Senate Standing Committee on Rules

Welcome, everyone. The Senate Committee on Rules will come to order. Good afternoon. We are holding our committee hearing in the O Street Building in Room 2200 as we continue to take some precautions to manage the ongoing COVID-19 risk. The Senate continues to welcome the public and has also provided access to both in person and conference participation for the public.

For individuals wishing to provide public comment via the teleconference service, the participant toll free number and access code is posted on our committee website and it will be displayed on our screen right now. Today, the participant number is 877-226-8163 And the access code is 289-7482. We will put that up more than once, but it is on our website.

I wilk maintain decorum during the hearing, as is customary, and any individuals who are disruptive may be removed from the remote meeting service or have their connections muted. For our court reporter and I, Wood, ask you all speakers, colleagues, witnesses alike, to speak slowly and clearly.

And when we get to, certainly the portion of the teleconference, I may interrupt and ask you to slow down or repeat something, and that is so that we can get your testimony, get your name, and that our court reporter has the ability to get that information for our record. Before we begin today's agenda, we need to establish a quorum.

So as a reminder to my colleagues, you will need to turn your microphones on for the roll call. And every time that we vote, Madam Secretary, will you please call our roll.

Laird, Here. Ochoa-Bogh, here. Smallwood-Cuevas, here. Grove, here. Atkins, here

Thank you. I will say, for Members of the public and those who are standing by to call in or testify, we have actually a very busy committee meeting today, so I'm going to try to keep us on track and keep us moving. Just forewarning you. Last week we had a very great and wonderful long discussion and debate with our person who appeared before us for confirmation and to move them onto the Senate for full confirmation today.

As we get to speakers, I will say give your name, organization, if any, and your position of support, and I likely giving you advance warning will stop you if you start to go into further comments. And that is because we have three people who need to be confirmed and we also have Executive session and other work to do.

So I'm just letting my colleagues know as well as public in advance, if there are no objections, I want to take up first governors appointees not required to appear. That would be item two. And I understand we are being asked to move a couple of items.

So the motion I would entertain first would be governors appointees not required to appear. D and E, which are Members of the law revision commission, F G and H, Members of the state contractor state license board. And then I wilk ask to include J Member commission on teacher credentialing as the first motion. And then I will come back for the two remaining items I and K.

Madam Vice Chair, did you need to remove anything else, or were you oh, H. Thank you, Senator. Yes, f, G and H. So it would be two D E F G H and J. And that is the motion from the Vice Chair. Thank you. Thank you, Madam Vice Chair. Madam Secretary, will you please call the roll.

Laird, aye. Ochoa-Bogh, aye. Smallwood-Cuevas, aye. Grove, aye. Atkins, aye. 5-0

Thank you very much. Five to zero. I would entertain a motion on item two, I and K, and these are Members of the Commission on Teacher Credentialing, so move. Thank you, Senator Laird. Madam Secretary, please call the roll.

Laird, aye. Ochoa-Bogh, not voting. Smallwood-Cuevas, aye. Grove, note voting. Atkins, aye. 3-0

3-0 Thank you, colleagues. I would entertain a motion on item three, and that is Bill referrals, reference of bills to committee.

So moved.

Thank you, Madam Vice Chair. Madam Secretary. Call the roll.

Laird, aye. Ochoa-Bogh, aye. Smallwood-Cuevas, aye. Grove, aye. Atkins, aye. 5-0

Five to zero. Thank you, colleagues. Item number four is Deferred Area Assignments, and I want to just make a comment before I ask for a motion. This is the Senate deferred area assignments. Most of us know that Senate and Assembly District lines are redrawn every ten years by the California Citizens Redistricting Commission after the United States census numbers are updated and finalized.

Given that 40 Senate seats are staggered with 20 seats on the ballot every two years, the creation of the new district results in regions of California without Senate representation until the next election. This is a two year gap where a total of about 3.6 million constituents up and down California are left without a state Senator until 2024.

To ensure that all residents in California continue to have a voice and the ability to petition their state government, including obtaining assistance navigating critical state services and programs, constituent services, as we like to call it. The action of the Senate Rules Committee that we will make today is to assign these specific deferred, unrepresented areas until December 2024, when new senators are sworn min to office for those new seats.

Some of these deferred areas are large and or have such large numbers of constituents that it will take more than one Senator to cover the regions. So while the creation of new districts causes these gaps, I'm confident that our senators will serve these regions such that the resident would not see a difference min the level of access and quality of service by their state government. So with that, I would remind folks this is an administrative task to ensure that the work of the Senate gets completed and that constituents are served.

We are not the Redistricting Commission, nor do we have that function and that is not what we are doing today. It's important that the public understands what action we are taking. And with that, if my colleagues have questions or comments, I can take it. Otherwise, I will entertain that motion.

One question.

Yes, Senator Grove.

Sorry.

You go first.

By all means. Former Secretary. Please.

Please go. I might have to chen this up.

I just want to assure that there is with the amendment from the first packet that we got, there's an insert. On amendment for one change. That's what we're approving.

Yes, the change.

Yes, that there's one amendment.

There's one amendment.

Change was made that's included that's what.

We're approving is the changed amendment.

So you're approving the entire deferred area assignment? There's a sheet with a list. It includes the amendment from the last time we reached the Members. Okay. But for purposes of the hearing, you're ting on the entire list of the deferred rendon.

Thank you, ma'am. Thank you, ma'am.

Thank you, Madam Vice Chair.

Senator Laird, I just had a very brief comment, which is I wanted to thank the staff and everybody that worked on this, because this is a herculean task. 3.6 million Californians didn't have a Senator for two years. And the fact that you could find an adjoining district to take it and you could honor the fact that no Senator that is about to run in an area that they don't represent would not be assigned those people so they don't get a leg up in the next election. To be able to do that was very complicated.

And I just want to salute them. And I know because there's 3000 and one people in a district, I will run in two years that are unrepresented, that are being assigned to a Senator that is adjacent to me. And I also want to just acknowledge, thank heavens this is happening, because last weekend there was massive flooding in an unrepresented area in my area. And I'm glad there'll finally be a formal assignment of someone in that situation. So do we have a motion yet? No. Then I would move the report that's in front of us.

