This is Part 2 of a series on the EDD. Part 1, an interview with Spokesman Dan Stephens, is here.

Just after the Labor Day weekend, the California Employment Development Department released a $100 million computer upgrade. It crashed.

Without warning, 150,000 jobless Californians were cut from unemployment benefits. The EDD blamed a computer glitch and said it would take weeks to fix.

November hearings in the Legislature produced promises to fix the system. In response, Henry Perea, D-Fresno, the chairman of the Insurance Committee, sent a letter to EDD Director Hilliard demanding fixes by Dec. 31. Perea identified five improvement areas:

1. “Update the criteria for scheduling determinations due to untimely certifications,” so unemployment claimants are not burdened with ongoing unnecessary work and delays;

2.  “Update the criteria for scheduling determinations due to attending school or job training,” to prevent benefit delays;

3. “Improve communications with claimants.” The EDD has been moving to more of a self-service claims system, but had not provided claimants with the necessary tools;

4. “Translation of documents and websites.” The EDD website has only a few pages in Spanish, and virtually none in other languages. If the goal is a self-service model, the EDD must help those with limited English language abilities access multiple languages on the site.

5. “Call center service improvement.” The call centers historically have been problematic, time consuming “and perhaps the most frustrating and time consuming for ongoing UI claimants.” Even under “normal” conditions, “claimant access to call centers goes from bad to impossible.”

Hearings in the new year will determine how the fixes are doing. But three months after the computer crash, the EDD’s own Facebook page remains clogged with complaints about delays in benefits.

I also called the EDD’s phone line. It refers claimants to the online computer system. Then the computer system directs claimants to call. It’s a computerized Catch-22.

Background: How the problem started

As the countdown to Dec. 31 continues, I compiled some background on what happened.

The post-Labor Day “malfunction” created a huge backlog of claims. California Labor Secretary Marty Morgernstern ordered EDD officials to pay the unemployment claims immediately, and check eligibility later. 

An EDD employee whistleblower, who claimed to work daily on the broken program, warned supervisors and coworkers that the new EDD computer system “was slow, had glitches and was not ready to be released,” Sacramento’s News 10 reported in October. Documents showed that the $100 million “California Unemployment Benefit Services system,” or CUBS, built by EDD and contractor Deloitte Consulting, was never working correctly.

“An EDD employee said managers even took time a few days before CUBS was released to let everyone know how proud they were,” News 10 said. “‘We had parties. We had celebrations. We had contests,’ the employee said. ‘We all knew it wasn’t gonna go live. When it actually did go live we were shocked.’”

In emails released by the EDD in October, News 10 reported EDD Representative Adolfo Jimenez responded to one of those “Congratulations” emails with, “Don’t pat yourselves on the back don’t congratulate yourself nor others. CUBS does not work.”

News 10 reported in a follow up email, Jimenez’s boss Donald Owens wrote, “Mr. Jimenez has been counseled regarding the nature of the email and the proper chain of command.”

Hearing

The initial outcry from unpaid claimants was so big, the Assembly Insurance Committee conducted an oversight hearing on Nov. 6. EDD representatives showed up in force and some apologized for the blunder. (The hearing video is available on The California Channel.)

However, EDD Chief Deputy Director Sharon Hilliard claimed the media reported “inaccuracies” as to what caused the delays. Hillard said the massive backlog was resolved only after EDD staff worked overtime to make manual fixes to the system.

“We underestimated the amount of effort needed to stay on top of that,” said Shell Culp, chief deputy director at the state Office of Systems Integration. Her agency was responsible for managing the computer upgrade project. Culp said the agency knew there were problems with the computer upgrade but failed to predict the backlog of claims the glitch created.

By Nov. 8, the EDD posted information on its website on indicating the problem had been fixed. As of mid-December, the message still says:

“Updated November 8, 2013, 4:30 p.m.

“The EDD is working to complete the transition to a new upgraded payment processing system as quickly as possible. We are supplying continual updates on our progress and are providing recommendations to our claimants, including how they can help us expedite this effort with the submission of their certifications for continuing benefits. For more information and updates on the new payment processing system and how it may affect you, visit the New Upgrades for the UI System page.”

Soon the Legislature will investigate and render its own judgment.

Because of California’s disastrous unemployment rate — 12.2 percent at last count — the State Unemployment Fund is in a precarious position. It actually went insolvent two years ago, and pays out benefits today only because of federal loans. Assuming the Legislature continues to do nothing to fix the mess, it will rack up a $13.4 billion deficit by the end of this year. Also, the state has until September to start paying interest on those federal loans, and has to pay them off by November.

Failure to pay back the loans and interest will cost California employers more than $6 billion in additional federal taxes in 2012. According to the state Legislative Analysts Office, approximately 30 other states have similar fund deficits.

I learned about this sorry state of affairs from reading the state Auditor’s new report (No. 2010-112) on the Employment Development Department (EDD). Put simply, the agency charged with getting people out of work into jobs is a mess.

This, at a time when the Great Recession and subsequent jobless recovery have seen the numbers of unemployed in the state more than double, from about 1 million in mid-2007 to 2.2 million today. And though the whole world’s economy has been a mess for the last few years, EDD’s troubles apparently go back even further.

A Decade of Deficiencies

“This report concludes that over the last 10 years the department has consistently failed to perform at a level the United States Department of Labor considers acceptable regarding its timely delivery of unemployment benefits,” Auditor Elaine Howle wrote in the report’s introduction. “The department’s attempts to resolve its performance deficiencies have had mixed results.”

The biggest problem is that the agency is just ridiculously slow. For years, the department apparently knew that its phone system was inadequate to handle calls from the increasingly irate jobless wanting to speak to a human being about benefits, but only put in a new system in December 2010. The department still takes four or more weeks to determine if an applicant actually deserves to get unemployment benefits, which means a month goes by before people who actually warrant benefits receive a dime. This has apparently been a problem since 2002, according to the Auditor’s report.

What’s more, while hiring additional staff to process the myriad claims did improve response times, many of the other corrective actions taken by the department — such as increased training for managers and improvements to IT systems — resulted in “negligible” and “minimal” results, states the report.

“In reviewing the corrective action plans the department submitted for federal fiscal years 2008 to 2011, we found that it has not fully implemented certain key corrective actions and that the impact of others has been minimal or remains unclear,” the Auditor determined. “We also found that its corrective action plans have not consistently included milestones that directly relate to specific corrective actions, nor have they included sufficient information to effectively gauge the corrective actions’ impact on the department’s goal of achieving the acceptable levels of performance related to the timeliness measures.”

In its defense, the last couple of years have been abysmal for the EDD. Until 2008, it paid out about $5 billion in unemployment benefits every year. But in 2009, the agency paid out an astonishing $20.2 billion in benefits, according to the official EDD response to the Auditor’s report. The next year was even worse, with $22.9 billion in payouts for 2010.

Four Recommendations

The Auditor ended up making four recommendations, all variations on the same theme: plan better for a future that will, in all likelihood, be pretty bleak for a huge portion of California’s population. That the department agreed with all four recommendations says a lot about how bad things have gotten there.

It also puts yet another nail in the coffin of former Governor Arnold Schwarzenegger’s alleged “legacy.” Every time a new jobs report would come out — each progressively worse than the previous one — Schwarzenegger would repeat his promise to create “jobs, jobs, jobs” as though it were some sort of mystical chant, all the while ignoring the rot that permeated the state agency set up to help people out of work.

-Anthony Pignataro