Assembly Budget Subcommittee No. 5 on State Administration

Good afternoon and welcome. Welcome to Budget Sub 5 on State Administration. Today we are going to be talking to the California Employment Development Department. Hello. Our first hearing of 2026 and some familiar faces now as this is my third year as the chair of this Committee and my final year. So with that, nice to see everybody.

Today's hearing is entitled Employment Development Department. Is the Department ready for the next recession? Which by the way, we hope isn't very soon. During the Great Recession of 2008 and the COVID 19 pandemic in 2020, the Employment Development Department struggled with providing Californians with timely assistance and unemployment with unemployment insurance.

EDD has also dealt with extensive fraud and today there is a perception of delays or with confusion about paid family leave assistance. The goal of today's hearing is to understand what went wrong in helping Californians in the 2008 and 2020 and what did we learn from those experiences and have we truly resolved these problem?

So our question is, will EDD be ready for the next Great Recession? Today's hearing is an informational hearing. We will not be taking any votes.

And our first panel, we will hear from the Legislative Analysis Office about the significant investments the state has made in modernizing EDD's data management systems that helps with the unemployment insurance, paid family leave and disability insurance.

Ideally, the LAO will provide us with some guidance on how to ensure that these investments will result in timely assistance to Californians in times of need.

In our second panel, we will hear from the Employment Development Department, EDD, about the challenges they faced with providing Californians with assistance during the Great Recession of 2008 and the COVID-19 pandemic in 2020, and how those challenges are now being addressed, and how rampant was fraud back then and whether it is under control today.

Public comment will be taken at the end of the hearing. And before we begin, we would ask any of our other Committee Members if they'd like to make any opening comments. And I'd like to welcome our Assembly Member for your second year on this Committee, Assembly Member Liz Ortega. Welcome.

All right, with that, we're going to jump right into it with our first panel. And please join us, our good friend from the LAO office, Chas Alamo, and he handles personal income tax, employment and labor law for the lao. But I'm going to hold for one second because I see another Member of our Committee.

And without putting her on the spot, we want to welcome our new Member to this Budget Subcommitee, which would be Assemblymember Jessica Caloza from the Los Angeles area. And would you like to make any opening comments.

Hello. Thank you so much to our chair. Just wanted to thank you for your leadership and thank you again to the staff on your budget sub for all their hard work. Looking forward to today's hearing. Welcome.

All right, Mr. Alamo, thank you very much.

Good afternoon. Chair, Members of the Committee, my name is Chas Alamo. I'm an analyst at the Legislative Analyst Office and I've covered the Employment Development Department since before the pandemic. Staff asked me to provide sort of a broad overview of efforts to improve technology at the EDD over time.

I will focus most of my time on the project known as EDD Next, the department's current IT technology upgrade, but also with a mind toward the question of whether or not the Department is prepared for the next downturn. So a quick roadmap. Our office prepared this handout.

I hope that a copy is in front of each of you. It's available on our office's website.

Just one second. Let's make sure the Members have this. If not, it's outside. And there was some handouts outside as well. We have another Member who has joined us, Assemblymember Chris Ward from the San Diego area. Assemblymember, would you like to make any opening comments? All right.

Thank you. As a brief roadmap for my comments today, I'll describe the major benefit programs that EDD runs. I'll talk about the history or legacy of technology improvements at EDD, which is longstanding. Now I'll look specifically at EDD next. I'll also touch on the fraudulent activity that occurred during the pandemic.

And I will try to assess the main question of the hearing, whether EDD is prepared for the next downturn. My handout concludes with several questions that our office thinks it would be wise to ask the Department during the next panel. So beginning on page one, EDD administers the state's three largest employment related benefit programs.

Those are unemployment insurance, disability insurance and paid family leave. As you all know, UI is available to workers who lose their job through no fault of their own in normal times. About a million workers in the state receive UI benefits each year during recessions in the past, not including the pandemic.

About 2 million workers receive UI benefits in a year. For context, that's about 5% of the state's workforce during a normal year and up to 10% of the state's workforce during a recession.

Average benefits for unemployment insurance are about $400 a week and the state runs in total five to $10 billion in benefits each year out of unemployment insurance. The Disability insurance program is actually EDD's largest benefit program.

It's available to workers who hurt themselves outside of the job and so aren't eligible for workers compensation, and it lasts up to 52 weeks. It has a higher benefit level, averaging $1,000 a week, and it serves about 750,000 injured workers each year. Paid family leave is the state's most recent addition in benefit programs.

It was established in the early 2000s. It's available to family members to care for loved ones. The most common claims are for bonding with a new child, and about 350,000 workers each year receive paid family leave weekly benefits following one of those events.

This program costs about 2 to 3 billion dollars each year to administer or to in benefit costs. Turning to page two, I want to quickly touch on the legacy of technology improvements at EDD.

The core conflict that EDD and other state departments experience today is that we have database systems that were created in the 1970s and 1980s, most of which are based on a programming language called COBOL that was simply pre Internet. The systems were intended to be paper based.

There would be batch processing of important features overnight, all at once. Since that time, we have integrated new technology modules by connecting those modules with the database mainframe. Each of these connections is custom. They tend to be not as reliable during downturns or when we're making changes.

And this sort of conflict over time has resulted in not only EDD but many state departments endeavoring to improve their underlying database architecture based on COBOL to something more modern.

With that in mind, it's clear that EDD has been making steps, some more successful than others, to improve its technology and its existing database mainframe since at least 2003.

Earlier this morning, I searched our own office's records for any reports on EDD technology, and this is a testimony I have here from two weeks before I was born in 1984 assessing EDD's current automation plans, and it was a testimony to the Assembly Finance and Insurance Committee.

I only bring it up to underscore the fact that technology improvements have been underway at EDD for decades. And it's not just EDD Next. EDD Next is the newest chapter in this endeavor. On page three of my handout, I go through a key timeline of major technology efforts at EDD. I'm going to focus on UI.

In 2003, the state began its first modern attempt to update unemployment insurance through a program that became known as UI Modification, or in parlance, UI Mod.

That program was interrupted by the Great Recession in 2008, the Great Recession had workload constraints, but there were also federal policy changes through the American Recovery and Reinvestment act that the state struggled to implement at the time.

The program was ultimately finished in 2015 with the advent of UI Online, an online portal and application, but it was considered a partial modernization and not a full modernization that would include that database COBOL system.

The state had a tenuous relationship with the key vendor on the contract, and I think in retrospect that was considered a partial success story. UI modification in 2016, shortly after UI Online goes live, the state begins planning for its sort of first modern technology improvement, known as Benefit System Modernization.

That project was in planning stages for three years prior to the pandemic, and it was the first attempt to integrate UI DI and Paid Family Leave into the same system. Currently, they operate under somewhat of silos. Those programs don't talk to one another.

So if you apply for unemployment insurance this year and two years from now have a child and apply for paid family leave, there's no communication. The systems don't know that you are the same person, so to speak.

And so there has been an effort since at least 2016 to integrate the system so you would apply to but one EDD for any benefit you might need in 2020 before the benefit System Modernization Project got started.

Technically, the pandemic obviously required the Department to redirect its staffing and technology expertise to to the pandemic workload and changes needed to deal with implementing federal benefits that were provided at the time. And the Governor's Strike team, which assessed EDD's capabilities during the pandemic, recommended that the state pause BSM in 2020.

