California’s Employment Development Department (EDD) administers unemployment insurance, disability insurance and paid family leave programs for state residents. The department provides services to keep employers and job seekers connected and competitive. EDD, by far the largest department in the Labor and Workforce Development Agency, also oversees training programs funded by the federal Workforce Investment Act of 1998, collects employment payroll taxes, and gathers data and research to generate information about the state’s economic and occupational demographics. EDD is California’s largest tax collection agency. It handles the audit and collection of payroll taxes and maintains employment records for nearly 16 million California workers. The department paid $22.9 billion in unemployment insurance (UI) benefits (excluding any federal extensions), and more than $4.5 billion in state disability insurance (SDI) benefits in 2010. It received and processed more than 4.5 million initial regular UI claims (excluding extensions) and over 926,000 SDI claims.

EDD Fact Sheet (pdf)

About EDD (EDD website)

The Employment Development Department has roots in several programs. In 1915, California established State Free Employment Bureaus. A Department of Employment was created during the Depression. The federal Social Security Act of 1935 ordered states to pay out unemployment insurance, and to comply, California passed the Unemployment Reserves Act in 1935. This set aside a monetary reserve “to assist in protecting the public against the social effects of unemployment.” Its original purpose was to set up employment offices throughout the state and to distribute the payment of unemployment insurance to eligible workers.

State Disability Insurance, a partial wage replacement program, started in 1946 and is administered by EDD. At its inception, only three states and the territories of Hawaii and Puerto Rico had such a program. Another benefit program administered by the same office is paid family leave, established by a law passed in 2002.

The agency changed its name to the Department of Human Resources in 1968, then to the current Employment Development Department in 1974.

Although the department started as an employment agency, its mission to find jobs for those who needed them was enhanced by state and federal laws over the years—the most recent being the federal Workforce Investment Act of 1998.

The Legislature relocated EDD in 2002 from the Health and Human Services Agency to the newly-created Labor and Workforce Development Agency, along with the Department of Industrial Relations, Workforce Investment Board and Agricultural Labor Relations Board. It was hoped that the move would allow EDD to capture lost revenue from the underground economy while coordinating programs, services and data collection with the Department of Industrial Relations and other agency departments.

By 2009, several factors—not the least of which was the ongoing recession—pushed the state’s unemployment insurance fund into insolvency, and the state has been borrowing money from the federal government on a quarterly basis to continue to pay benefits.

Inventory of the Department of Unemployment and the Department of Human Resources Development Records (Online Archive of California)

The Proposed Labor & Workforce Development Agency (Little Hoover Commission) (pdf)

The Employment Development Department, overseen by the California Labor and Workforce Development Agency, has more than 10,000 employees at 400 offices in the state, all connected to EDD’s main activities: employment services, dispensing unemployment and disability insurance, training for employment, collecting taxes and gathering labor market information.

As California’s largest tax collection agency, EDD administers the state’s payroll tax program. EDD collects, accounts for and audits over $48.9 billion each year in employer and employee contributions.

Employment services are guided by the federal Workforce Investment Act of 1998, which led to the building of one-stop career centers throughout the state.  The EDD’s website on Jobs & Training presents an overview of the programs with links special areas. Job seekers can register with CalJOBS to view jobs placed on the online service by employers. Veterans are given priority, but job training services and referrals are available to all.

EDD oversees the federally funded Local Workforce Investment Areas, which targets dislocated workers, youth, veterans and people with disabilities. These LWIAs are part of the one-stop centers, and involve employers and businesses too. The goal is to get more people trained and employed.

Unemployment insurance (funded by taxes paid by employers) and state disability insurance (funded through payroll deductions) are paid to eligible workers by EDD.  Paid family leave insurance is also paid through EDD. These programs are designed to help those out of work either because of layoffs, injuries, illnesses or other reasons. Applicants can apply for the programs by phone or online, as well as at offices. Payments, traditionally made by check, are now downloaded onto debit cards each week.

