The U.S. Department of Labor today announced steps it will take to address fraud and improper payment concerns related to California’s Unemployment Insurance program.
In a letter to California’s Employment Development Department, the Labor Department cited the state’s poor performance in key areas, including an increasing improper payment rate, insufficient timeliness of payments, and the accuracy and quality of the state’s data – quality that matters for accountability, eligibility of participants, and responsible use of taxpayer and employer dollars.
In addition to performance concerns, California also has a depleted UI trust fund. The unemployment trust fund holds state-collected payroll taxes used strictly to pay the state portion of unemployment benefits. California currently carries $21 billion in borrowed funds from the federal government to keep the state unemployment system afloat. The Labor Department previously announced that, because of this continued debt, California employers are now subject to increased UI taxes to repay the outstanding loan balance to the federal government.
“Financial issues and potential fraud in California’s unemployment insurance program will be fully examined. The previous administration turned a blind eye toward failing Labor programs: This ends now,” said U.S. Secretary of Labor Lori Chavez-DeRemer. “Immediately, we are engaging a specialized strike team to uncover any potential fraud or abuse and quickly moving to protect the American worker and taxpayers. I look forward to restoring the California UI program’s integrity and financial health.”
The California state auditor has also identified the state’s UI program as high-risk. The auditor noted that inadequate internal controls failed to prevent suspected fraud during fiscal years 2019-20 and 2020-21, allowing the payment of more than $30 billion in potentially fraudulent claims.
The UI strike team will be comprised of specialists from the department’s national and regional offices.