Two years later, in the 2022-2023 Budget Act, BSM is reimagined as EDD Next, and that is where we are today. EDD Next, starting on my handout on page four, is an ambitious, wide-ranging upgrade to EDD's technology, but also to its processes.

Prior technology improvement projects at EDD focus more exclusively on more narrowly scoped technological improvements, whereas EDD NEXT not only takes on the technology improvements, but looks at process changes as well. From lessons learned during the pandemic.

This year's budget for the upcoming fiscal year includes $146 million total funds for EDD Next, and that tallies out in now, in its fifth year to a total appropriation of $931 million. Most of the elements included in EDD Next are now complete or nearly so.

The state has made substantial improvements by standing up a shared customer portal, which is in essence a one stop entryway into EDD Next benefit programs. Call center services have been redesigned and improved. There is real time identity verification. There are additional fraud safeguards in place.

There's the ability to have a callback when you call the call center and they're busy. Many improvements to processes and technologies have already taken place and are completed. The Department, in our view, deserves credit for these accomplishments. I want to be clear about that.

That said, in its fifth year now, the most complex and costly portions of EDD Next have just started. This month, EDD initiated its vendor contract for the Integrated Claims Management System, which I'm sure you'll hear more about today. ICMs, which is that COBOL area database mainframe upgrade to something modern.

That is the most complicated part of this project and the state is now just beginning it. In the last 18 months there have been some project changes that for us raise questions and are a clear sign that we're at sort of a heightened level of risk for the project.

The first is that the Department decided to shift the shared customer portal vendor contract into as a subcontract the contract to complete the Integrated Claims Management System project that occurred last year and was the first. I wouldn't call it a red flag, but a yellow flag for our office that things were getting more complex and risky.

The second was more recently the Administration has indicated that it would like to proceed with paid family leave and disability insurance first for the Integrated Claims Management system, and to only after completing those two elements, contemplate the inclusion of unemployment insurance as well for the three integrated systems to be together.

I want to pause here a bit of context. One of the underpinning elements of EDD Next has always been that the three programs would be integrated.

This indication of sort of a reprioritization of paid family leave and disability insurance over unemployment insurance, at least in its timeline, is an indication that there's been a bit of a shift in scope for our office.

We think it raises questions that this Subcommitee and others in the Legislature will want to pose to the Administration to understand the rationale and to grapple with whether you share the rationale and think it's an appropriate, prudent path forward. Turning to page five of my handout, I did want to briefly discuss pandemic-era fraud that affected the state.

Several additional layers of fraud mitigation and prevention have been enacted since the pandemic. Some of those predate EDD Next. Some of those were instituted mid-pandemic with ID'd me the real time verification software that was brought on board.

But the vast majority of fraudulent activity that occurred during the pandemic targeted the federal unemployment insurance pandemic Area Benefit Programs. Those programs were 100% federally funded. They were passed in very short manner by Congress in response to the pandemic. And those programs did not include the fraud safeguards that are inherent in states UI system.

There was for the temporary federal programs no requirement that an employer be contacted to confirm prior employment. There were no wage records that were required to be cross verified.

The program was very different from the state's underlying sort of bread and butter UI program and as a result it was the target of substantial amount of fraud during the pandemic. The state's underlying program, which we manage, was not targeted by nearly as much fraud and not nearly as much successful fraud.

The figure below shows the administration's estimates for suspected fraud for both the federal and state programs and a very small dark rectangle on the bottom right that is considered likely fraud by the Administration. We pointed that out to emphasize how small the relative fraud that affected the state's underlying program was during the pandemic.

And you might be asking why am I sort of slowing down here for this portion? And it is to articulate clearly that the outstanding federal loan that the state currently holds and is repaying the Federal Government for unemployment insurance benefits that were paid during the pandemic, that loan amount is not largely attributable to fraud.

We think that that loan amount is overwhelmingly because the state paid benefits to unemployed workers, rightfully so, during the pandemic, that were not fraudulent. There are two numbers that are often discussed in ui, sort of in the UI world these days in California.

And one is that the state owes $20 billion in repayment to the Federal Government for the UI loan. And that is true. And the other is that there was something to the tune of 20 to 30 billion dollars in fraudulent activity that occurred during the pandemic.

It is very easy to assume those two numbers are related when in fact they are not. The fraudulent payments were made by the federal program. They were 100% federally funded and the state has endeavored greatly to recover a substantial portion of that fraud.

But the UI loan that we are repaying the Federal Government was not largely attributable to fraud. Turning to the specific question of the hearing, is EDD prepared for the next recession? A few contextual points are probably in order. The first is that the pandemic was unlike any prior recession.

The absolute surge in UI claims was unprecedented normally, and I looked back at the Great Recession and the.com recession, and including the early 1990s recession, normally there's a slow, gradual uptick in the number of people who begin claiming unemployment insurance at the beginning of recession.

And I point this out because that typically means the department's going to have six months or a year where it's seeing its claims rise slowly and it can begin to operationalize any contingency planning it has to staff up to change processes or to accommodate that increased workload. The pandemic was unprecedented.

We went from a normal workload level in February of 2020 to to more claims than the state had ever seen in March of 2020. And that is, barring a similar experience, would not be the case in a, dare I say, run of the mill recession that might be forthcoming.

The second point I want to make is that relative to 2008 and relative to 2020, when the pandemic hit, the state is in a much better position to be prepared for heightened workload during recession.

The process and technology improvements made to date, both those that are part of EDD Next and those that were instituted before EDD Next but during the pandemic, have greatly improved the capacity for an unemployed worker to file a claim online, submit digital documents related to that claim online, answer sort of common eligibility questions online.

All these activities they can do through self service, whereas in 2020 you had to get an EDD staffer on the phone to do those. When workload spikes, it's hard to get someone on the phone.

And so to the degree to which the state's workers can now use self service options and that those self service options are reliable, the state's in a much better position than they were in 2008 or in 2020.

Despite this better positioning, the things we've focused on and improved as part of EDD Next are things that we learned from lessons during the pandemic and the Great Recession.

That means that there are some outstanding elements that are sort of beyond our imagination now that could take place during the next downturn that we simply won't be prepared for. There are always unforeseen issues that could still cause stumbling blocks during the next recession.

Aside from the broad sort of the vague, scary idea of an unforeseen issue, we think there are two identifiable weaknesses that remain with EDD heading into the next recession.

The first is simply this continued reliance on the COBOL era mainframe and what are relatively fragile connections between that mainframe and all of the new functionality the state has added onto it.

If Some of those functionalities don't work during heightened workload or if they are affected by, say, a temporary change to policy that the state wants to make during a recession, those program deliverables could be compromised during a downturn.

And the second key weakness we see relates to actions the state and predominantly the Federal Government, has taken during the last two downturns. Because of the COBOL era mainframe and the complexities, it's very difficult to make changes to UI DI or paid family leave quickly.

And the Federal Government has taken steps during the last two downturns to stand up new programs, to extend benefits, to change program eligibility, all in the effort of serving workers during a downturn, but putting substantial strain on the Department to make those changes quickly. And that remains an outstanding risk going into the next recession.

Finally, as your second panel provides their comments and throughout this year's Legislative Budget Subcommitee hearings, we think there are some key questions you can pose the Department to learn more about its preparedness. Those questions are on page eight.

I won't go through each of them specifically, but they relate to the Department's statutorily required recession plan and how that plan might mitigate risk. They relate to recent changes in the EDD Next project portfolio specifically related to sort of prioritizing paid family leave and DI ahead of UI for the Integrated Claims Management System project.