An Employment Training Panel provides funds to businesses in the state to train current employees, especially in high-tech industries; to train those receiving unemployment insurance currently or within the last 24 months; and to provide special training in high unemployment areas, or for small business owners, or to workers with barriers to full-time employment. The funds also go to train workers for green businesses.

EDD collects and provides statistics on the national, state and local labor markets, and unemployment.  Research, studies, demographics and data are available at the Labor Market Info site.

EDD also performs several other duties, such as detecting and investigating fraud in its programs, working with other states and agencies to ensure compliance with labor, licensing, and tax laws, identifying new hires who are delinquent in child support payments, working with local Employer Advisory Councils to improve services to employers in California, maintaining the State Disability Insurance Elective Coverage program for business owners and the self-employed, working with community groups on programs to increase opportunities for youth and others with special needs.

EDD Fact Sheet (pdf)

Since the Great Recession of 2008, most of EDD’s enormous budget has been spent on relief for unemployed workers.

In 2011-12, 71% of its $25.9 billion budget was earmarked for its Unemployment Fund, which sends weekly checks to the jobless for up to 99 weeks. Another 20.3% is distributed through its Unemployment Compensation Disability Fund.

About 6.5% of the EDD budget is spent on operations, including personnel and equipment.

The expenses include certain extras, such as almost $22 million for ACES—the Automated Collection Enhancement System, which improves EDD’s ability to track certain payroll taxes and is expected to add $27 million to general fund revenues in 2011-2012—and nearly $39 million to continue the six-year Disability Insurance Automation Project, with expected implementation in 2011-2012. Also included is $362 million to make an interest payment on funds borrowed from the federal government for unemployment insurance payments—a loan to be repaid over four years.

The largest source of funding for EDD is the state unemployment insurance tax paid by employers and the State Disability Insurance payroll tax. Only $361 million comes from the state’s General Fund, and another $62.7 million comes from special state funds. California is also expected to receive a total of $535.6 million through the federal American Recovery and Reinvestment Act of 2009 for training and employment services, to be used locally through EDD’s one-stop career centers throughout the state. Recent shortfalls due to the damaged economy have been covered by heavy state borrowing from the federal government.

3-Year Budget (pdf)

Benefit Delays

The Employment Development Department has performed at an unacceptable level for a decade by U.S. Department of Labor standards, according to the California State Auditor.

A March 2011 report (and the Labor Department) criticized EDD for not delivering unemployment benefits in a timely fashion. The department has responded to this ongoing criticism for years by increasing staff and allowing them to work overtime but has failed to implement key reforms.

The department replaced an antiquated phone system in December 2010 that had been blamed for some of its problems, but the Auditor warned that “access to agents may continue to be a challenge.” Forty-eight percent of callers who wished to speak to an agent in 2001-02 were unsuccessful; that number grew to 91% in 2008-09.

The Auditor also expressed skepticism that EDD would be able to meet a September 2012 federal deadline for changing the way it calculates base pay for claimants in order for it to qualify for $839 million in stimulus funds.

Finally, the Auditor criticized long delays by EDD in determining eligibility for the California Training Benefits program, thereby shortchanging claimants and limiting their participation.

The Auditor recognized that the economic downturn was responsible for much of EDD’s difficulties. The California unemployment rate rose from 5.3% in 2007 to 12.3% in 2010. And federal extensions of benefits during that period caused a major uptick in the department’s workload.

Its Unemployment Program Has Struggled (State Auditor) (pdf)

The Insolvent Unemployment Insurance Fund

“California’s unemployment insurance fund descended into insolvency more than two years ago but the state continues to pump out about $600 million a month in benefits to jobless workers and has borrowed $11 billion from the federal government to keep the checks flowing.” That’s how Sacramento Bee blog CapitolAlert stated the problem.

