Bill to Address Inmate Fraud at EDD Passes Key Committee

Requires EDD to cross check unemployment claims with inmate records

SACRAMENTO – Senator Shannon Grove (R-Bakersfield) announced that her bill to target unemployment insurance (UI) fraud at the Employment Development Department (EDD) passed out of the Senate Public Safety Committee today. SB 39 would require the EDD to cross check unemployment insurance claims with state prison rolls. 

In the past year, audits have uncovered billions of dollars in misspent UI benefits at the EDD due to the department’s inability to prevent fraud. Between March and August 2020, more than 35,000 Pandemic Unemployment Assistance claims were filed on behalf of inmates and more than half of those claims were paid despite inmates being ineligible to receive the benefits under current law. 

“Governor Newsom’s EDD is the most mismanaged department in the country,” said Senator Grove.  “District Attorneys raised the alarm five years ago, that the department had potential for inmate fraud, but the EDD deliberately ignored their warnings. With the COVID-19 surge in unemployment claims, the doors were open wide for inmates to exploit the department’s lax procedures.”

In May 2020, the U.S. Department of Labor issued a memo to states urging vigilance to protect against fraudulent claims, stating, “During this time, there is a heightened need for states to maintain a steadfast focus on UI functions and activities that ensure program integrity and the prevention and detection of improper payments and fraud across all UI programs.”

Thirty-five states across the nation implemented fraud protection.  California failed despite the warning to cross match prison and jail rolls. This paved the way for a widely utilized fraud scheme to steal nearly $1 billion in taxpayer money.

“The State Auditor has made it clear that EDD was both poorly managed and vulnerable to fraud especially when the COVID-19 pandemic hit. Given the Department’s historic failure and continued unwillingness to implement audit recommendations, it is critical that the Legislature hold EDD’s feet to the fire to better serve unemployed Californians,” said Senator Grove. “I applaud the Public Safety Committee for supporting this important bill.”

SB 39 passed with a bipartisan vote of 4 to 0.  The measure will next be heard by the Senate Committee on Labor, Public Employment, and Retirement.