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SB-420 Unemployment insurance: Unemployment Insurance Integrity Enforcement Act.(2021-2022)

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Date Published: 03/09/2021 09:00 PM
SB420:v98#DOCUMENT

Amended  IN  Senate  March 09, 2021

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Senate Bill
No. 420

Introduced by Senator Umberg

February 12, 2021

An act to add Section 320.4 to Part 5 (commencing with Section 4800) to Division 1 of the Unemployment Insurance Code, relating to unemployment insurance. insurance, and making an appropriation therefor.


LEGISLATIVE COUNSEL'S DIGEST


SB 420, as amended, Umberg. Unemployment insurance: Unemployment Insurance Integrity Program. Enforcement Act.
Existing law establishes the Employment Development Department (department) within the Labor and Workforce Development Agency and sets forth its powers and duties, including administration of the unemployment and disability insurance programs for California. Existing law requires the department to pay unemployment compensation benefits from the Unemployment Fund to unemployed individuals meeting specified requirements, to periodically review policies and practices used to determine eligibility for and the amount of benefits in the unemployment insurance program, and to report to the Legislature, as specified. requirements. Existing law requires the department to maintain a field investigating staff, whose function includes investigation of violations of the unemployment and disability insurance programs.

This bill would establish the Unemployment Insurance Integrity Program within the department, to publish and revise specified information provided to the public by the department related to the repayment of benefits and backlogged claims. The bill would require the program to develop a recession plan for the purpose of improving access to services provided by the department during economic downturns, and specify required findings and recommendations for the recession plan. The bill would require that the director submit the recession plan to the Legislature, as specified, on by January 1, 2023.

The bill would provide that the annual costs and expenses associated with the program shall be funded upon appropriation by the Legislature in the annual Budget Act or other statute.

Existing law establishes the Department of Justice within state government, and establishes the Attorney General as the head of the department and as the chief law officer of the state. Existing law sets forth the powers and duties of the Attorney General, including the direct supervision over the district attorneys of the several counties of the state. Existing law authorizes the Attorney General to assist any district attorney in the discharge of their duties, as prescribed.
This bill would establish the Unemployment Insurance Integrity Enforcement Program within the Department of Justice, administered by the Attorney General. The bill would require the Attorney General to establish a task force consisting of the State Auditor and 5 members appointed by the Attorney General. The bill would require the task force to coordinate with local district attorneys and, when available and necessary, with the United States Attorney’s Office to pursue available methods to recover improper benefit payments made from the department. The bill would require the task force, prior to pursuing any civil or criminal action, to prepare a cost-benefit analysis, as specified. The bill would make an appropriation by, to the extent allowed by law, continuously appropriating funds recovered pursuant to the program to the Department of Justice to pay for the costs of administering the program, with any excess to be deposited into the Unemployment Fund.
Vote: MAJORITY2/3   Appropriation: NOYES   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 The Legislature finds and declares all of the following:
(a) The COVID-19 pandemic created unprecedented challenges for state officials responsible for administering California’s unemployment benefits program.
(b) According to the State Auditor’s office (auditor), the number of unemployment insurance claims submitted to the Employment Development Department (department) jumped thirteenfold between April 2019 and April 2020. The department was tasked with providing unemployment benefits to this vast number of unemployed Californians as quickly as possible.
(c) The volume of claims and speed of processing those claims, combined with the lack of effective fraud controls, resulted in a flood of potentially fraudulent claims. According to the auditor, the department could not identify the claimant for nearly 2.2 million of the 9.5 million claims submitted between March 2020 and late December 2020. The auditor estimated that, due to a lack of fraud detection efforts, the department paid out at least $10.4 billion to 597,000 unidentified claimants.
(d) The auditor found that the department’s existing processes of detecting fraud have been overwhelmed by the pandemic. For example, during a two-day period in which 1,000 fraudulent claims were detected, the department had two staff persons available to review these potentially fraudulent claims.
(e) The department’s inability to distinguish fraudulent claims from legitimate claims has imposed hardships on many Californians whose unemployment benefits were suspended through no fault of their own. For example, the auditor found that in September 2020, the department directed the Bank of America to freeze 344,000 debit cards issued to benefit claimants, without any plan for unfreezing the accounts of legitimate claimants.
(f) The department’s Investigations Division reported that as of December 10, 2020, it had opened more than 250 criminal investigations related to an estimated $30 million in fraudulent claims. Based on the number of potentially fraudulent claims made during the pandemic and the difficulty in identifying those responsible for the claims, the auditor found it “highly unlikely” that the department would be able to investigate more than a small fraction of the claims or to recover a significant portion of the lost funds.
(g) Attorneys General in several states, including Illinois, Massachusetts, and Pennsylvania, are spearheading efforts to hold those making fraudulent claims accountable and to recoup fraudulently obtained unemployment funds.
(h) In California, local police and prosecutors are undertaking efforts to track down those responsible for making fraudulent unemployment claims and to recover lost funds. Local prosecutors have asked for more resources to investigate unemployment fraud.

