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McCarthy, Steel, and CA Republicans Condemn Newsom Administration for Mismanagement of $11.4B in Taxpayer Funds

Feb 5, 2021
Press Release


Today, Congressman Kevin McCarthy and Congresswoman Michelle Steel (CA-48) led a letter from the CA Republican Congressional Delegation to the Newsom Administration expressing outrage regarding fraudulent COVID-related unemployment assistance payments administered by the State of California and uncovered in a recent audit. The Newsom Administration’s mismanagement of these taxpayer dollars in the amount of $11.4 billion, and possibly up to $31 billion thus far, is unacceptable, and especially galling given the fact that hundreds of thousands of Californians’ legitimate COVID-related unemployment assistance claims are administratively backlogged.
 
Highlights of the letter are below, or you can read it in its entirety here.

"As you are aware, in response to the economic challenges presented by COVID, Congress has provided federal funding to states to help support the availability of unemployment assistance to individuals laid off as a result of this pandemic. Last year, Congress funded a new program called Pandemic Unemployment Assistance (PUA), which was designed to provide unemployment assistance to individuals who typically would not be eligible for unemployment benefits, such as gig workers, independent contractors, or self-employed individuals.
 
"The California Employment Development Department (EDD) recently confirmed that it has paid out fraudulent unemployment assistance claims totaling over $11.4 billion, mostly through the new PUA program, and an estimated $20 billion in unemployment assistance payments are still under investigation. In an attempt to reduce fraud, on December 31, 2020, the EDD suspended the processing of roughly 1.4 million unemployment assistance claims in order to verify the identities of claim applicants. This action was taken with no warning and there has been little follow-up clarification on which unemployment assistance claims were found to be fraudulent and which were legitimate, nor how EDD is making such determinations. In addition, the EDD has recently confirmed that the backlog of Californians who are still waiting for their unemployment assistance claims to be processed remains at roughly 900,000 individuals.

"Let us be clear - the mismanagement of taxpayer dollars in the amount of $11.4 billion is absolutely unacceptable and the delay in processing Californians’ legitimate COVID-related unemployment assistance claims is also absolutely unacceptable.

"This is all the more grievous given that the State of California received over $318 million for the administration of all COVID-related unemployment assistance programs and an additional $2.4 million in emergency funding to help the State combat fraudulent COVID-related unemployment assistance claims, in addition to the multiple guidance documents issued by the U.S. Department of Labor to assist states with the administration of these programs. Adding insult to injury, California State Auditor Elaine Howle reported last month in an audit that the federal government warned California multiple times about the threat of fraud, but states California continued “to pay claims despite having evidence that they are very likely fraudulent.
 
"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. So, 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 unemployment assistance programs – a clear attempt to deflect blame and accountability for these failures from the Newsom Administration...

"As California faces daunting challenges due to COVID, it is critical that Californians can trust their state government to effectively administer integral unemployment assistance programs, including those created by the CARES Act, which are traditionally administered by the states...Federal and California taxpayers deserve answers to our questions, assurances that their tax dollars will not continue to be wasted, and to be reimbursed for the $11.4 billion the State of California has lost."