Senator, thank you. I want to add my thanks to staff and also to the staff that worked on this specifically that took the time to brief the Senators, not just this Rules Committee. I want to thank those Senators for agreeing to take on this task. And I want to thank the Secretary of the Senate for ensuring that we will have the proper resources in order to support those Senators and those ayes, particularly for those constituents.

So with that, Madam Secretary, we please call the roll on item four.

Laird, aye. Ochoa-Bogh, aye. Smallwood-Cuevas, aye. Grove, aye. Atkins, aye. 5-0

Wonderful. Thank you, colleagues. Let me ask for a motion on items five and six. These are floor acknowledgments by senators, so move. Thank you. Seeing no comment or question, madam Secretary, will you please call the roll?

Laird, aye. Ochoa-Bogh, aye. Smallwood-Cuevas, aye. Grove, aye. Atkins, aye. 5-0

Five to zero. Thank you very much. Let me go ahead and move to governor's appointees required to appear and invite to come up as I'm making some comments, Nancy Farias, who is the Director. Nancy, let me not forget your title JD.

I know you worked for that title, Director of Employment, Development Department and say welcome back to you and offer you the opportunity to go ahead and make any introductions or acknowledgments you would like and your opening comments or statements, after which I which go to colleagues directly for questions and comments. So welcome.

Thank you for your patience.

Thank you.

Thank you. Good afternoon, Madam Pro TEM, Members of the committee, thank you so much for inviting me here today to discuss EDD's progress over the last couple of years and since I've been appointed Director of the Department. First, I'd like to thank the Governor for appointing me twice at EDD and for his continued faith min my ability to lead this Department and to his amazing appointment staff and all the staff in the governor's office who have supported me over the past few years.

Thank you. It is my honor to serve. I want to quickly introduce a few people here with me today. More people than I expected, actually. But my husband Dave, for his love and support when I'm having a bad day, and for keeping me jones and my ego in check on the Wood days. I love you with all my heart.

And one of my best girlfriends from Boston flew in, Lily Lucas, extremely successful in her own right. Thank you so much for being here. I'd also like to thank a few people who are not here with me today. My dad, who recently passed away from leukemia, was a custodian for the public school system in my hometown of Fall River, Massachusetts. Thank Lizzie Wardon. He was very, very proud of me.

In fact, he cried when I graduated from law school and when I passed the bar. And to be fair, I cried during the bar exam. But he was also very proud of this appointment. But it was his example, his years of public service and his generosity that shaped me and taught me that every public service job matters.

Titles matter, of course, but it's how you treat the person without the title that matters most. My dad was also a dues paying union Member, of course. I also want to thank my mom and my 99 year young grandfather, both of whom are watching today back home in Fall River. My mom, I'm sure, had to tear my grandfather away from the casino.

My brother Derek, his wife Kristen, both public school teachers, my nieces and nephews who all attended public schools, as well as Dave's kids and our seven grandchildren. Thank you all for your support and for never letting me forget where I came from and for always welcoming me home. I would be remiss not to thank my village, my biggest cheerleaders and mentors in work and min life, some of whom are here today.

April Sheilan Meg in Boston mary jenny. Daphne. Angie christie jackie michelle tia yvonne maribel anna mona Julie. There are so many more. I appreciate your love, friendship, advice and support always. But truly, I would not be here today without the support of the staff at Edd. All of the staff, including, of course, the Executive team, the amazing ELT, but also those who do the work, run the numbers, keep the lights on and the buildings clean, answer the Jones and help their fellow Californians navigate state government.

Having the opportunity to lead this organization by understanding the value that those employees provide informs how I lead. It's not bottom up or top down, it's not management versus labor and it's not my way or the highway, although my husband may disagree with that one. It's leading by understanding, leading by asking questions, leading by listening, and leading by fostering relationships, including, of course, those in the Legislature and with stakeholders.

So to all the Edd staff and all public employees, thank you. I am so grateful to you and your public service. And lastly, of course, I would be remiss not to thank the Legislature and the legislative staff for your continued commitment to Edd and your dedication to helping Californians in times of need. I am so very appreciative of your support and with that, I am honored to answer any questions you may have.

Thank you very much. Given the tough role that you play, I'm glad to hear you have all of that incredible support here and thank you in your hometown. Welcome. And I'm going to go ahead. This is our second Rules Committee and so that the new Members of this committee understand we do equity and fairness.

I'm starting on this end of the Dais today with this appointment. And so, Senator Smallwood Cuevas, you go ahead and go first.

Absolutely. Thank you so much, madam. Pro Tem. And thank you so much, Director Farias, for connecting with us. It was wonderful to meet with you prior to this appointment hearing and very excited to hear about how you are fighting for and centering equity min the work that EDD does and also doing it in a way that is creating collaboration across the various units that make up this very important work of ensuring communities get back to work in good, quality jobs.

So I really appreciated how you talked about low you align the Workforce Development Board work with the Division of Apprenticeship Standards, the Employment Training Panel and all of the other networks that are on the ground in my district. So I appreciate that.

I had the honor to meet you while touring my district. You were part of a community tour. Looking at the significance and importance of having an EDD asset in the heart of the 28th District and certainly in one of the communities that is hardest hit, the Crenshaw District, where we have some of the poorest census tracts in the nation and where the need for access to quality jobs and true workforce development and placement is critical. And I don't want to sort of make this conversation repetitive.

And we talked about how it is important for the Legislature, and particularly me, as the state Senator of that district, to do our job, to ensure that we have the resources needed to make sure that this office that has Allen into desperate ill repair is quickly brought back to life and functioning and operational for our communities that need and deserve it so much.

But I wanted to see, if you could share with us today and tell the committee how, through your leadership and vision, the EDD plans to ensure that this building does not fall through the cracks. Because we know it is possible and particularly in a moment where dollars aye beginning to be scarce that we make sure that we are prioritizing this facility in both the budget process and in the capital outlay process.

