an Unprecedented Volume of Claims in 2020

The dramatic rise in unemployment and the expansion of unemployment benefits created a massive surge in claims (claim surge) after California's statewide stay-at-home order went into effect on March 19, 2020. California's statewide unemployment rate rose from 4.3 percent in February 2020 to 16.2 percent by April 2020. Unsurprisingly, UI claims rose sharply in March and April, and they remained well above historic monthly totals through October 2020, as Figure 2 shows. In fact, individuals filed about 13 times as many claims in April 2020 as in April 2019. Ultimately, from March through November 2020, EDD reports that it processed more than 17 million regular UI and pandemic unemployment assistance claims—eight times as many claims as were filed for the entirety of 2019—and it paid more than $111 billion in unemployment insurance benefits.

Table 1

Summary of Major Unemployment Benefits

Benefit Type	Description	Maximum Time Claimants May Collect Benefits
Pandemic Unemployment Assistance (PUA)	Benefits for individuals who are ineligible under regular unemployment insurance, such as self-employed workers, or individuals who have exhausted regular unemployment benefits	46 weeks*
Regular UI	California's unemployment insurance program	26 weeks
Regular UI Extensions
Pandemic Emergency Unemployment Compensation (PEUC)	Additional benefits for claimants who have exhausted regular UI benefits	13 weeks
Federal-State Extended Duration	Additional benefits for claimants who have exhausted PEUC benefits	20 weeks

This claim surge is unprecedented in California's recent history. For instance, in 2009 and 2010, at its height for UI claims from the Great Recession, EDD received about 3.8 million claims in each of those years. The pandemic, however, increased statewide unemployment more dramatically in only a few months: EDD received 6.5 million claims in the first half of 2020 alone.

Along with the surge in claims came delays in the receipt of benefit payments, as EDD was overwhelmed by the extraordinary number of claims. When a claimant has waited more than 21 days after submitting an application for either processing of payment or disqualification, EDD considers that claim as part of its backlog. This metric is similar to a measurement used by the United States Department of Labor (Department of Labor) that measures the timeliness of the first payment of UI benefits according to 14-day and 21-day time frames, depending on the specific requirements of a state's UI program. According to data from the Department of Labor, for regular UI claims filed from April through September 2020, EDD provided 80 percent of claims with a first payment within 21 days—leaving more than 800,000 claimants in the regular UI program waiting longer than the 21 days to receive their first payment. In contrast, for claims filed in 2019, EDD provided 88 percent of claims a first payment within the designated window.

Figure 2

Californians Filed Claims for Unemployment Insurance Benefits at a Historic Rate and Number, Even Compared to the Great Recession

Recent Steps to Improve the Effectiveness of EDD's UI Claims Processing

In July 2020, the Governor directed the secretary of California's Government Operations Agency and a former chief deputy of the White House Office of Science and Technology Policy to lead a team (called a strike team) to recommend reforms at EDD related to its UI claims processes. The strike team received assistance from staff from both the California Department of Technology and the Office of Digital Innovation. The strike team's report, issued in September 2020, made 100 recommendations to improve EDD's claim processing and to reduce the number of claims in its backlog, which EDD was reporting had reached about 1.6 million.

Because of the volume of claims in the backlog and the extensive delays in payment, the Legislature also requested that the California State Auditor (State Auditor) conduct an emergency audit of EDD's response to the economic impact of the pandemic, which the Joint Legislative Audit Committee (Audit Committee) approved in September 2020. The committee determined that our office should take into consideration the results of the strike team and thus begin the audit after the strike team had completed its review but no later than the end of September 2020. Additionally, in August 2020, we designated the State's management of federal funds related to the pandemic as a high-risk statewide issue, giving us the authority to conduct audits related to that issue. We identified EDD as one of the state agencies responsible for managing a portion of the federal COVID-19 funds because of its management of the new UI funds authorized by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

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