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

Washington, D.C. – Today Reps. Michelle Steel (CA-48) and Kevin McCarthy (CA-23) led a letter from the California Republican Congressional Delegation to the Newsom Administration expressing outrage regarding fraudulent COVID-related unemployment assistance payments, made by the State of California and uncovered in a recent audit. Governor Gavin Newsom, Attorney General Xavier Becerra, Secretary Julie Su, and Director Rita Saenz were sent the letter, which can be seen here. Reps. Doug LaMalfa (CA-01), Tom McClintock (CA-04), Jay Obernolte (CA-08), David Valadao (CA-21), Devin Nunes (CA-22), Mike Garcia (CA-25), Young Kim (CA-39), Ken Calvert (CA-42), and Darrell Issa (CA-50) also signed on to the letter requesting answers on behalf of their constituents.

Recently the California Employment Development Department (EDD) confirmed that it has paid out more than $11.4 billion in fraudulent unemployment claims, mostly through the new Pandemic Unemployment Aid (PUA) program. As part of COVID relief efforts, PUA was established last year by Congress to provide federal funding to states to help support the availability of unemployment insurance. PUA provides additional benefits to individuals who usually wouldn’t be eligible for unemployment benefits, such as independent contractors or gig workers. An estimated $20 billion in potentially fraudulent unemployment payments are still under investigation. 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.”

In an attempt to reduce fraud on December 31, 2020, the EDD suspended the processing of roughly 1.4 million unemployment benefits claims in order to verify the identities of claim applicants. This was done with no warning to those whose benefits had been suspended. Since then there has been little follow-up clarification on which claims were found to be fraudulent and which were legitimate, or how EDD is making such determinations. In addition, the EDD has recently confirmed that the backlog of Californians who are still waiting for their benefits claims to be processed remains at roughly 900,000 individuals.

The Members also raised concerns about the financial impact the fraud will have on many California taxpayers whose personal information has been stolen by criminals in an attempt to collect unemployment benefits with stolen identities. Many of these Californians have received or will receive 1099-G tax forms and will suddenly be responsible for paying taxes on benefits taken out in their names that they never even received.

Led by Reps. Steel and McCarthy, the Members asked the following questions:

1. How is the EDD assessing fraudulent COVID-related unemployment assistance claims and what is the State doing to ensure this never happens again?
2. How many individuals falsified identities and illegally received COVID-related unemployment assistance benefits?
3. How does California plan to recover the over $11 billion in fraudulent COVID-related unemployment assistance benefit payments made by the EDD?
4. As Congress continues to debate additional pandemic relief, how is the State ensuring that future COVID-related unemployment assistance benefits only go to qualified individuals and not local bad actors, criminals, prisoners, or international criminal enterprises?
5. What plan does California have in place to provide individuals who are victims of identity theft and had unemployment assistance benefits fraudulently issued in their names with the support and resources to obtain corrected 1099-G forms?
6. When will California citizens, who are legally entitled to legitimate COVID-related unemployment assistance benefits but are still waiting to receive them, be issued said payments?

You can view the letter here.

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