Thank you Senator, it was a pleasure to go to your district. That was a great tour. It was a day long tour in Crenshaw and it was really amazing and thank you for our conversation yesterday. So yes, currently Crenshaw EDD owns a building in Crenshaw and it has been vacant for due to litigation, it was vacant for about four years.

So it is in some disrepair as we have seen. And currently we are working with our partners at DGS to do a plan, mitigation plan to see exactly what the building needs. And I did clarify, Senator, from our conversation last night that that will be jones in the next couple of months. So that is a this year thing and once we have the plan we would be happy to review it with you so you understand what we understand and we both understand what is needed to move forward to get that building open.

Appreciate that and looking forward to working with you on that. I have a couple of follow up questions on that and making sure that we secure resources sooner than later. The other very surprising but important function that Edd serves is that it's one of the largest tax collection agencies in the nation and the Edd Tax Branch collects billions in taxes and ensures that we have the Edd Unemployment Trust Fund.

We understand that the Unemployment Trust Fund is running a deficit I wanted to know if you could collaborate on the steps that Edd will take to ensure that businesses aye paying their fair share. We hear a lot about the fraud that many vulnerable populations may have participated in and that we made sure that we took steps to extensively address that issue.

But when we have employers who are not paying taxes who aye unlawfully holden resources that our state so desperately needs, really want to understand how you will prioritize and make sure that we're plugging those issues as well.

Great. Thank you so much for that question. It's a very important question. At EDD, we have always, prior to lawsuits, bills, et cetera, we have always believed that we want to make sure that employees are properly classified.

And we want to make sure that employers are paying what they should be by law into the system. And that is our mission, sort of, if you will, under the tax branch. And through that mission, we are part of many different tasks force. And we work with local law enforcement.

We work to do investigations or to make sure that employers are paying what they're supposed to be paying. For example, new employers, for example, we do random audits on new employers to make sure that they are classifying their employees correctly. Occasionally what will happen is that an employee will apply for benefits. But we don't have an employer on record, which is a flag.

So that flags an investigation into whether or not the employee is eligible for benefits or whether the employer believes that that employee is not an employee, if you will. There's probably about 20 different tasks force that we're on. I suppose of a few we lead. There's a joint task force with the DA's office.

I'm sorry. There's a lot of different task force that we work with and work in, some of which we lead in order to make sure that my first statement is correct.

That's right. Thank you. Thank you for the detail. And it's all right because we want a leader who knows the weeds, who understands the complexity of the issue. So I appreciate that. This is my final question, Madam Chair, and that is that there's been secured in this budget.

There are funds that are going to be allocated to the displaced oil and gas worker Fund to ensure that we have a just transition of those workers career counseling, employment training, job placement so that we are not moving from one sector and restructuring into a sector where it's low wage race to the bottom conditions.

We want workers who are min strong careers to transition into strong careers. And you mentioned that Edd in our conversation is essentially the fiscal agent for administering those funds. And I wanted to just see, as part of your role in administering those funds, how will you look at the people who will participate in this program? And I raised that because in my work as an organizer. There are particular populations that were left out of the first industrial building of the industrial economy women, black workers, immigrant workers.

In terms of the benefits and opportunities, how will you be looking at race and gender and economic equity as we move into the green sector, into renewable energy careers, to make sure that those communities are centered, meaning that we're going to be bringing those populations who too often were the last hired and first to let go. Like, how do we make sure that they're centered min the new economy and the new work?

Thank you. That's a great question. So that is a very specific program, as you mentioned. And I think we want people to have careers, not just jobs. And so some of what we are looking at is within Edd we have a market division that does lots of research and they look at what the market is and where some people may be losing jobs due to climate change or whatever the X is.

And I would say that what we're doing is looking at the populations and making sure that if they need training, we get them training. We want them to keep their salary because those are highly skilled and well paying jobs.

And we want to make sure that the people that may lose their job, when we see the trends that they transition into another high paying job, are they using their skills? I mean, ways that we measure successes, are they using their skills? How long did it take them to find a job? Did they find a job? Did they have to relocate? Things like that.

And we work very closely with the workforce Board on the high road transition projects as a mechanism. And so we believe that that is a good mechanism in order to ensure that there's equity and inclusion.

Thank you very much.

Thank you.

Thank you. Senator. Senator Ochoa Bogh.

Good afternoon, Mrs. Farias. Just for the public, we had an opportunity to meet via Zoom and we had a really positive conversation on various issues. But one of the things that I wanted to just highlight today was some of the things that we discussed, which was the fact that Edd as of now, has implemented and resolved 19 of the 21 of the Bureau of State Audits or the BSA recommendations pertaining to Edd.

The reason I mentioned that, well, that also the fact that the 100 Edd Strike Team recommendations that were given, 82 have been complete, including the 100% of all short term and near term recommendations. The reason I'm bringing that up because I wanted for the record to share some of your thoughts with regards to the many concerns with the fraud that happened this past two years and wanted to have it on record.

What your plan are moving forward to making sure that amends are being made and how that also impacts the unemployment or the debt that we have to the federal government. That as quoted, if I understand correctly, it's about $18 billion at this time, which, as we discussed in our conversation, we mentioned the fact that it's not just employers that are responsible for these payments, but the fact that ultimately, it's every Californian who will be paying the price of this debt. So your thoughts?

Sure Great. Thank you so much for acknowledging our compliments. And thank you so much for our accomplishments. And thank you so much for the meeting the other day. To your point, on the CSA audits, there were two separate audits, and one of them, you are correct in that 19 out of the 21 are completed there's actually, just today I got an email that it's actually 20.

We're waiting for CSA to confirm that they think it's completed. And the last one will be completed by April, which is the timeline that they gave us that's on the operations. There was also a fraud audit, of which there where, I believe, 19 recommendations, if I'm correct, and we've completed all of them. And so that was done by late last year.

We completed all of them. And the auditor agrees it's on their website that that they we have completed all of them. As far as the debt and the fraud, I say this all the time, but the fraud was unprecedented. It hit every state. And that is for California, it's a lesson learned.