Happy to go through these in more detail at the committee's request if so, but also happy now to take any questions you might have. Thank you.

Thank you. Very well done. Appreciate the hard work on this and it does answer some questions. I know we'll have additional questions. Some of these questions could be for the second panel or right here. So do we have any members that would like to ask questions to our representative here, Assembly Member?

Great. Thank you again for a really helpful holistic overview and history lesson here. I wonder if you had any knowledge or quick calculation. You mentioned, you know, modernization efforts have been going on for more than 20 years. And yes, as the technology improves, we need to get into the next phase of getting the new systems in place.

But you had mentioned to date for EDD Next, it was about over $930 million, including that includes this year's proposed allocation.

That includes the proposed budget year allocation, yes.

Got it. So if you went back to 2003, how much have we spent collectively to continue to modernize this phase over phase?

Undoubtedly the state has spent more than 931 million, of course, and though we don't have an exact figure, and I suspect arriving at one would just pose a great challenge to figure out exactly each budget proposal we could endeavor to do. So.

Yeah, I think that it begs the next question, which I'll say for a minute for the next panel as well too, is that I want to get into the future like when we are successful in EDD Next, and I'm sorry, the acronym again, ICMs is fully integrated.

You know what happens in the next phase when technology improves again. And so at what point can we maybe step back and think generationally about a system that's going to accomplish these very core functions that we will always need for Californians, but do so in a cost effective way over time? I'll say that one for the next.

But I'm raising this because if we go back 20 years, you imagine how much we've invested and we're constantly having to make these like major billion dollar investments, you know, every 10 years or so.

One of the core concepts I was hoping to share with my testimony is the notion that these projects have been ongoing, that we have essentially been working on technology improvements at EDD nonstop since at least 2003. The notion that we begin a project, we plan for it, we execute it, we finish it, we cut the ribbon.

That's a bit of a false notion. In technology there will be a time when ICMS hopefully is replaced and integrated with all three programs and the cost then are ongoing maintenance costs. But you're, you're absolutely right. There will be another technological challenge, a recession that we learn new things from going on beyond that.

So I sort of, I tend to think of these technology programs as, as ongoing endeavors rather than discrete projects.

Understand back to the topic of federal benefits, state benefits and thank you for first time I've seen this chart and I do understand it, breaking it out as far as like sort of the source of the fraud.

What's your understanding of why federal benefits were so specifically more susceptible to fraud as opposed to the state benefits which you've been able to calculate were just a of fraction, fraction of that sliver. And why did that occur? Were there distinctions in how federal benefits were processed distinct from how state benefits are processed?

And that sort of, you know, first distinction was because we had to act so quickly, more susceptible to fraudulent intervention there.

I'll start on the state side because I think the context is important. The state's UI program is available to workers who are payroll employees. So most self employed workers are not eligible for unemployment insurance in the state. When you're a payroll employee and you lose your job and you file a claim for Unemployment insurance.

One of the steps EDD does immediately is sends a notice to your former employer and says your former employee has submitted this claim. In essence, do you contest the nature of the claim for any reason? That right there is the surest safeguard against fraud that the state has for its state program.

Because if the former employer doesn't recognize the name or does recognize the name, but that person is still employed, all they have to do is contact EDD and say there's something bogus about this claim, it's clearly an accident or fraudulent. That is sort of the underpinning of the state's program.

It's a built in fraud prevention, just in addition to the other steps that the state takes to prevent fraud. The federal temporary benefit programs that were stood up very quickly during the pandemic were for workers who were not eligible for the state's existing UI program.

So they were workers who had, maybe they didn't have the work history that you need, sort of the duration you've been employed for the prior 12 months or you are self employed, the nature of those work environments, those work circumstances are such that there is no former employer to contact.

If you're self employed, you are your own former employer. And mindful of that, when Congress enacted the policies and the benefit programs, they did not include steps to verify prior wages, steps to verify identity, steps to verify employment. Because those steps aren't really available in most cases.

To my knowledge, the Employment Development Department instituted those temporary federal programs in accordance with federal law and regulation. And the fraudulent benefits not only affected California, but they affected all states. It was inherent to their development and the reason why the states program weren't targeted largely there was this immediate backstop where the employer was contacted. Right.

So and you're right to say that so many other states, all other states had degrees of effect as well too, you have noted.

And I do want to get next panel to question a little bit about, you know, this decision to sort of bifurcate the implementation of PFL as opposed to some of the UI or other or disability insurance.

But I, but I hear what you're saying and wonder have you been able to estimate if we were staying the course to develop this system, integrate in an integrated fashion, would there be a cost effective total cost of the project versus by separating some of this out and saying we're going to do a little bit over here later and everything is this adding cost because of the piecemeal approach?

I can say that it's too early in our analytical process to answer that question specifically because we just found out a month ago about this scope change.

It's early, but I'll again maybe note for the next panel too, I think it's a really important question because out of $136 million, $146 million we might be asking for this year, this was a differential of $10 million. That's not insignificant.

I will note the budget proposal for this year includes a $70 million reversion

Okay.

From prior year appropriations that was corresponding to an ICMS vendor contract for all three components at once. I'm not certain how the Administration will characterize that reversion, but I think it's an indication at least of the magnitude of the fiscal effect of that policy change. Now, those costs would occur in the future.

Should the state endeavor to include UI later on. There would be cost there. And so maybe it's one for one or something like that. I would want to impress that as an office. I think we would also want to include the risk assessment with that cost assessment.

If approaching PFL and DI first individually presents less risk to the project overall, it might warrant some additional costs. And figuring out how to weigh that cost benefit is for the second panel and for you all.

I understand exactly what you're saying. I think it's worth at least a little bit more attention to because of the magnitude of what we're talking about here. And last question is, do you have any sense that given and you're right to also celebrate, I think the progress that we made today with EDD Next and the functionality improvements.

Would you imagine, based on the today's and the expected completion functionality, to see a repeat of some of the same issues that we had during the COVID spike of workload intensity and the amount of fraud

Or will EDD Next, as it is to be completed, have solved some of the gaps that we had that underlie some of the fraud?

I will say that the improvements in technology and process as part of EDD Next logically imply that the state is much better prepared for a heightened workload, even of a pandemic magnitude, than it was during the pandemic. I don't know. I certainly don't know.

And I'm not sure the Administration does exactly how the technology portfolio will perform during the next downturn. There is a certain amount of sort of institutional stress testing you can do with the system, and it's included as part of the project plan for the vendor contract.

But outside of a real world context, it's got to weigh the value of stress testing. But logically and the reason why we've been, you know, have taken a step to acknowledge the department's progress is that we do think they are in a better position than they were prior to the pandemic.

Okay, thank you for all of us.

Thank you for those questions. Assembly Member Caloza, thank you so much.

Chair thank you, Mr. Alamo, for your testimony. Really appreciated the LAO's report on EDD and wanted to take maybe a few steps back to, to really one, thank you for your work and helpful analysis on this and also wanted to better understand some of the information that I was looking through because I know your report is really around. How does EDD modernize its system?

You're tracking the timeline of how it began, modernizing since 2003. Obviously a lot has happened since then, including the pandemic. Some of the things that we are witnessing now. And so from your analysis, could you just share how many of the claims that EDD receives? How much is it based on paper versus online?

I'll have to defer to the second panel for the specific details. My understanding is that UI has the largest share of applications submitted online, followed by disability insurance and followed by paid family leave. But I'll have to defer to the second panel for the specifics.