The State Auditor projected that tab would reach $13.4 billion by the end of 2011 and notes that if repayment isn’t made by November 2011, the federal government could begin incrementally increasing the state’s federal unemployment tax rate on employers to the tune of $325 million a year.

“Moreover, if the State does not repay the loan and fails to pay the interest by September 2011, employers in the State could eventually face $6 billion in higher federal unemployment taxes annually,” the Auditor said in its March 2011 report.

California is not alone. About 30 other states were in deficit in 2010, according to the state Legislative Analyst’s Office. 

States must begin making interest payments to the federal government by September 30, 2011.

LAO Offers Solution for Insolvent Unemployment Insurance Fund (by Dan Walters, Sacramento Bee)

Its Unemployment Program Has Struggled (State Auditor) (pdf)

Unemployment Benefits Shrink in Some States (by Alana Semuels, Los Angeles Times)

Responding to Insolvency, States Begin Reducing Benefits and Restricting Eligibility in 2011 (by Claire McKenna and George Wentworth, National Employment Law Project) (pdf)

Unemployment Insurance Appeals Board

The Unemployment Insurance Appeals Board is a quasi-judicial agency that handles disputed unemployment and disability determinations, along with tax-liability assessments, made by EDD. Although it is an independent agency and not responsible to the EDD director for its operations and decisions, its budget is paid through EDD.

The 7-member board is scheduled to meet 16 times a year and is staffed with administrative law judges. Governor Jerry Brown proposed in May 2011 that the board be eliminated at a projected savings of more than $1 million, but it survived.

Brown was proposing that just the board be eliminated, not the entire agency, which has a 2011-12 budget of $102.5 million and resolved nearly 475,000 appeals in 2010. The federal government requires that states have some mechanism for adjudicating appeals of unemployment insurance decisions.

The board has been criticized over the years for being a dumping ground for career politicians who are in between jobs. The governor appoints the board chairman and four of the other six members. The Senate Rules Committee and the Assembly speaker pick the other two. Board members are paid $128,109.

“It’s one of the choicest plums at the fruit stand,” said Steve Maviglio, former Governor Gray Davis’ press secretary. Maviglio, now a Democratic consultant, was, thanks to Governor Davis, a member of the board for one year. “It’s a job that requires really no experience in the field, pays well and you can do it from the comfort of the home office.”

As of August 2011, Governor Brown’s sole appointment, Chairman Robert Dresser, was the only member who was not a former state senator or assembly member. Dresser was  an administrative law judge for the board from 1992 to 2001. He spent one year as chief counsel and interim director of the Department of Information Technology after that, and then five years as general counsel for the Labor and Workforce Development Agency.

Prior to 2011, at least 12 other former lawmakers graced the board, including Art Agnos, Fred Aguiar, Richard Alatorre, Ruben Ayala, Sal Canella, Liz Figueroa, Elihu Harris, Trice Harvey, Cindy Montanez, David Roberti, Sharon Runner—now a state senator—and Virginia Strom-Martin.

Unemployment Insurance Appeals Board (Official website)

Governor Proposes Eliminating Unemployment Insurance Appeals Board (by Kenneth Ofgang, Metropolitan News-Enterprise)

Board Information Official website)

Appeals Board Fact Sheet (EDD website) (pdf)

Unemployment Insurance Appeals Board: Just the Name Evokes Controversy (by Greg Lucas, Capitol Weekly)

Inaccurate Unemployment Figures

When the state’s unemployment rate dropped below 12% in April 2011, most thought that was cause for celebration. More people had found jobs, right? Not really.

The unemployment rate comes from a monthly survey by the federal Bureau of Labor Statistics. It fits respondents into categories. If a person is unemployed but not looking for a job, they are not considered part of the labor force. They are not counted among the unemployed.

If someone takes a part-time job, they’re considered employed. The fact that they want or need full time work is not considered in the statistics. If a worker’s hours are cut, they are still counted as employed. The self-employed are employed, even if their hours have been cut and their income has decreased. In California, 1.5 million people work part-time involuntarily (meaning they would like to work full-time), but are counted as simply employed.