I think for every state, it's probably a lesson learned. The debt is not necessarily doesn't correlate to the fraud because the fraud was in the federal programs and the UI debt is just the state program. And so of the fraud, of the 20 billion that we have identified in fraud, there's only about a billion of it that was actually or less, a little bit less, actually, that is part of the UI trust Fund.

So part of the UI system, though, the rest of it is all the federal it's all federal money that came in. And so when we recover that money, that money has to go back to the federal government. It does not go into our UI trust Fund is a simple way of saying it.

Okay, thank you for your feedback. And then the last question that I wanted to ask was with regards to the technology, the new information technology project, we talked about the concerns that we had within my district with constituents. Really being challenged with the system of appeals and the delay that happened on that end.

So I understand you have new technology that's being in place, that's being implemented. So moving forward, how are you addressing those of us who are less technologically savvy and what plan of action do you have in order to accommodate those who may have a little more difficulty in navigating that system?

Yes, thank you. That's a great question. And really, since day one that I've been at EDD, that is, the population that I have focused on, because anyone, even during the Pandemic, if you could go online and submit a claim, you were pretty good.

It was the people that maybe had language access barriers or didn't have access to the Internet, where they got sort of especially the language access, it tripped a lot of people up because we didn't have the language lines that we have now.

And so what we're doing part of Edd Next, which is a modernization not only of our It system min our mainframe, but it's a culture shift. So we want to change the policies and procedures that go along with the It, because you can't just change the It and have the same old policies and procedures, right? So some of what we're doing currently is simplifying forms.

For example, the forms, if you look at a form, they're somewhat complicated and they haven't changed in a long time. And so we want to just use plain language min a form, and we want to make them available to everybody. We have translated the vital forms into the top languages, which was not done prior to the Pandemic.

We have a language access line where people have access to over 100 different languages. And all of the ways on how to get to that language line is all those documents are all translated online. And we still have, because we are modernizing, part of the It. The goal is that less people will call because the It is now modernized. There are so many things that we can do now that we couldn't do during the Pandemic that was manual.

And so now that we have implemented It projects during the pandemic and then we continue with Edd next, the call center will be able to deal with people who maybe don't have access to online rather than like during the Pandemic people had to send a piece of paper in for an application.

And we don't have that anymore because we now have document upload and the people that do have to send documents in there are more staff that are available to help.

Perfect do.

So the last question would be what the current projected timeline for completion and rollout of EDD Next? Well,

it's going to roll out in stages.

It's about a five year I've said this in budget committee.

It's about a five year project. We haney to come in front of the Legislature every year to talk about the good things, the good, the bad and the ugly on it. It's a five year project but it's a stage project.

So, we anticipate, like for example, as I just mentioned, the forms redesign, the shared customer portal. That's all this year. So, there will be successes each year as we go along.

Okay. And just for the record for the public, what year? Aye, we are in year two.

Thank you.

Although I still don't know what actually year it is.

But thank you very much.

Thank you, Senator. Thank you so much. I'm going to turn now to our vice Chair, Senator Grove.

Thank you, Madam pro Tem., I'm just going to make a statement because of course some things that were said in previous questions kind of just got me riled up a little bit.

I hadn't even thought about asking about the money that was put in the budget. Flora our oilfield workers I represent 70% of the state's oil and gas in the state of California and we produce it.

I can tell you going out and talking to my oil field workers, they don't want to stand min a food line. They don't want to be reassigned.

They are 55% people of color. They are 22% second chancers some of these people can't even read and write at a 6th grade level.

But they have the opportunity to come out and make $80 to $100,000 a year in an entry level position. 12% of veterans and 11% women, 48% of them have no college degree.

They want to produce California oil. The Californians consume 1.8 million barrels a day on California soil.

Flora californians creating jobs for Californians.

They don't want to stand in your unemployment line. And we, dang sure don't need another Dollar Tree.

No offense to Dollar Tree, but we don't need another dollar tree to transition jobs to. So that statement, the second thing I'd like to say is that I want to thank you for answering my colleagues question.

Ms.Smallwood-Cuevas or Senator Smallwood Cuevas, that you look at both sides because there is employee fraud and there is employer fraud and I really do appreciate you taking a balanced approach.

Not very many people do that.

People sometimes in your position think that employers are these big evil people that don't even care about employees and that's just not the case. And so I really do appreciate you looking at both sides of that issue.

And I know we talked extensively yesterday.

You did mention something. Thank you for being here.

That was my rant.

Thank you.

We had a lovely meeting here and.

Thank you for meeting with me yesterday.

We did talk a little bit yesterday about the fraud component and the money that is the potential dollars, $18 million in underfund liabilities are underfunded in, the UI Fund, and then roughly, I think, up to $32 billion.

That was billion.

Two, not million. I think it was $32 billion for the fund. I guess my question to you is you made a statement in response just now that there was a mechanism for recovery.

You use the word recovery like if you were going to recover some of these funds, can you talk about how you're going to do that? And I'm not trying to be sarcastic, but I know that there's a woman in Chowchilla Prison that the Edd office paid $103,000.

And there's a guy who claimed to be Scott Peterson and who's not the real Scott Peterson that murdered his wife and child, but they got $89,000. And then there's another guy that was 22 year olds old, they got $104,000.

Like, how do you get a 22 year old to pay back 100 grand? And how do you get a lady that's serving in Chowchilla Prison to pay back $103,000 that went someplace? That's a great out of curiosity? Yeah,

No, that's a great question, Senator.

And I don't think we're under the impression that we're going to collect every last dime.

We're certainly going to try to collect every last dime.

But we do have the Governor created the OES task force a couple of years ago now.

And through that task force, we really do coordinate with local law enforcement, FBI, Department of Labor Investigations Office.

We also hired, as you probably know, McGregor Scott to sort of coordinate all mathis.

And some of our biggest partners, in capturing, recovering some of that money is our fraud partners IDme and Thompson, Reuters, they actually help us put together packages because they also have access to the fraud that's happening again nationwide.