Okay. Did the LAO analysis involve any work looking at the difference between what was paper based versus what was online? By chance?

This analysis has not. In the past we have reviewed paper based applications insofar as they were an additional challenge in certain circumstances for Department staff during heightened workload. We acknowledge that there are many instances when paper applications are the most seamless option for workers.

If you're part of a large scale layoff and your employer provides you a paper application for unemployment insurance and helps you fill it out, that's going to be the most seamless transition to you. And there are circumstances where that will remain true for all three programs.

I will say though that in California and nationally, the movement has been toward getting as many of the claims automatically. We call them a clean claim, a claim that can go through the automated process without having much staff Member involvement to get that payment out as quickly as possible, starting online and finishing online.

That's been an effort that the Department has endeavored to pursue.

That would be, I think, a request that I would make to LAO for, I think, a future report. If there could be an analysis specifically to look at paper based applications versus online applications.

I know that's really important, especially for senior seniors, especially if some of these forms are only available in paper form for the ones that are translated in other languages, and what that looks like, especially if, you know, EDD Next is looking to modernize the entire system.

We want to make sure that we aren't leaving anyone behind by this transition to the digital age.

The second question that I had is I was also looking at the state auditor's report from a few years ago, and I know that there was a lot of concerns raised at the number of overturned cases that EDD frequently then went ahead and paid out after there was an appeal.

Was there anything in the LAO report or that kind of analyzed what that appeal process looked like? So we can really better understand that as we are modernizing EDD, some of these things in which we're finding things overturned, like very serious appeals, including in my own district, that we're accounting for that.

Absolutely. Our office produced a report in 2022 that looks specifically at EDD's processes for determining eligibility and making benefit payments in the unemployment insurance program. I will say the key finding from that report was that the EDD is sort of administratively balanced toward providing core services to its employer clients, often at the expense of workers.

That was the key finding from that report.

And that included as one piece of evidence, the statistic that you brought up that many cases when an unemployed worker files for a claim and is denied eligibility, if that unemployed worker appeals the denial, the claim is that appeal is reviewed favorably by the appeals board at a very high percentage of rates.

I think sometimes in excess of 50% of cases where the eligibility determination made by the Department is overturned by the appeals board. The Department has indicated since that report was published that there are sort of statistical reasons why the that you that you would need to direct to the Department to get a better answer at.

But I'll attempt statistical reasons why the statistics purporting that there's a high prevalence of overturned eligibility decisions don't actually reflect the reality of most claimants. It's something we want to look into more. But it was one of our key findings from that earlier report.

Thank you. And the last comment that I had was, again, for future reports around EDD, some of the things that I think would be helpful is to really understand any analysis of the WARN notices that are going out. And for those members of the public who are listening who are wondering what is a warned notice?

Let me see if I can quickly. It's a worker Adjustment and Retraining notification warn, and it requires employers to give 60 days notice before a mass layoff, closure, or relocation. And I just say that because given the state of the economy, everything that's happening at the federal level.

I'm always deeply concerned about mass layoffs that are occurring in my district. When there was, you know, a lot of mass layoffs in the entertainment industry, many of them were workers in my district and many of them depend on EDD.

And I think those are the types of trends that would be really helpful to get an analysis on. And I plan to ask the same question for EDD folks who are coming to the next panel. But I know the forward looking analysis of the LAO is very helpful in that regard. Thank you.

Thank you. Appreciate that. And forgive me, I forgot to introduce our consultant on the Republican site. Brent Finkel has been, I think, three years. Yes. On this Committee. So thank you and welcome. I do have a few questions, but a comment.

One of the areas that we've covered that is not only edd, but when we look at state, State Administration across the board, we know that we are well over billions of dollars when it comes to technology upgrades. And as the Member from San Diego noted, this has now been a 20 year process, particularly for EDD.

But there's many other upgrades that are costing the state billions of dollars. I know that our accountability chair is considering doing a hearing on how much exactly are we paying for all of the technology and we could probably just average it out for two decades. Do we have any numbers across the board?

Our office unfortunately does not have a number we can point to that would summarize the state's efforts on technology projects. Obviously, the newer technology projects have become more expensive for a host of reasons. It's something we could look to do.

And then you did mention in your comments that the systems aren't speaking to one another, from UI to disability to paid family leave. And I can ask it to the second panel as well. But are there situations where there could be individuals receiving all three benefits?

That is an appropriate question for the second panel. I understand that there are flags in the systems that would spike an automated flag, say if you were currently receiving disability insurance and an unemployment insurance claim came in, that the system would flag that.

I think the important thing to point out is that those flags are an example of a custom connection that is maybe more fragile than the existing system is. So, all of this functionality we've built into the system has made it more complex.

Okay. And then finally, given the complexity and huge cost of EDD, EDD's IT modernization project, can the legislative body ever be fully capable to providing significant oversight? And if so, what would your recommendations be?

Last year, as part of the budget deliberations, our office recommended a series of heightened oversight statutory changes for EDD next in particular. We think those suggestions still hold merit. They would include more frequent oversight reports submitted to the Legislature, more frequent meetings with the Department staff and legislative staff.

At the time, it included an opportunity for this legislative body to review and approve this final vendor contract for ICMS integration. That's now in the rear view mirror. But there could be other instances where the Legislature would wish to insert itself in the decision making process for EDD next.

The quality of the oversight, yes, is partly statutory, but it really derives from this body's focus and interest in the project. They're complex. The Administration is working on them every day with dozens of staff, and it really takes a great deal of effort from your staff and yourselves and our office to keep tabs on the moving pieces.

One of the things we said during the pandemic when the strike team report came forth was that we, by and large, agreed with the recommendations of the strike team report for technology changes. But the onus was on the Administration to execute those changes.

Just how quickly they happen and how nimble the Department has to be that the Legislature almost by necessity has to relinquish some of that sort of day to day decision making to the Department. And that's part of the balance.

But identifying core decisions where we can have an additional touch point would be an enormous contribution to the legislature's oversight capacity. We'd be happy to work with your staff and with the Department and with the Department of Finance on reworking that budget bill Language to include some of those statutory provisions.

Appreciate that and then for the Members on the Committee, we will be, on March 10th, speaking more about the BCP as far as that goes. So, we'll have another opportunity there. All right, any other final questions? We appreciate this well done presentation. Thank you so much.

All right, we're going to call up panel number two, which is Employment Development Department. And I'll introduce our panelists, which is Amy Faulkner, who is the Chief Deputy Director, Caleb Horal, who is the Deputy Director for Administration, and Ajit Girn, Deputy Director of Information Technology.

And we will be hearing the presentation on ED Department and what it has done since the pandemic to improve its response time for requests for assistance from Californians. We'd like to hear about what challenges the EDD legacy system faced with the pandemic and how we are or will those challenges be resolved.

And we can go ahead and start with the Director, Chief Deputy Director. Welcome.

Thank you so much. Good afternoon, Madam Chair and Members of the Committee. My name is Amy Faulkner and I'm the Chief Deputy Director of the Employment Development Department, or EDD. Thank you for inviting us to provide a brief overview of our modernization effort and discuss the progress EDD has made to date.

This work would not be possible without the continued support of Governor Gavin Newsom's Administration. I am also incredibly grateful to the nearly 9,000 employees at EDD who deliver our services every day. They are truly the heart and soul of our department. As you know, EDD administers vital programs for California's workers: unemployment insurance, disability insurance, paid family leave, and employment services.