When the state’s unemployment rate dropped below 12%, the true rate, according to experts, was around 20%. 900,000 of the state’s residents had been out of work for over 26 weeks.

Another number that skews the unemployment rate is the state’s growth. California’s population grows by about 1% a year. Also, kids grow up and graduate, joining the labor pool.  That means 150,000 new jobs per year must be found just to maintain the same rate of employment.

The Real Unemployment Rate? 16.6% (by Mary Engel, MSN Money)

A Plan, Sort of, for Insolvent Unemployment Insurance Fund

California, like about 30 other states, has racked up huge deficits paying unemployment benefits during the economic downturn that began in 2008. So far, the federal government has bailed the state out but by the end of 2011 that debt to the feds will reach an estimated $13.4 billion and Washington wants to see a state plan for doing something about it.

The state Legislative Analyst’s Office says the state has three choices: reduce benefits, increase employer tax contributions or deploy some combination of the two.

In the short term, Governor Jerry Brown’s new state budget borrows money meant for disabled workers to pay the $320 million interest payment on the borrowed money, due in September 2011.

Because many states are facing the same problems, the U.S. Congress is considering three proposals. “All three of the recent federal proposals would improve the solvency of California’s UI fund,” the LAO said. But, “It is currently unclear whether any federal reforms will be enacted. This uncertainty complicates the Legislature’s decision as to how it should address the insolvency.”

The LAO urges California’s Legislature to act, increasing payroll taxes and cutting benefits. “We recommend that the Legislature ensure implementation of a long-term solvency plan by 2014. If federal reforms are enacted, it is likely that no additional action by the Legislature will be necessary. . . . However, if no federal reforms are enacted, it will be critically important for the Legislature to enact its own long-term solvency plan.”

LAO Offers Solution for Insolvent Unemployment Insurance Fund (by Dan Walters,  Sacramento Bee)

Managing California’s Insolvency: The Impact of Federal Proposals on Unemployment Insurance (by Brian Uhler, Legislative Analyst’s Office)

The Dole

California’s unemployment benefits, like those in most states, last 26 weeks. The federal government can extend payments afterward, as it has since the economic downturn in 2008.

Is that the right path to take in tough economic times? Arguments for and against the extension of benefits often expose deep feelings about being “on the dole.” 

Extending Unemployment Benefits Hurts All of Us

John Heckers, an executive training coach in Denver, spoke for employers when he pointed out that he paid for the unemployment benefits his former employees received, and the more he paid per employee, “the fewer employees I’m going to hire. . . . Thus, the unemployment tax extensions place a chill on hiring.”

Heckers listed other ways that unemployment benefits hurt society. “Lower level workers,” he said, “are unemployed from things that are vanishing.  . . . What these folks need to do is use their brains and find something else to do. Many have. Others check their mailbox for the unemployment checks. By extending unemployment benefits, we are preventing the unemployed from finding various ways to earn an income. . . . Extending unemployment benefits simply creates a class of people who are buying the minimum, further impairing the economy.”

“Increased unionization, waiting for jobs that will never return, and counting on the government are simply foolish and short-sighted notions that must end. The old way of doing business is making a valiant last gasp. President Obama and Congress should go ahead and pull the plug [by not passing an extension to unemployment benefits] and bring America into the 21^st Century.”

An opinion piece by Fox News in 2009 criticized the federal stimulus package that included $36 billion in increased unemployment benefits: “Larger benefits at least for this year will encourage some people, who may be unhappy with their jobs, to be unemployed while they look for something better. Others will be a little more reluctant to take a new job when they are offered it.”

A year later, with further extensions of unemployment benefits before Congress, a Wall Street Journal editorial built a case against extending benefits:

·     One of President Obama’s appointees in the Treasury Department completed a study showing that “job search increases sharply in the weeks prior to benefit exhaustion.” The conclusion, according to the WSJ: “Many unemployed workers don’t start seriously looking for a job until they are about to lose their benefits.”