But interestingly enough, how do we recover that? We have to go to court.

Somebody brings a case, the DA brings the case.

And EDD is often named as a victim.

And it is how we get restitution.

So it's sort of a fascinating twist on the fraud. And we have collected so far recovered over a billion dollars in fraud money. So it is not an overnight process. It will take time.

But we have been working on it now since we stopped the fraud two years ago. And we do anticipate there is still I just saw an email just came by my desk. It was $750,000 that we got back.

And it sounds small when you compare it to the 20 billion that was high indicia of fraud, but we're working it.

I appreciate that very much.

Thank you.

I was not aware of the recovery process, so I do appreciate that. And I do appreciate that you have to go through a court system, get what's back to you? Renters.

I mean, people that rent properties have to go through a court system, and it takes a while. So I appreciate that very much.

I do want to follow up with some questions that I asked you yesterday when we had the opportunity to visit regarding, obviously, the UI Trust Fund and the UI Fund and the overdraft, I believe it was in 2010 or 12..

There was an overdraft, and business owners or job creators in this state were responsible for paying the Food Attach reduction credit, and it created an additional dollar amount.

We ran that by colleagues here in the building.

And again, there's not so much now, but there were a group of individuals that really felt like the employer would just pay it.

We'll just pay it.

But just to give the public an example, if you have a $500,000 a year payroll, which is not a lot of money chen you are employing people that's six people, 6.25 people at $80,000 a year, or it's 14 people at minimum wage.

So a restaurant that has two cooks, a dishwasher and three servers and a hostess.

This is a small business that has a $500,000 a year payroll, and that's a gross payroll, $500,000 a year payroll.

A Bill will be sent to them, what, December 31, and in 15 days, they have to come up with $15,000.

Based on the percentage that we would calculate here in California, it's a 0.3%.

You know how it works.

Like, it goes up.

So it would be $15,000. If they don't have the money to shell out $15,000 at the end of the year and they are 15 days late on that payment, there is a 15% daily penalty on that.

How do you ever get out of that? And what's a solution. Because in my mind, speaking for every small business and business owner in the state of California, in my mind, it was blatant mismanagement, misuse, however you want to put it, by the Department, which I applaud you and Director Signs for fixing over the last two years, I really do.

But there was this huge gap in providing services but not verifying.

I mean, I gave you the example yesterday.

A person applying under the name of Poopy Pants got tens of thousands of dollars of benefits.

So I say that to say, if my staff took a job, that'd be a red flag.

So I ask you this because these penalties are so severe, it's not the employer's fault that it happened, but they're going to be on the hook flora the repayment, because it's not in the budget to make amends for the errors that were created by a state agency.

So how can you explain that? So,

Senator, I will start.

Thank you for the question.

And we had a really nice meeting yesterday.

Thank you.

I'm happy to know that we have a mutual friend.

So I will start by saying the fraud was unprecedented.

I've said that there was a short period of time when the fraud happened since that time we have instituted as we talked about and to your example and thank you to the Legislature, we cross match with CDCR.

That was not something we did prior because as I've said, the federal program didn't haney the same checks and balances that regular UI has as no employer that you have to check against.

And so we cross match against the CDCR list.

We will do that in perpetuity.

We have now iDMe a lot of the fraud was identity theft, as you just mentioned with another one of your examples.

And we also have Thomson Reuters that we use and they are our fraud filters.

So whatever the filter might be, we work with them to make sure that our system is secure in that way. And so I do believe that the fraud is over. Now the scammers are out there every which way and there is always a new scam. And so as I mentioned yesterday, we are always looking at our filters, always making sure that we aye on top of things.

If we see thanks we have a command center now thanks to Senator Laird's Bill and the command center really looks at the workload and sees are there more paper coming in, more online, more by phone and we look at that because that is a flag.

So I would say that that is the first part of that question and your second question was about the UI Trust Fund, is that right? Yes.

And so I will just say that there is a way that mathis debt is paid off.

It was paid off this way during the Great Recession.

And to your point, it is the food attacks and absent any reforms, I mean, I also just want to say that California has the lowest taxable rate which is 7000 the base rate and we also have the lowest rate in any of the states.

To be honest with you.

We are low.

We're we're low.

Our rate does not fluctuate with the debt.

There are other states that have like for example, the $7,000 wage base.

We are on par with Arizona.

That's the lowest allowed by the federal government and Arizona's rate will move up chen they have a deficit and we do not have that in California, for example.

So absent any reforms, that's the process that we have. It's the federal process. That's what we follow and that's what we will continue to follow to pay off the debt.

So I appreciate that. I just want to make a point to and again, I know I don't want to feel like I'm talking in circles. Yesterday I mentioned there were three states, I call them the evil trifecta three states that will have to have a food attacks reduction clate.

There's actually four.

I didn't know that Connecticut was part of that.

But it's California.

Min, Illinois, new York and Connecticut.

It's usually always just California, Illinois and New York.

And that's because we have a state unemployment tax and most states don't.

I understand that the rate of the $7,000 does fluctuate by all different states, and $7,000 is one of the lowest numbers or the lowest numbers based on a base flora wages for wages on the first $7,000.

But that fraud was administered by your Department or the Department edd those checks were sent out.

And that mismanagement of those funds is creating a heavy burden on employers starting possibly in 2024, because in this year's budgets, it's already pulled back.

So I just want to make that point specifically.

I mean, I know you understand it, but to my colleagues and the public, that the mismanagement that happened at a state Department has now California based businesses, small and large, on the hook for $20 billion.

And $20 billion is a lot of money, especially when you're coming out of a situation where the response government had to the pandemic shutting down businesses and not having a revenue for two years.

So I just think that's highly important to highlight.

I do want to thank you for all of the information that you gave me yesterday on what you guys have put in place over the last two years to stop fraud like that from happening.

The Bill you talked about cross referencing, that was originally my Bill.

It was given to another author.

But it doesn't matter because it's something that's working.