Our job is to support workers during life's more challenging moments. Given the breadth of programs EDD administers, it's almost guaranteed every worker will interact with our Department during their careers. Whether it's experiencing a job loss, suffering from a serious illness, or welcoming a newborn child.

Those moments are often full of uncertainty about the future and EDD will be there to help. We are prepared for any downturn or impact to our services. We have a 100-page recession plan that we've prepared, thanks to Senator Laird, that we can execute if unemployment levels increase. This preparedness is foundational to EDD Next.

We've learned the importance of making incremental improvements. We are continuously streamlining our processes based on customer feedback and providing multiple avenues for customers to access our services. It's never been faster or easier to apply for benefits. Following the peak seasonal workload that happens each winter, I'm proud to say that EDD is processing benefits timely.

As of January, 83% of paid family leave claims are processed timely within two weeks of receiving a customer's claim. Our current processing timelines represent a substantial improvement from a year ago when paid family leave program was driven entirely by paper and most claims required manual processing. Now, 83% of PFL claims are filed online.

We are at 84% of unemployment and 85% of disability claims processed within two weeks of receipt. Today, I want to talk about where we are with EDD Next, a top to bottom modernization effort focused on continuous customer service improvement.

Over the last few years, we've made historical improvements and there is still more work to be done. That includes investing in employee training, improving internal communication, and using data to drive decisions across programs. And key to that continuous improvement is listening to our customers, our employees, the Legislature, the auditor, LAO, advocates, vendors, and other states.

I want to take a few minutes to highlight some of the recent improvements and share where we're headed next. We're continuing to make it easier for customers to get updates and information on their claims without making a phone call.

Workers receiving disability or paid family leave benefits can check their claim status and payments by chatting with EDD's virtual assistant and we'll be rolling this out for unemployment customers too. In the meantime, unemployment customers can chat online with a live EDD staff Member for real time support in the top eight languages.

For our call centers, the disability and paid family leave programs are on a new platform powered by Amazon that provides better support for both our customers and our EDD agents. This has provided more detailed claim status information shared with customers and allowed agents to focus on more complex cases.

In 2025, more than 1 million customers used newly developed, newly deployed, excuse me, self service options to get information about their payments. Following the streamlining of our unemployment application in 2024, we recently improved our online disability insurance application, making more than 200 changes including simplifying questions and instructions.

Customer satisfaction with the online disability application is now at 80% and rising and we are actively analyzing the feedback from the remaining customers to further improve clarity and reduce friction. We also improved our website with step by step instructions to apply for and manage benefit claims in all three of our programs.

These changes are about making the claims experience easier and smoother to our fellow Californians when they need us most. Along those lines, we recently announced the award for updating our core benefit systems, which have not been modernized, as Chas just so eloquently went over, in decades.

The effort, known as the Integrated Claims Management System, will make it easier to manage claims, share information securely, expedite program changes, and improve the overall experience for our customers. We are implementing this project using a phased approach using industry best practices including independent oversight and regular reporting to ensure accountability and transparency.

We're improving our unemployment processes and systems to pay benefits to eligible customers faster, including a wage reporting tool that helps workers report any earnings they receive while collecting benefits and expansion of our online eligibility questionnaire to include more issues that can be resolved without a phone interview.

We now have a smoother online identity verification process which will roll out to disability and paid family leave customers in the future. In 2026, we're simplifying the bi-weekly certification questions that UI customers answer every two weeks to continue receiving their benefits.

EDD is committed to protecting the integrity of its programs with the help of industry leading technology from ID.Me, Thomson Reuters and Secure. We shifted from paper to an online identity verification process during the pandemic which has allowed us to process claims more quickly while ensuring program integrity.

We also regularly conduct benefit audits and utilize data matches to further prevent and detect fraud. The wage reporting tool I mentioned earlier is an important piece of our integrity toolkit. It helps customers properly report any earnings so that we can pay them the correct benefits each week.

We're also continuing to make process on a new document management system that speeds up claim processing and reduces errors of manual work. Phase one covered the unemployment forms and went live in August of 2025, with disability and paid family leave forms coming up next. Language access continues to be a top priority.

In October, we completed the translation of 246 of vital unemployment forms into 14 languages. We launched speech to text translation on our fraud hotline for messages received in languages other than English and now, translation happens in mere minutes.

We also have some exciting improvements coming for the employer community, including enhanced security for online services, streamlining payroll tax systems and simplifying forms, and a modernized job search portal to find qualified candidates. Those changes represent a small portion of the work that we're doing at the EDD.

Thank you for inviting us here today to highlight the changes we have made to better serve Californians and be fully prepared for the next economic downturn. At EDD, we are committed to continual improvement for our customers and our employees and appreciate the support of the Legislature and the Administration in meeting those goals.

I am joined by my colleagues Ajit Girn, EDD CIO, and Kayla Perel, our CFO, to answer any questions you may have. To summarize EDD's improvements, we want you to walk away with these three things. 1. operational stability, 2, discipline, long term modernization, and 3. measurable customer experience improvements. Thank you.

Thank you. Well done. Were you going to make any other comments or just take questions? All right, appreciate that. Then back to our Members.

Thank you for the overview and presentation for all of you. I wanted to dig in on paid family leave because that's one that, you know, we get kind of an uptick of concerns from our district staff. I'm not alone in that, with other colleagues as well, kind of reporting the same.

And I wondered if you could talk a little bit about your understanding about workload issues. And thank you again. I know we've been through a lot in the time that I've been here trying to resolve UI and other claims issues as well and getting that workload down to manageable levels.

I am happy when I get my weekly district reports about very, very low open cases. But lately, it's not been the same for PFL. And I'm wondering what's, from your perspective, going on there that needs some attention.

Yeah, I'm happy to talk about that. Thank you for your question.

Can I just interrupt? Just as you answer his question, if you could just give a synopsis of what paid family leave is and who qualifies and so forth, because it is something we're hearing a lot about.

Yeah, absolutely.

So, the paid family leave program is intended to provide benefits for those who are either at home taking care of a newborn child, who are taking care for an ill parent, grandparent, et cetera, and based off of their respective earnings, then they receive benefits that will help them support and be sustainable while they're off during those periods of time.

And how long does it last for? And can you, in essence, have two partners kind of take one leave and then another partner follow?

The number of weeks, 18. And yes, oh, sorry. Go ahead.

Oh, sorry. The duration for paid family leave is up to eight weeks specifically. For the disability insurance program, it could be up to 52 weeks. But PFL is an eight-week duration.

And the answer to your second question is yes, the time off could be staggered so you can be off for a few weeks and then come back to work and then decide to take subsequent weeks that you're entitled to later.

But in the same family, could one parent take it and then the other parent take it, follow and take it after? Because you said newborn, so.

Yes, yes, you can stagger it. Each person can stagger it or take it. Each individual eligible for the eight, that's eligible for the eight weeks, can take it on their leisure whenever they'd like to, staggered, sequentially, whatever their desire.

Then back to, I'm sorry.

Yeah, so, no worries.

Yeah, the distinction about like PFL backlog right now.

Yes. So, in 2024, we did see a slowdown in processing of our PFL claims. We transitioned our PFL into the SDIO online application. So, that caused some slowdown. In addition to that, we had the regular seasonal churn that we experience, oftentimes due to the staggered when the individuals take the leave, they often take it during the holidays.

And so, we do see some seasonality with the claims that occur in PFL. Also, we had to get staff fully trained on the PFL system being moved to the SDIO system, so that took some time. We were able to clear the that up though.