·     The paper quoted another Obama advisor Lawrence H. Summers, who in 1999 wrote that “Each unemployed person has a reservation wage—the minimum wage he or she insists on getting before accepting a job.” Summers claimed that unemployment insurance increased that reservation wage, “causing an unemployed person to remain unemployed longer.”

·     The Cato Institute found that the average unemployment episode was 10 weeks before the recession, and 19 weeks after Congress twice extended unemployment benefits. The average episode at the time of the editorial was 31 weeks.  “The democrats are slowly converting unemployment insurance into a welfare program.”

The summation? “When you subsidize people for not working, more people will choose not to work.”

Why NOT to Extend Unemployment Benefits (by John Heckers, Colorado Biz)

Obama’s Stimulus Package Will Increase Unemployment (by John R. Lott, Jr., Fox News)

Incentives Not to Work (Wall Street Journal editorial)

Extending Unemployment Payments Has Proven Benefits for All

“Unemployment benefits help workers and their families by putting money in their pockets while they search for a new job.” So said the Center for American Progress.  “During the Great Recession, these benefits have been effective in keeping families out of poverty and helping them keep up with their mortgages.”

“Not everyone who wants a job can find one.” Since there are nearly five job seekers for every new opening, the odds are tough. “Unemployment benefits kept 3.3 million people out of poverty in 2009.”

In addition, “Economists estimate that the economy grows by $1.61 for every dollar spent on extended unemployment benefits because recipients typically quickly spend all of their benefit payments. UI benefits also help stabilize the economy by boosting small- and medium-sized businesses . . . many would see even fewer customers without unemployment benefits as the jobless would have no money to spend.”

The authors show that “Congress has provided emergency unemployment benefits to the long-term unemployed during every recession over the last four decades. . . . Congress has not once during the past 40 years allowed extended UI benefits to expire when the unemployment rate was above 7.2 percent.”

Economist Paul Krugman responds to those who say that unemployment benefits make people lazy by pointing out that “there are five unemployed workers for every job opening. Cutting off benefits to the unemployed will make them even more desperate for work—but they can’t take jobs that aren’t there.” He adds, “One main reason there aren’t enough jobs right now is weak consumer demand. Helping the unemployed, by putting money in the pockets of people who badly need it, helps support consumer spending.”

“To suggest—with the average weekly unemployment benefit payment of $302.90—that these people are milking the system is ridiculous,” the LaCrosse Tribune wrote. “Perhaps our congressmen and women would like to trade their salaries for two years.”

Extending Unemployment Insurance Benefits 101 (by Heather Boushey and Jordan Eizenga, Center for American Progress)

Punishing the Jobless (by Paul Krugman, New York Times)

Our View: Extending Unemployment Benefits Is Fiscally and Morally Responsible (LaCrosse Tribune editorial)

Pamela Harris, 2009-2013

Patrick W. Henning, 2004-2009

Michael Bernick, 1999-2004

Al Lee, 1997

Thomas P. Nagle, 1991-1996

Alice J. Gonzales, 1990-1991

Kaye Rex Kiddoo, 1982-1989. Kiddoo was blamed for managerial abuses that put employees under stress—so much so that in 1987, the State Employees Union demanded she be fired.

Douglas X. Patino, 1980-1981

Martin Glick 1975-1979

Jim Lorenz, 1975. An activist lawyer appointed and fired within six months by Governor Jerry Brown, Lorenz had innovative ideas for the department.

Richard Camilli, 1974

Dwight M. Geduldig,  1974. Geduldig, who had been director of the earlier Department of Human Resources, resigned to work on the senate campaign of another state official. His name is most often mentioned in a court case brought by four women who were denied disability benefits because they were pregnant, Geduldig v Aiello. The women lost, but in 1978 the U.S. Supreme Court decided that disability benefits should cover pregnancy.