There are renewed calls for reform of the state Employment Development Department, which oversees unemployment claims, following revelations that the backlog of unprocessed jobless claims continues to grow.
Republican Assemblyman Kevin Kiley believes change is needed. Kiley, who represents Sacramento, wants the private sector involved.
In fact, the private sector is already a big part of processing jobless claims in California and nationwide.
The state’s unemployment agency has spent at least $236 million in private contracts to help process jobless claims, according to CalMatters. EDD says it needs the help from contractors.
“The way that our bureaucracy is set up, it is not designed to have a customer service mentality or paradigm,” said Kiley.
He wants the state to “adopt the practices of the private sector where we can bring in people who are competent managers, who are able to run a state agency the same way they would run a business.”
A Bloomberg Law report found that with the surge in unemployment claims related to the coronavirus pandemic came big paydays for contractors. Contracts with private agencies such as Accenture, Deloitte and EY in only 11 states, including California, totaled $173.8 million. The private companies were hired to help state agencies improve their ability to process claims, provide staff for call centers and assist with fraud prevention.
According to the contracts seen by CalMatters, most of California’s new contracts went to consulting giant Deloitte.
California had previously hired the firm in 2010 to overhaul the website people use to apply for unemployment benefits. Later that year, technical errors stopped payments for about 300,000 people, according to the LA Times. Not only were there errors that incorrectly kept people from receiving their benefits, the software was expensive. The paper reported that the final cost of Deloitte’s system -- $110 million -- was almost double the initial estimate.
Despite Deloitte's past failure, The Sacramento Bee reported that the company received another $16 million to provide unemployment call center services and help disperse benefits in June 2020. Deloitte still receives nearly $6 million per year under the contract to maintain the system, the Bee reported.
Despite the assistance from private companies politicians like Kiley are clamoring for, the contractors hired to fix the inefficient unemployment system appear to have contributed to its building. Moreover, the contractors have failed to identify fraud.
State authorities announced that California paid out $11 billion in bogus jobless claims in 2020, and investigators are looking into possible fraud involving $20 billion more.
EDD said the number of unemployment claims taking more than three weeks to process is now more than 222,000.