And as of February, we're processing 85% of all of our claims timely, within two weeks of receipt of the claim. We do, we do not want to undermine that we are hearing that there's still improvement to be made.

Which is we have lots of plans in 2026 to improve where we're at in the performance of the program, which also further supports the pivot on putting PFL and DI before UI and the Integrated Claims Management system.

Yeah, I want to get to that in a second. You know, great, great that 85% of the claims are, you know, being processed and people are getting supported in reasonable time frame.

It's probably this remaining 15% that reach out to our office because something got like kind of messed up in translation and we have to help them problem solve with you. Thought it was interesting that, you know, you'd mentioned too that people PFL was 85%.

UI and DI claims as well were in the 83 to 85% range as well. But again, just like from what we're hearing, those actually we have very, very low casework on those. It's the PFL one. So, there is something there that's going on and you mentioned in your answer that something was cyclical around the holidays.

I guess I can know that and appreciate that. Are you planning for that cyclical nature then? Are you thinking about the next holiday season coming up to?

Absolutely, absolutely. In addition to looking at the automation, we're constantly reviewing our resources to right size that ship to make sure that we're adequately providing resources to the increased workload.

And yeah, preparing for that anticipated pattern. I'm wondering with the work that you're doing with EDD Next, is that in partnership with Department of Technology or are you sort of managing this on your own?

It's in partnership with CDT. Yes.

Great. Okay. And then, same question I had for our LAO representative as well. Where do you see—I just want to talk sort of like in the next 30 years, post EDD Next and the ability to, you know, not need to go back and start a 20 year cycle of a new product and new modernization and $3 billion over the course of that, like, you know, 30 years.

Where do you see as utilizing EDD Next as really like, you know, the good new baseline of completing the function that we need to complete and minimizing, I guess, additional expense on future budgets?

No, thank you, Mr. Ward. I totally hear your concern about ongoing cost for these systems. What EDD needs right now is a stabilized platform which we don't have today. We are still dealing with unemployment system that was developed in 1980s, even though we have done incremental improvements on these systems.

But the base platforms, mainframe and...as Chas mentioned, remains the same. Same thing with paid family leave program. The way we see in IT, these systems, is you need a proper caring and feeding of these systems. So, this improvement does not stop with EDD Next. This is a continuous improvement that you have to make.

You have to make constant investment in these systems so that you can never fall behind. I'll give you One quick example, Mr. Watt. In the last five years, EDD has paid over $200 billion in administering the benefit programs.

In the next five years, we will, based on our projections, will probably make another $120 billion payout for these benefit programs. That's roughly around 320 billion over a 10-year period. During the same time, EDD Next project, which is the duration of this project, the total expenditure is around $1.3 billion.

If you do the math, that equates to roughly 0.5% of the total payout that the EDB is going to make in these 10 years.

Now when you compare that with any private industry, coming from private, when I look at the practices that we have policies that we have in the stateside, any company dealing with this size and this complexity of a system would be making a minimum of 10% investment in innovation and research and development.

And what we are doing here is 0.5%, which is nothing compared to the complexity and the stress that is put on these systems.

To make matters worse, if I add all the revenue that EDD is going to collect over this 10 year duration using the same systems, which talk to again...systems, at the end, we will be—this percentage drops down to 0.01%, which is shocking.

So, when people say, hey, EDD is making investments and there's a lot of money being spent, my argument is because we have not been making the constant improvements in these systems and the investment rate is so low to the complexity and what these systems does, this investment is absolutely necessary to provide the services that the customers demand, because the customers are looking at services from Amazon, from Google, all the companies that are making massive investment in their services.

So, EDD has to do the same thing, otherwise we will always be playing catch up.

You know, great point. And on space, I absolutely agree. That is some efficiency, I guess, to celebrate, given the investment you're making, the administrative cost as opposed to the level of activity that you're really working on. Two new thoughts kind of come to mind, though.

One is, is that, you know, on comparison of a private sector investment for managing that money, I mean, this is not—we are, we are, we are still spending a billion dollars or sometimes two or 3 billion dollars, right, to be able to manage that.

And these are funds that are coming in, you know, from certain resources that we are just the custodians of and have to make sure everything is sort of pulled and people are getting the benefits. So, I still see that as a necessary cost that the state is having to produce. Right?

To be able to help manage this system, you know, responsibly. And it's costly. And I also want to underscore, I know that there's going to be ongoing maintenance class. My question is, are we going to be here in 10 years needing to have a whole new system, right.

Kind of built from scratch that like, needs to, like, you know, which will be much, much more expensive than just ongoing maintenance costs?

No, thank you, Mr. Ward. That's a great question. So, the way I see it is after 10 years, we will not have to do the base modernization like we are doing today. Right now, we are dealing with system that's 50 years old. That should not happen. Once this project is over, we'll have a base platform.

Of course, there'll be technological advancements, there'll be new things coming in that we'll have to implement. But I don't anticipate this level of complexity and this level of modernization that we have to do right now.

Yeah. The same question I also asked for the LAO. Your decision—can you explain a little bit more your decision to last month bifurcate the UI from sort of the holistic approach that you're having with the other systems. Why did you make that decision and how do you see that implicating the budget?

Sure. One of the key things I want to emphasize about EDD Next is that this is the agile project. We listen to the customers, we listen to the Committee Members, we listen to the Legislature, and we listen to the vendor community before making a decision.

That pivot is basically from the lessons learned throughout the history of the state where we have done projects. What traditionally state has done is awarded massive monolithic contracts that are 10 years long, six years long, and then you are stuck with those contracts. What EDD has done is we have made it.

We have bifurcated the project into two pieces, DI, PFL, and UI, where UI is mandatory, optional. What that does is it puts tremendous pressure on the vendor delivering these services to do well in the first phase. Otherwise, the phase two is an optional first phase.

Now, for EDD, we have full intention of implementing the entire project as integrated system. So, we have—the costs are built into apparel processes. So, that is one thing that played a big role here. Lessons learned. Another thing is the vendor community.

The vendor community, as part of our market research, as part of our negotiations, during the evaluation process, as part of our RFI process, as part of pre-solicitation, continuously alluded that EDD should move DI and PFL upfront and move UI last, the reason being DI and PFL programs are relatively easier.

The number of customers getting the benefits are smaller. It gives the vendors a better chance to be successful by putting a platform that they can expand to put UI on top of it. So, that was the second reason. The third reason is, again, hearing from the customers.

As you rightfully pointed out, yes, there are some challenges in paid family leave program that we are actively working to remove. Putting DI and PFL first helps us meet that objectives, helps us eradicate those problems that our customers are facing today.

One additional thing I would like to mention is SB 590, which was passed last year in October by the Legislature, will increase the number of PFL applications by roughly 2.7% and it is applicable and effective in 2028.

Now, with the ICMS timelines, our goal is to get done with the first phase, which is implement PFL and DI before the implementation of SB 590. So, it'll help us, it puts in a better position to handle the workload, stabilize the systems, and then bring the UI on top of the system.

Thank you. That makes sense. Still for, you know, your kind of ongoing timeline and sort of projecting forward what your ongoing needs are going to be to see this project through to completion, by taking the decision you did, was there a change in this budget request for this year?

I know we're probably going to bring that up in a couple of weeks, but do you want to give us a preview?

Sure. The only change we are making in this BCP is that we are giving back $70 million by not utilizing the General Fund for the UI modernization. We are using the Disability Fund to proceed forward with the PFL and DI modernization. So, this PCP is split, I think 60% is DI Fund and 40% is the General Fund.

