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California Unemployment Fraud Could Have Easily Been Prevented

Few states have fared well during COVID-19. An influx of cash from the federal government as well as sweeping lockdowns forcing millions of workers onto state unemployment systems were the earthquakes needed to cause a historic tidal wave of fraud across the country.

While most are struggling, California seems to have taken it as a personal challenge to see how quickly they can bankrupt every man, woman, child, and business in their state—as well as the state itself.

It was bad enough that as early as the beginning of May 2020, California had to be the first state to ask to borrow money from the federal government to make its unemployment payments. And then it was extra bad when the state reported it had lost $11 billion in fraud as of January 2021, with the total likely being more than $30 billion.

But now Californians are learning that most of these losses were completely preventable.

California’s Employment Development Department (EDD) for years had been using software from Pondera Solutions to help it detect fraud and prevent ineligible payments. The Obama administration had given the state agency a grant to install the software, and they began to use it in 2013 with much success. It had, according to a state employee, found an “amazing amount” of fraud.

It was so successful that there were calls to expand use of it by other departments across the state as early as 2016. So, naturally, California’s EDD shut the program down entirely because they weren’t concerned enough about waste, fraud, and abuse.

It’s not just a matter of having the tech to stop these problems. Computers alone aren’t going to end fraud if the state’s agencies don’t do their jobs.

California is a trailblazer for all the wrong reasons and should be a lesson to the rest of the country. Making sure people get money during hard times isn’t enough—you have to make sure the right people are getting the correct benefits. No computer software can counteract that level of laziness.

And now we’re seeing that story repeat all over the country in states like in Kansas, Michigan, and Washington state.

With few barriers to stop fraud in the state’s overly generous and expansive welfare programs, the dollar amount is going to keep trending upward until California goes bankrupt or is willing to make tough choices on widespread reform—whichever comes first.

At FGA, we don’t just talk about changing policy—we make it happen.

By partnering with FGA through a gift, you can create more policy change that returns America to a country where entrepreneurship thrives, personal responsibility is rewarded, and paychecks replace welfare checks.