As Gov. Gavin Newsom faces the growing threat of a recall, House Republicans from California said Friday that his administration must answer for the state’s recent finding that $11 billion in state unemployment claims were fraudulent.
They pointed to the fraud and the state’s announcement that an additional $19 billion in claims are under investigation as reasons to be cautious before approving more federal dollars to support state unemployment programs.
In a joint letter, all 11 California Republicans in the House demanded Newsom release more details about the fraud, such as how the state will try to recover the money, how it will help victims of identity theft related to the scam and when the backlog of pending legitimate claims will be paid.
“California had the resources to combat rampant fraud in these unemployment assistance programs, and appears to have been warned repeatedly about the possibility of fraudulent unemployment assistance payments being made,” the lawmakers wrote, led by Rep. Michelle Steel of Seal Beach. “Without any accountability mechanisms in place or plan to recover fraudulent COVID-related unemployment assistance payments, we fear that there will be a continued decline in taxpayers’ faith in California’s ability to administer other critical pandemic relief programs, such as vaccine distribution.”
Newsom is the target of a Republican-backed petition drive seeking to trigger a special election in which voters would be asked to remove him from office.
Republicans are also yoking the Employment Development Department’s problems to California Atty. Gen. Xavier Becerra and state Labor Secretary Julie Su, who are likely to face contentious confirmation hearings on Capitol Hill in the coming weeks — Becerra for his nomination as secretary of Health and Human Services, and Su for her expected nomination as deputy Labor secretary.
The Republicans’ letter was sent a little over a week after the Newsom administration acknowledged that more than $11 billion in unemployment benefits had been paid on fraudulent claims since the pandemic began last March.
A representative for the Democratic governor responded to the letter Friday, saying the administration was acting to address problems at the EDD, including hiring of thousands of additional workers and installing new leadership.
“EDD was overwhelmed and unprepared for the crisis brought on by the pandemic — both in the volume of claims and the criminal attacks on the system,” said spokeswoman Erin Mellon. “The governor has taken many actions to fix the problems EDD faces today as well as addressing the systemic challenges that have plagued EDD’s ability to timely provide benefits to qualifying Californians.”
Su said the EDD was overwhelmed by the unprecedented 19.6 million claims for unemployment benefits it had received since March, many of them through the new program approved by Congress for gig workers, independent contractors and the self-employed.
Mellon said 95% of the fraud was linked to federal pandemic unemployment assistance, which she said lacked the usual safeguards.
“It had never existed before, and states were given little support on administering it,” Mellon said. Even when it appeared international crime rings were behind much of the fraud, state officials had to identify and confront the problem “on their own, instead of having a coordinated federal response.”
The letter comes as a deadline approaches next month for recall organizers to turn in 1.5 million signatures to qualify a ballot measure, possibly for this fall. Proponents of the recall say they are nearing that number.
The secretary of state’s office indicated in its most recent report, in mid-January, that 720,000 signatures had been turned in and some 410,000 of those had been validated.
While Democratic state legislators have been highly critical of the EDD, they have stopped short of blaming the governor.
“This is a crisis that predated Gov. Newsom and predated all of us in the Legislature. This has been at least a decade in the making,” Assemblyman David Chiu (D-San Francisco) said in a call with reporters Thursday.
“I know Gov. Newsom has been very focused on this,” Chiu added. “There are many steps he has taken, from calling for a strike team that issued a really great report on future recommendations, to replacing the leadership at EDD [and] creating a task force on how to root out fraud.”
“We are interested in solutions,” Chiu said. “We are not interested in finger-pointing.”
Republicans also blamed Su, whom President Biden is expected to nominate soon to be second in command at the U.S. Department of Labor, an appointment that requires Senate confirmation.
Last week, Su said part of the blame for the EDD’s failure to prevent widespread fraud lies with the Trump administration, which she said failed to provide adequate guidance and resources to California to counter fraud schemes targeting the congressionally approved program for gig workers.
Republican members of Congress responded Friday by saying California had the resources to combat fraud in unemployment programs but failed for months to heed federal officials’ warnings about the potential for fraud.
“It is unconscionable that Secretary Su would claim that the federal government did not provide adequate resources or funding for the administration of COVID-related UI programs, in a clear attempt to deflect blame and accountability for these failures from the Newsom Administration,” the GOP lawmakers wrote.
Responding to the criticism in the letter, Su said that states were struggling with a flood of claims and fraud rings, and that “a coordinated approach from the federal government months ago to support the states would have been welcomed.”
EDD Director Rita Saenz, the fourth state official to whom the letter was addressed, also blamed the lack of federal support.
“While the previous federal administration did not properly support states in fighting organized criminal attacks on unemployment systems, we are looking forward to having a partner in the new federal government,” Saenz told state lawmakers Wednesday during a state legislative hearing.