Got it. Okay. Kind of last question that I would have is the cost that we have and we'll continue to put into EDD Next, those are solely from the General Fund or are we using a portion from?

EDD Next is split funded. So, we are using funds from the Disability Fund, as well as the General Fund as well.

Just for DI, but for unemployment and for PFL, those are, we don't, those are, those revenues are wholly returned to the beneficiaries.

Yeah, thank you for the question. So, yeah, as my colleague noted, this project has been funded pretty much 50/50 up through '25-'26 by General Fund and the Unemployment Compensation Disability Fund. That Fund is the fund that supports both the Administration of disability insurance and the paid family leave programs.

Okay, great. Thank you again for, you know, this helpful overview and for answering the questions. Look forward to continuing to work with you. And, you know, we're in a better—I will leave it at this—we're in a lot better position than we were a couple of years ago, so, thank you for your commitment.

To this Department. Thank you. To the Member from San Diego, Excellent questions. I do want to go back to the paid family leave a few questions and thank you for your answers already. I appreciate some of the updates that you mentioned and the 85% moving applications quickly.

I did just kind of browse the EDD site myself, partly because myself not related to paid family leave, but I'm on many government websites because I'm looking at retiring. So I've been on Social Security, I've been on CalPERS and I've been on STRS and they're all very different and different levels of being able to navigate them.

We don't get retirement, Madam Chair.

I know, but I'm on CalPERS because of being a. Anyhow, that being said, I was very pleased to see the website EDD just going on myself, you know, logging in under Google maybe something an average person, very friendly site appreciated that like tell right away you see paid family leave.

I did scroll down onto it and looked at the forms that are needed and one that I hadn't really been aware of is this bonding form. Can you explain what that is exactly?

The bonding form is when an individual is transitioning when they had a baby and they're transitioning from DI disability insurance to paid family leave. And one of our improvements in 2026 is to streamline that process.

So when an individual is bonding with child and elects to revert from SDI or excuse me, DI to PFL that they're able to do that seamlessly without completing a bonding form, they are able to elect to participate in PFL immediately after birth of child to exercise that benefit.

So it literally means bonding with your child. Correct. Okay, well that's good to know. I did not know that. All right, so the next question I have, and again we're all on our own social media platforms and maybe because I've clicked on some of these things, I have a grandson who's almost 2 years old.

So probably somewhere I'm clicking on some of these. But I've seen influencers now kind of marketing this six month paid family leave in California and how you can access this, which in fact we don't have six months.

So can you clarify what's happening and are there red flags for you when you start to see if you want to say these stack on programs and if you haven't seen that, just Google influencers, paid family leave, six months and you'll see a bunch of sites come up.

And again, for those who have young kids, I'm a complete supporter of staying at home with your child, bonding for as long as possible and getting that support, but also being aware as a taxpayer of these influencers who have come through my feed showing how to get six months of this leave. If you can talk about that.

I'm not familiar specifically with what you're referring to, but what I can tell you is that our paid family leave program is treated like we are just as concerned about program integrity with paid family leave as we are other programs.

And we have implemented all of the same fraud security measures that we have under unemployment insurance program with paid family leave. So we do verify identities, we do process them through Thompson Reuters. We are looking to transition them to secure, which is our alternate identity verification supplier.

So I can tell you that we definitely are frequently looking out for things like that in terms of fraud prevention and exercising all the tools that we currently have at our disposal across program.

All right, then I would ask you to look at that because this is real and people are popping up, showing people how to navigate this in California. And again, maybe it's a tiny, tiny percentage. And again, if somebody's entitled, I certainly have no issue with that. But some of this stuff can go very rapidly through social media.

All right, we have, I think, a few questions from Assembly Member Coloza.

Thank you so much. To our chair for her leadership on this. And you guys pulled a lucky number for being our first hearing because that is, you know, really what it shows is really the leadership one of, I know the state.

And when we talk about affordability, when we talk about putting money back in people's pockets, the things that keep them up at night, we're talking about EDD, right? We're talking about both the agency that sometimes can both be a little bit frustrating to deal with, but also can also be the solution, right.

Once we get some of these claims back paid out and we put money back in people's pockets. And it was truly a lifeline. So I did appreciate hearing about the improvements in customer service, the turnaround time on some of the cases, especially with paid family leave, that my colleagues asked you questions about.

I'm going to ask you some of the questions that I asked the LAO relative to, to really the transition that we're making right now with your systems. Obviously, we've spent a lot of time talking about the investment in EDD next, which I think is necessary to modernize our systems, but really wanted to dive into detail.

I had an opportunity to meet with the Director, Nancy Farias, a few weeks ago after I got the appointment from Mr. Speaker to this Committee, and I think the numbers that I heard, and you can correct me if I'm wrong, was that 60% of your claims are online and 40% are paper based. Is that correct?

For disability? Yes, that is accurate.

For disability only, yes. Okay. Do you know what that breakdown is for your other two programs?

Yes. So for unemployment, we get 8% on paper, and for paid family leave, we get 17% in paper.

Okay, that would be really helpful to see and hear from all of you to understand what are you doing with those paper based applications? How are you transitioning those folks to your online system? What does that look like? And is there different turnaround times between the online system versus a paper based system?

And I say that because my district office is out there every single day working really hard to make sure that we process constituent claims. And you are number one yet again on, on our list for, for both better and for worse.

And I did just want to read some of the stories from some of the claims from my district, just to put it on the record, because I think it is important to, to share some of these stories in my district. And I represent Los Angeles, South Glendale, East LA.

We are at the end of February for 2026, and in less than two months, my team is going to open almost 200 cases, and that is triple from 2025. And so I'm deeply concerned about why we're seeing such an upper trend of EDD cases. And this could just be specific to my district, but maybe it's not.

And so that's why I'm always asking and prodding, like, what is EDD? What is the LAO seeing as it relates to massive layoffs that are happening.

Because I think it is an incumbent on us to assess what risk is out there and to be proactive to make sure that you're all equipped and ready for what's coming next and that we're also all equipped for what might be happening in certain industries, be it tech, entertainment or otherwise.

So one constituent that reached out to EDD had to wait almost six weeks to receive his checks. And this was backfilled with three payments. This totaled a little over $10,000. Another constituent applied on November 2, 2025 and had to wait until December 30, 2025 to get certified, which is almost two months later.

And after three weeks of no contact from EDD, she reached out to our office and we helped her secure $13,000 in back payments. Lastly, we had a new mother of twins who applied on August 20, 2025. She received a notice of computation on September 19, 2025. She never received any other notice of determination or eligibility.

We helped her file an appeal and she was rewarded a little over $4,000, which we know is nowhere sufficient of an income for a mother of twins to sustain her family in California. My team alone has helped retrieve over half a million dollars with EDD cases. And so you guys keep us pretty busy.

So I think one of my concerns as I hear these numbers from all of you and I think just the General trend and what my district team and my team in General has seen is that when our office reaches out to you, you respond to us quickly.

But it's when the Member of the public, without the assistance of an Assembly office, reaches out to you, that's where we have an issue and that our office has to get directly involved and engage for these claims to be resolved.

And I know you guys are working hard, but I really do need to really better understand what's going on here with your team. How can we work to improve these turnaround cases? These are just a few examples. I have a lot more.

But I guess my question for you is what are the standards of service that EDD has? What should we be relaying so that we can say, hey, we've talked to EDD and they told us that their turnaround time that they're committed to is X number of days or X number of hours?