And I just applaud the Governor for signing that piece of legislation that does allow us to cross reference with CDCR inmates their Social Security number so that they can no longer apply for benefits and scam the public out of the money that they were scammed out of.

I appreciate everything that you told me about what you're working on.

And I think the first question I ask you when you came into my office is, why do you want this job? Like, what are you thinking? I might have a conversation with your husband.

Husband? Yes.

Oh, he's over here.

Husband.

I knew somebody was on that.

Sorry.

I knew you were kind of sitting min the middle, but I might have a conversation with your husband because I don't know why you would want this job.

But after you answered all my questions yesterday, I understand that.

You will be very successful at this job because of what you guys have done over the last years.

To prevent I mean, there's no guarantees.

There's always scammers out there.

But you have put a lot of things in place with iDMe, all the things that you've mentioned already.

And I believe that moving forward, you will reduce the cost that the burden will fall on employers and business creators or job creators in this state.

And some of them, frankly, I'm getting phone calls.

They're scared to death, these small restaurants, these businesses, because people don't realize that a $500,000 a year payroll is only 14 minimum wage employees.

It's not a lot.

They're scared of these bills that are coming.

And so thank you for at least listening to my heart on that issue and for yesterday.

Appreciate you, Madam Vice Chair.

Thank you so much, Senator Laird.

Thank you, Madam Chair.

I think the vice chair just in her close, stole one of the things I was going to say, and that is that the three of us sitting here did your confirmation two years ago.

And I think it's really worth saying that you came in at the low of the lows.

And everything we're talking about was how you had to deal with the situation you were faced and did not create and how you worked out of it.

And I think my colleagues have been really clear that you don't own what happened before you, but you haney owned how you've responded.

And that has been really significant.

And the thing I was going to say, that the vice chair sort of stole mathis at the beginning.

You thanked the Governor for appointing you.

And it's like, what are you thinking? Because basically he should be thanking you just for how difficult it has been.

It's very significant.

And I met with you yesterday, and I don't need to rehash many of the things my colleague said.

But if you look at the number of audit findings that you responded to, and if you look at how there is a plan to work out of the deficit and you look at all the things that have been put in place that is just attributed and makes you worthy of confirmation by itself.

But let me talk about two that haven't totally come up yet and maybe close on those.

Jones is and I am not the one that took Senator Grove's Bill, Senate Bill 390 for the recession plan was introduced on its own.

And it's very significant because this was an audit that came out of the audit and there had been audits out of the Great Recession and one before that.

So we had three downturns and there were audits out of each jones that said we need a recession plan.

So finally there was the Bill that created it.

You have implemented it.

And would you talk a little about if in fact we are heading into a recession at some point in the not too distant future? How mathis time? You're more ready to face into it? Yes,

thank you.

It was great to meet with you yesterday and talk about the recession plan.

Also, thank you for the Bill, because you're right, we do have a recession plan now, and it's very extensive.

If you've seen it, I think it's about close to 100 pages.

We have within Edd, our command center, and they aye, the ones that I mentioned a little bit earlier, that they track and report on trends and the way that we have approached the recession.

Papan is basically a staged process with triggers.

And as I mentioned, yesterday, we have not hit any of those triggers yet.

So the trigger and I will just only remember probably one, but the first trigger I know is a 6% unemployment rate and we are not there yet, right? And hopefully we will not get there.

But what we aye fong is hiring permanent intermittents.

We have about 300 of them that we aye hiring.

And that is because lessons learned, which is my motto at Edd.

We know we can't hire a bunch of people overnight and so when we hire permanent intermittents, we are allowed to first of all, they're merit staff, they're state staff, merit staff, they have benefits, fully benefited and we get to dictate when they work.

So if we are heading into a recession, then we can ramp up and say we need 150 people to come min 20 hours a week.

If the unemployment rate does climb, then we can require that they work more or require that all 300 work.

And so right now we're not anticipating that any of them need to work, but we are prepared for a possible recession if that does happen.

And I know that we drilled down yesterday on what specifically happens and you anticipated that, you just mentioned it.

Thank you.

Because it's not just that we have a plan, it's like whether we're ready to really move on it.

And you were very clear yesterday, and I should just say it for the record, that a pandemic is different than a recession.

And if you move into a pandemic and there's this monumental dislocation in a matter of two days, that's fong to be a challenge.

So I will say to that, I did think about that a little bit, Senator, after we had that conversation. And you are absolutely right. The Great recession was gradual and the pandemic was basically overnight.

But again, during the pandemic EDD implemented, and this is the part that I forgot to tell you yesterday, we implemented 200 it projects to basically make it easier for claimants.

And so giving an example, which I think I did earlier, was the document upload flora example, during the pandemic, at the beginning of the pandemic, people had to send in mail.

Like when if we requested something, they had to send it in by mail. Now we have document upload.

So, in a lot of the calls and the mail that we received were people, rightly? So, did you receive my X that we asked for? And so, we won't have that anymore.

So I think we are definitely better prepared for something like a pandemic.

I mean, again, that's an anomaly.

And I couldn't sit here and say sure, if the unemployment rate goes to 20% or something, that's crazy.

But I would say that things that we have put in place to automate a lot of our systems during the pandemic will be really helpful if there is another sharp downturn quickly.

Thank you. I really appreciate that.

And the other thing I was going to mention is a lot of times when we are min confirmations, the Legislature does or doesn't put something min the budget or does enact something and you're supposed to implement it, and then it is the subject of confirmation hearings where it's like, how did you get there? And you have to be polite and try to figure out a way to say it's, because that's where you put me.

And so I think that's very important to acknowledge that you're dealing within a system that has been prescribed in many ways, but there are good pieces of it.

And I think it came up maybe in Senator Smallwood clavis's exchange.

I can't remember which one.

The Legislature gave you requirements on language access, and you have now implemented that and from Allen accounts reasonably well.

And I wondered if you would describe what it is that you had to do to implement that and how, in your view, it is working at this point.

Yes, that's great.

I will back up and just say one of the first things that I did when I got to Edd when I was Chief deputy was we created a stakeholder Liaison office to communicate with stakeholders.

