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Budget Changes Would Fund Employment Department’s IT Modernization

The California Employment Development Department has submitted two budget change proposals seeking funding for IT modernization that would enable compliance with recent legislation.

The state entity responsible for administering Unemployment Insurance and State Disability Insurance for millions of Californians has submitted two budget change proposals seeking funding for IT work that will enable it to comply with recent legislation.

The California Employment Development Department, which has grappled in recent years with large-scale fraud and threat of identity theft, is seeking millions via budget change proposals (BCPs) to meet the requirements of two new pieces of state legislation. Assembly Bill 110, from Assemblymember Cottie Petrie-Norris, D-Irvine, became law on Oct. 5 and requires the California Department of Corrections and Rehabilitation (CDCR) to provide “the names, known aliases, birth dates, Social Security numbers, and the booking date and expected release date” of incarcerated people to EDD to prevent “payments on fraudulent Unemployment Insurance (UI) claims.” And it requires EDD to do “any necessary system programming or automation to monitor CDCR’s inmate data and prevent payments on fraudulent UI claims” by “the earliest feasible date” or Sept. 1, 2023 at the latest. AB 397, from Assemblymember Chad Mayes, I-Yucca Valley, became law on Oct. 5 and applies to the “disqualification notice” for UI benefits. People can be disqualified from getting UI benefits if it’s found they “knowingly provided false information or withheld information in the pursuit of those benefits.” Before disqualifying people from getting benefits because of a false statement, AB 397 requires EDD to “provide notice and allow a claimant to dispute the potential disqualification,” and give the person three to 10 days to respond. The bill also requires EDD to make “the necessary changes to its forms and information technology systems by Sept. 1.” Among the takeaways:

  • EDD is seeking nearly $2.2 million in EDD Contingent Fund monies and 4.6 positions in the 2022-2023 Fiscal Year; $934,000 and 3.6 positions in FY 2023-24; and $720,000 and 3.5 positions in FY 2024-25 to comply with the bill. EDD already uses CDCR data to identify incarcerated people who are “attempting to file or certify” for UI benefits, per the BCP, but the existing process necessitates “manual intervention” from EDD staff. To implement AB 110, EDD would stand up an “automated system” to prevent and deter fraud. This would require a “one-time cost” of about $3 million to “document business requirements, complete development, conduct testing, and comply with California Department of Technology Project Approval Lifecycle requirements.” EDD will use existing funds for FY 2021-22 deployment activities but the new solution would need an “ongoing cost” of about $720,000 a year for maintenance and support. The department would also face administrative and appeals costs.
  • Specifically, AB 110 would require EDD to “use CDCR data to determine if the claimant is an inmate currently incarcerated in a state prison, in order to prevent payment on fraudulent UI claims.” This would have to happen by Sept. 1, 2023. The department would also be required to stand up that automated system, do “state-wide staff trainings and process appeals filed by suspected incarcerated individuals,” and support the need for “ongoing authority for data sharing between EDD and CDCR.”
    “The CDCR continues to share data on incarcerated individuals with EDD each month, however, there is an understanding that a long-term data sharing agreement requires explicit authority under state law which has now been provided with the passage of AB 110,” according to the BCP.
  • EDD is seeking $241,000 from the EDD Contingent Fund and 1 position in FY 2022-23, to implement aspects of AB 397, including revising notices to give more information on false statements or misrepresentation — and to “develop business requirements, complete development, conduct testing, comply with CDT Project Approval Lifecycle requirements and deploy new programming to its legacy information technology systems to accept, store, and utilize information provided by claimants.” The bill gives EDD until Sept. 1 to make these revisions, according to the BCP. The department will use existing funds for implementation in FY 2021-22, but “estimates requiring approximately $1,029,000 to implement AB 397.” Besides one-time costs, EDD “would also incur ongoing costs to mail forms and process claimant responses as appropriate,” depending on workload volumes.
Theo Douglas is Assistant Managing Editor of Industry Insider — California.