What are the standards of service that your team has that we should be relaying to constituents?

Thank you for the question and again, always appreciate the feedback from the offices and we always look forward to trying to work with you to resolve these issues. Issues with the constituents that you work with.

I think generally speaking, the base service level for our paid family leave or disability insurance program, which is fairly consistent with our UI program, is getting that first claim processed and payment out the door within two to three weeks. For DI and PFL, it's within two weeks or 14 days.

For UI, it's typically within 21 days, which is as the federal standard.

Okay, so just so I'm clear, we should be communicating to our constituents that their cases should be resolved within two weeks of reaching out to EDD?

Yes.

Okay. And what is your, what are the standards of service when it comes to EDD responding to casework when you receive calls from or emails from constituents? Because that is also a major issue that I'm hearing and seeing.

And as you modernize your systems, how can we also improve that turnaround time for even just any response from EDD like should we be what is an acceptable response rate from EDD

specifically talking about unemployment insurance program,

any of your programs. When should constituents say that we heard at least within 24 hours from EDD that they even confirmed receipt of our claim

for unemployment insurance Specifically, claimants can use self service options and they can talk to Chatbot, they can have a UI live chat to get a response immediately.

They don't have to wait for get a letter or they don't have to wait for any extended days to get a response back from EDD that's immediate for disability and paid family leave. Similarly, there are self service features available through Chatbot as well as through automated IVR system.

The challenge is Assembly member that I think you're referring to is claimants that are very claims that are extremely complex in nature that require extensive research from EDD side to administer the benefits.

I think that those are the ones where we try to do our best to be timely and give them response immediately when they reach out to us. So at this point in time our service levels are yes, if you get a call, our expectation is that we will respond back to that caller immediately.

Or if the customer is using the scheduled callback feature, we try to call them on the same day to provide them the answer for the question.

And I understand some of these cases are a little bit more complicated. Just so I can be a little bit more specific, I'm talking about a response from an actual person at EDD, not something automated, not a chatbot. So you're saying that your response rate and your standards of service would be to respond immediately?

Yes, if the claimant is I'm assuming there are three channels in which claimants can talk to EDD Paper, online and telephone.

So depending on the channel that you're referring to, assuming it's a phone call to EDD office, and if the claimant is able to get to our EDD office, then the person on the phone on EDD side yes, there is an expectation to respond to that claimant immediately.

Does EDD track the number of complaints that you receive on non responses?

Number of complaints

do you track? Do you audit yourself with your customer service? I know you're talking about the improvement, so I'm assuming that's based off of something that you must be tracking internally.

100% yes. We look at the number of calls that came in, the disposition for those calls, why the claimant has called us, what was the response? Did we do a timely resolution of the call or not? So those numbers are tracked in our Call centers.

Do you have a report of that?

Absolutely.

Okay. And I don't wanna belabor the point, but it's all that to say that it's when we get involved, when our. Our office gets involved, you respond to us very quickly. It's when we're not involved that I'm deeply concerned that the response time of what you're saying is that you would respond immediately. That is not happening. Right.

That is the reality that we are hearing from our constituents, and that's why they're reaching out to us. And they're waiting 3, 4 weeks, if not longer. And that is missing rent, that is missing mortgage, that is missing a car payment, that those are very serious consequences for families in the district.

And so, you know, I look forward to following up with you on that. And I think the last thing that I'll ask is related to the warrant notices that I asked the LAO about. Are you seeing trends from what you're receiving from employers about where these mass layoffs are happening? What analysis are you doing?

So, you know, to go back to our chair's theme of today's hearing is EDD, you know, prepared for the next big crisis. How are you preparing? What trends are you seeing that you want to warn us about? Where are the risks in industries right now?

So EDD does track all of the warn notices we receive. We don't have the data readily available in terms of the industries we're seeing and that level of specificity available today. But we're happy to get back to your office with that information.

I will tell you that when we do receive warn notices, EDD collaborates with the local boards and the employer to provide rapid response. And so we're readily available on site. We actually send EDD representatives on site to assist and avail all the various services that we provide given their current situation and the mass layoff that's occurring.

So we will partner with the local board and the employers in those instances. And we are happy to get back to you on the data related to the warn notices.

Thank you for that. And the reason why I asked that is really, I know you're implementing a lot of these changes in EDD next because, one, our systems are old, but two, it's really understanding what is the stress test for our system. We had that stress test tests during the pandemic.

You know, what does that look like now with this current system? Does EDD know the limits in which we would push the system if, let's say we had a few warn notices that resulted in mass layoffs this year. What does that look like? And could we handle it?

Thank you. We'll definitely track like Chief deputy mentioned. And then just to reassure you the unemployment system is stable enough to handle the influx of the claimants that are coming in as, as verified by the LAO as well.

Okay, I look forward to following up. Thank you. Thank you,

thank you. And similarly, as noted, not only this year, but last year, some of my interest in particularly paid family leave has been the just uptick of calls to our office.

Now I do know that there are some constituents that will tell other constituents, hey, we got support from this office and then they want to go through that, but that way is us assisting them. But I do concur with my colleague that they shouldn't have to go through our offices to get the timely response that they need.

And I think what I heard is that on the average it's two weeks. A more complicated case could be longer and UI is even maybe three weeks.

So I guess a follow up question would be do you track these kind of lengthier claims or experiences that are going on to 4, 5, 6, 8 weeks and try to get some kind of intervention to help? Maybe it's a case manager that's having a difficult time.

Yeah, we do track the number of weeks, the number of outstanding cases that we're currently adjudicating. I will just add, you know, one of the intricacies to DI and paid family leave is the ball is not always in EDD's court.

There could be times where we're waiting on the medical provider to be provide something, we're waiting on the claimant to provide something. And so because of that kind of like triangle in order to connect all those dots to execute payment, the ball is not always in EDD's court.

Sometimes we're waiting on those other integral pieces to determine the eligibility or triage the case appropriately. But we absolutely do track the number of cases and the number of weeks that those said cases are outstanding, the complex cases.

And I do agree, I know that we've worked with case management in our office where we're actually trying to help and they haven't, you know, sent in a document or uploaded that. And it can be on the individual themselves who hasn't moved forward with some type of form that's needed. So I get that. I understand that.

And again, I'm not doing the job myself. I know these are complex jobs for the people who are handling them. But I guess if you see any patterns within your system, because people are people as they go to work. And some people are very efficient with doing the steps they need.

And maybe there's some that aren't and maybe that could be the hangup if you see red flags in the system. Because as was mentioned, sometimes it feels like we're talking about EDD as a system and we know it is a technology system. But these are people.

And whether it's getting the leave they need for their newborn child or the dollars they need to pay rent or utilities, that's what what it comes down to. But we appreciate your focused comments. We appreciate you being here. And I know you'll be back on March 10, I believe.

And we will now go to unless you have any final comments. Any final comments. All right. Then we will go to public comment. Thank you so much. Have anybody looking to speak publicly for brief comments, not seeing anybody running up to the microphone in this particular hearing. We do. Thank both panelists. We appreciate it.

Thank you for the discussion today, really, about ensuring that California is prepared to help California's need during downturns in the economy. We appreciate the LAO for his excellent presentation and to our EDD commitment to helping Californians in the need of hard times. Thank you to both panels.

And we, as mentioned, we'll be back talking about EDD next and paid family leave March 10. And with that, we are going to adjourn. Thank you.