A new state policy could require nearly 900,000 Californians to return their unemployment benefits because they are not working or looking for work. But some researchers worry that the clawback campaign could force low-income individuals into paying thousands of dollars for what they no longer have.
The state Department of Economic Development last month began notifying one-third of California’s 2.9 million pandemic unemployment aid recipients that proof of work is required. The federal program, which ran through March 2020 and ended in September, was intended to help people who typically do not qualify for unemployment benefits because they are freelancers or small business owners.
The state is asking them to prove retrospectively that they were working, or planning to work, before filing an unemployment claim. If they cannot provide the documents, they will be ineligible and will be asked to give back the benefits.
A full repayment can exceed $32,000 if the recipient receives full benefits throughout the program. Also, if a claimant gives wrong information, the state can impose a 30% penalty. Some experts are now suggesting passes to recipients even if they cannot prove their worth.
“We should say, ‘Look, if you got unemployment insurance benefits during that time, you’re fine,'” said Chris Hone, executive director of the left-leaning California Budget and Policy Center based in Sacramento.
“If the concern is fraudulent claims,” he said, “then work to fine-tune the system’s administration” rather than requiring recipients to prove they qualify for benefits.
It is not clear where the MLAs stand. Democratic Assemblyman Tom Daly of Anaheim, chairman of the Assembly Insurance Committee, which oversees EDD, did not return a request for comment. Yucca Valley Assemblyman Chad Meyers, an independent member serving as the committee’s deputy chairman, also did not respond.
The chair and vice president of the Senate Labor, Public Employment and Retirement Committee — Democrat Dave Cortés of San Jose and Republican Roslie Ochoa Bogg of Yucaipa — did not respond to requests for comment.
EDD noted that the repayment policy is a federal requirement, passed by Congress in the Continuing Aid for Unemployment Workers Act in 2020. EDD acknowledges that it may waive the repayment if the overpayment was not the recipient’s fault, was not fraudulent, and if the repayment would cause exceptional hardship. ,
The new policy is an attempt to recover an estimated $20 billion lost in California due to fraudulent claims. But McGregor Scott, a former U.S. attorney leading the state investigation into unemployment fraud, doesn’t believe EDD’s repayment policy will fix much.
The state, which suffered heavy losses after EDD, began to expedite the process by waiving the need for proof of work, along with unemployment claims in the early days of the pandemic. Investigators have said the rollback allowed organized crime and prison inmates to extort money from the state through fraudulent claims.
Recipients receiving an EDD notice must use pay stubs, tax returns, business licenses, or job offer letters to prove that they were employed or plan to be employed to file their claim.
Those filing on or after January 31 have only 21 days to send the documents. Those who applied before that date, and received payment after December 27, 2020, have 90 days to comply.
“We probably need to apply this with compassion,” said Jesse Rothstein, a professor of public policy and economics at UC Berkeley. “We won’t be able to collect in every case.”
Even before the pandemic, one in three California households struggled to pay for basic necessities, according to the United Way of California. During the pandemic, a report by the Ludwig Institute for Shared Economic Prosperity found that 4.8 million Californians were seeking, but not finding, full-time work that paid a living wage.
A recent report from the Tipping Point Community, a nonprofit focused on reducing poverty in the Bay Area, estimated that 200,000 residents of the area were kept out of poverty because of expanded support from the government and charitable organizations.
“Without bold action ahead, we risk a ‘return to normal’ in terms of sustainable poverty and inequality,” said Tipping Point chief executive Sam Cobbs. “We can’t take that step back.”
this is part of the article California Divide, a collaboration between newsrooms examining income inequality and economic survival in California.