One of the things that we did on top of that was to create a language access office that's fully staffed.

They may not be fully staffed right now, but I know that they were hiring most of the staff.

Just actually last week there was an interview.

And so that has really informed as well as with the Legislature, and we've had several negotiations with stakeholder organizations on what the right thing to do is as far as language access.

And it comes down to translation, to be honest.

There's a lot of what we're doing in Edd next with online the portal and online documents and online applications.

But immediately what we've jones is we have translated vital documents into the top spoken languages.

We do have a language access line that is available in over 100 languages, which I think is pretty impressive.

And we have staff at Edd that speak the top languages to the extent that we can find people that want to come work at Edd that speak other languages.

And we continue to work with the Legislature and stakeholders to make sure that we aye doing exactly what is expected of us and what should be done as far as language access.

Thank you.

I just really appreciate it.

I really appreciate the fact that you were given that assignment and you really ran with it.

We have experiences.

I mean, I have to run in one county that translates my ballot statement into Spanish, Chinese and Vietnamese.

And then they send it to me and they say, would you check this and pass the Spanish? I'm really hampered.

And so 100 languages and what you do, I can only imagine.

So thank you.

I really appreciate the responses.

And I look forward to supporting your confirmation.

Thank you, Senator.

Thank you, Senator.

Let me go back to Vice chair Grove.

Thank you, Madam President.

I did have a question that I failed to ask you, and I need to make sure that I ask this question.

I'm in receipt of a letter from the Committee of Oversight and Accountability signed by Congressman Comer regarding the edd fraud that took place during the pandemic, distribution of the Pua funds and some of the documents that they're asking for prior to the audit.

Recommendations that were put in place to prevent fraud in the future and after are all documents, processes and procedures related to the disbursement of the unemployment insurance benefits during the pandemic, including policies, procedures extended to ensure payments made to the proper individual and to ensure that the individual is qualified recipient to receive the unemployment insurance.

All documents, communications with employees, Edd employees, and the US.

Department of labor regarding UI benefit programs, all documents and communications related to efforts to prevent payment, fraudulent UI claims all documents and communications related to recoup UI claims paid improperly, and then all documents and communications and identifying the total number.

Slow down a little bit, Senator.

I'm sorry.

I can provide the court reporter a copy of this as well.

I am so sorry.

Sorry.

No, it's okay.

To all documents and communications related to efforts to recoup UI claims paid improperly and all documents and communications related to identifying the total number of improperly paid UI benefits.

That's my job.

Some of the comments min the letter also identify the 133 death row inmates that were receiving over $500,000 in benefits, state CDCR inmates that received $140,000,000 worth of benefits, and a large over billions they estimate went to transnational criminal groups that used for money for nefarious purposes to harm democracy.

Obviously, outside gain, outside transnational.

Bigger than we ever think about in California.

Are you ready for this? Have you got all this together? So I did receive the letter for a friend.

I did receive the letter.

We are analyzing and looking at what we can provide and we will respond as appropriate for sure.

Thank you, ma'am, very much.

Thank you.

Senator Laird.

Yes.

On the mic.

Yes.

Not to Senator Grove.

On the mic? No.

I'll make it to the Mic through the chair, to the committee.

And I would just like to note that that letter came from the House of Representatives three or four days after it flipped, partisan wise.

And we heard earlier in this hearing that there was fraud in all 50 states, but that letter was just sent to three large Democratic states with Democratic governors and not to the other 47 where fraud might have happened.

And I'm just noting that flora the.

Record, I think both we're going to move on and I'm going to leave that on the table because I know that people will.

I think the comments of the Vice chair are noted I think we'll see how things go.

But it's clear to me that the people on this committee believe you are doing an incredible job to help right a situation that has vexed us all regardless of our political persuasion, our constituents.

Haney really paid the price for this pandemic in ways that we could have never been prepared for.

But we do have to figure out how we are going to move forward.

And I know that my colleagues seem to agree have been really impressed with your forthrightness and your seriousness to the job at hand.

So I'll let my colleagues questions and comments stand because we represent different constituencies and so that just is what it is.

I appreciate the answers to the questions.

I'm always pleased to hear and go last because my colleagues hit the issues.

And so I will just underscore I don't have a question because colleagues ask those questions.

I do want to underscore my concern about any upgrades in technology from a state this size.

Every endeavor we have undertaken has proven more problematic and more complicated than we thought.

What I do get a sense is you have dived into this, given your past different experiences, one would not have necessarily thought you would be prepared to dive into this quagmire of difficulty.

But I'm going to trust that as we look at how to transition in a new system, there will be issues, there will be concerns, it never goes easy or well.

And if you and your leadership do not have your fingers in this pie as these procurements are done, as the work is done with those experts that help figure out what that system is going to look like, I am clearly not technologically able to comment on any of that, but I worry about it.

And then secondly, your comment earlier about people who are scam artists, figure out ways through around that is going to continue to be an issue for us.

We get hackers, we get scam artists.

So I just appreciate your diligence and understanding that those things concern us, the technology and the upgrades we need to do it.

But then it's just hard when you're in it.

So appreciate your continued diligence.

I agree with my colleagues here to the left, both of them, that you would agree to do this job.

Jones of probably the most difficult jobs in the state and our next appointee will be talking about another difficult job to do and I appreciate that you're willing to do it.

I'm also concerned about I knew that Senator Laird was going to ask you about 390 and the plan because the recession that happened a decade ago, we were ill prepared for that and that was what, half a billion dollars versus or half a million claims.

I forget the numbers, but it was a lot less, a lot less than what we're faced now and the pandemic.

My first question and then he went on.

And you went on to talk about a pandemic is very different than a recession where we didn't have the time to ramp up.

It just was.

So I appreciate all of your serious and thoughtful answers to these questions.

Take that back to your team.

I know that we still have claims that are being resolved the longer term.

Jones where there were complications.

I also know that we were in a dilemma of pushing claims to be done quickly because people had no money.

Our constituents needed the support.

And so that balancing act of getting stuff out quickly versus the oversight and the due diligence, we aye always going to be balancing that when we're dealing with people's lives.