SEC. 2.

 Part 5 (commencing with Section 4800) is added to Division 1 of the Unemployment Insurance Code, to read:

PART 5. Unemployment Insurance Integrity Enforcement Program

4800.
 This part shall be known, and may be cited, as the Unemployment Insurance Integrity Enforcement Act.

4801.
 There is hereby established, within the Department of Justice, the Unemployment Insurance Integrity Enforcement Program, to be administered by the Attorney General.

4802.
 For purposes of this part, unless context requires otherwise, the following definitions shall apply:
(a) “Department” means the Employment Development Department.
(b) “Program” means the Unemployment Insurance Integrity Enforcement Program established by Section 4801.
(c) “Task force” shall mean the task force established by the Attorney General pursuant to Section 4803.

4803.
 (a) To fulfill the purposes of this part, the Attorney General shall establish a task force consisting of the State Auditor and five members appointed by the Attorney General.
(b) With the exception of the State Auditor, the members of the task force shall serve at the pleasure of the Attorney General.
(c) Prior to pursuing any civil or criminal action pursuant to this part, the task force shall prepare a cost-benefit analysis. That analysis shall consider, among other things, the following:
(1) The likelihood of prevailing on the merits of the case.
(2) The likelihood of collecting any of the misappropriated funds subject to the case.
(3) The costs of investigating and litigating the case.

4804.
 (a) The task force shall coordinate closely with county district attorneys to pursue available methods, including both civil and criminal actions, to recover funds misappropriated from the department.
(b) When available and necessary due to jurisdictional limitations, the task force shall coordinate with the United States Attorney’s Office and federal law enforcement agencies to pursue available methods, including both civil and criminal actions, to recover improper benefit payments made from the department.

4805.
 (a) To the extent funds recovered pursuant to actions brought by the task force under this part are legally available, those funds are appropriated to the Department of Justice for the purpose of paying for the costs of the program, and the balance shall be deposited into the Unemployment Fund. Notwithstanding Section 13440 of the Government Code, funds appropriated to the Department of Justice under this section are continuously appropriated without regard to fiscal year.
(b) The recovery of costs pursuant to this section shall not foreclose the Attorney General from any other actions allowed by law.

SECTION 1.Section 320.4 is added to the Unemployment Insurance Code, to read:
320.4.

(a)There is hereby created within the department the Unemployment Insurance Integrity Program, to be administered by the director.

(b)The program shall do all of the following:

(1)Publish on the department’s internet website, at least once every six months, the total amount of benefit payments for which the department has required repayment, and the total of those amounts that has been repaid.

(2)Revise public dashboards maintained by the department related to backlogged claims for unemployment and disability benefits to clearly distinguish between claims awaiting payment and claims that have been paid.

(c)The program shall develop a recession plan for the purpose of improving access to services provided by the department during economic downturns. The recession plan shall include all of the following:

(1)Findings related to effects of previous economic downturns on the department’s services, including the effect of increased claims resulting from the COVID-19 pandemic.

(2)Findings related to temporary automation measures for claims processing, and recommendations regarding whether those measures should be made a permanent feature of claims processing.

(3)A risk assessment of the department’s deferred eligibility determinations to recommend the most appropriate order to process those deferred eligibility determinations.

(4)To improve the department’s call center performance, data related to the reasons why people who call the department need assistance, and the rate of calls that successfully resolve caller issues.

(d)By January 1, 2023, the director shall submit to the Legislature the recession plan in accordance with Section 9795 of the Government Code.

(e)The department’s annual costs and expenses associated with the implementation of this section shall not be paid out of the Unemployment Administration Fund or the Unemployment Fund, and shall, instead, be funded upon appropriation by the Legislature in the annual Budget Act or other statute.