And so I hope we can recoup more.

I hope people have to pay the penalty for for taking money that belongs to employers and employees.

So I just want to say thank you very much.

We obviously believe in you, otherwise you would get and I see that Senator Chobogue wants to comment.

Yes, please see how important this is.

If I talk too much longer, we're going to have ten more questions.

I'll stop, I promise you.

Senator, go ahead.

Just one hart question.

It has to do with the recovery of the funds that you folks are working with that were fraudulently paid.

Jones that automatically go into paying the UI? No,

because it's federal money.

So it goes back to the federal government.

Most of it is pua.

So again, the deficit is not necessarily because of the fraud.

It's not because of the fraud.

It's because we paid out UI benefits, state UI benefits.

The Pooh was a completely different program.

Say what poo means.

Sorry.

It's the pandemic unemployment assistance.

So it was the federal programs, and there were several different programs.

There was several different programs, but that was the money that basically came from the federal government to help people that didn't have an employer.

Generally speaking, they were like the self employed.

And that's where a majority of the fraud was from because, again.

There were.

No checks because basically the Feds just gave us the money and said, distribute this.

All you had to do is apply for the most part.

And then that changed over time.

The backdating was a big deal.

Min, California, was the first state to say, we think back dating is a problem.

And then the Fed said, oh, yeah, you shouldn't backdate anymore after we did that, but it does not pay down the UI debt.

Okay.

I said one question.

That's okay, Senator.

Go ahead.

I'm trying to understand.

So I have in my notes here that essentially every state except for New York paid down their debt using federal funds.

That may be true.

I'm not sure.

Okay, so my question was just going to be a follow up.

If other states, except for New York were able to do that with this federal funding, is there a reason why we in California did not do that.

I believe that what you're talking about is money that they got from the federal government.

And it's my understanding that we used it for different purposes during the Pandemic.

What purposes would that be? I

could probably get you a list, but I'm imagining it was to help support people and businesses that were closed and things like that.

Okay.

Allen right.

We might have follow up questions.

Yeah, that would be fine.

And those questions may be further than just edd.

It might be schools, it might be any number of things.

But I'm sure we can ask and receive the list or either it'll come up through the budget process, but that question can be answered.

Yes.

Finance.

Finance.

Department of Finance.

Thank you.

Okay.

We are now fong to turn to Members of the public.

And again I am going to say name organization of any and just support or opposition.

When we get to that category.

And I realize we talk more up here, but it is our job to confirm the appointee.

And so we're not like other committees where we haney lots of dialogue.

So it's just your support and it's good to know if you are here in support or opposition.

So I'm fong to move to Members of the public.

We will start with those who are here present physically and in support.

And as I speak, I know that our incredible staff are going to put back up that toll free number and the access code so that Members of the public who are waiting also on our website 877-226-8163, access code 289-7482.

And with that, I will ask Members of the public to step forward.

If you're here to speak min support, we have a mic right here, right with the screen.

Your name, your organization if any, and your position.

Good afternoon, Madam Pro TEM.

Senators, Terry Brennan with SCIU California and strong support. Thank you.

Known her a long time.

Appreciate it.

Perfect.

Thank you so much.

Next witness.

Madam Protem and Members.

Ted Toppin, here for the professional engineers in California government and the association of California State Supervisors.

In strong support of Ms..

Ferris's.

Confirmation to EDT Director.

Thank you.

Thank you so much.

Next witness, please.

Thank you, madam.

Pro TEM Members and staff.

Mitch Steiger with the California Labor Federation here in strong support of the reappointment of Director Ferris.

She's done a great job through her time in the labor movement and in her current position.

We strongly urge a reappointment.

Thank you so much.

Thank you.

Next witness.

Good afternoon, Madam Pro TEM Members and staff.

My name is Daniel Shirley, legislative Advocate with SCIU Local 1000 here min strong support on behalf of our Members and edd staff.

Thank you so much.

Thank you.

Next witness, please.

Good afternoon, Madam Chair.

Members.

Tim Kremlin's, International Union of Operating Engineers.

Haney, of course, is a great choice and has known her for a long time also.

But thank you very much.

Thank you so much others in support.

And to all of you, thank you so much for your brevity.

I do appreciate it.

We will now go to our moderator and welcome the moderator for the teleconference, for those who are in support.

So if you would please prompt individuals waiting to speak Min Support and Chen, maybe give me the number if you aye able to.

Moderator of those wishing to speak in support.

Thank you, Madam Pro TEM.

For those who wish to speak Min Support, please press one, then zero.

Only once, press one, chen zero.

And at and T operator will provide you with further instructions.

And we have several people who signaled they wish to speak.

Mr. Moderator, do you know how many people or we have? Three.

Three.

Perfect.

Thank you so much.

And again, to those speaking, your name, your organization, if any, and your position of support only, go ahead, Mr. Moderator.

We're going to start with line 21.

Line 21, your line is now open.

We're going to move on to line 18.

Hello, welcome.

Go ahead.

My name is Tommy Lewis.

I'm a hope and redemption team life coach with the Anti Recidivism Coalition.

And I strongly support Mr. Ashley's position.

Thank you, and we will note that for the next appointment go ahead, Mr. Moderator.

With the next person for the Edd position with Ms..

Farius, we're going to.

Go on to line 14.

Line 14, your line is now open.

Okay, Madam Pro TEM, it appears that we have no one else to speak in support.

Thank you so much to our moderator.

We'll be back with you in a moment or so.

So having given the opportunity for those to call in support, we will now grove to witnesses who may be in opposition here in room 2200.

Let me see if anyone is approaching the microphone.

I see no one approaching the microphone.

So, Mr. Moderator, we're going to come back to you.

For those who may be calling in opposition, if you want to tee those caballero up.

For anyone who wishes to speak min opposition, please press one, then zero.

Madam Pro TEM, it appears that no one has signaled that they wish to speak.

Thank you so much, and we will talk with you a little later in the hearing.

I'm going to bring it back to Members of this committee.