California Governor Gavin Newsom signed a package of legislation on Tuesday to enable the Employment Development Department (EDD) better detect and prevent fraud, and protect unemployment benefits claimants from identify theft. The governor hopes these bills will better prepare the state to respond to future economic downturns.

This development comes in the wake of an audit report released earlier this year, which revealed that the EDD approved billions of dollars in fraudulent unemployment benefits payments during the pandemic to prison inmates who were ineligible to receive them. Specifically, of the $176 billion paid out in unemployment benefits, the EDD has admitted that at least $11 billion were fraudulent while another $19 billion are suspected of being fraudulent.

Thirty-five states have a system to cross-check unemployment claims against a list of prison inmates, but California was not among these states. As a consequence, the EDD was unaware which of the benefits claimants were prison inmates.

These bills will address this issue by requiring the state prison system to share the names and social security numbers of inmates with the EDD. The legislation package also includes Assembly Bill (AB) 397, which requires the EDD to provide additional notification to claimants before disqualifying them from benefits.

Assemblywoman Cottie Petrie-Norris and Senator John Laird, commented when the bills passed the state legislature:

The EDD’s inability to promptly and efficiently respond to the increased amount of claimants is an issue that has spanned the administration of three governors of both parties…Due to a loophole in the current system, hundreds of millions of dollars were lost…The government must do a better job as custodian of our hard-earned taxpayer dollars.

State lawmakers have also ordered the EDD to begin offering claimants an option for direct deposit to prevent criminals from stealing benefit checks from mailboxes.

Earlier this year, Newsom signed other bills to boost language access and strengthen California’s job centers as part of the effort to continue investments aimed at improving California’s unemployment insurance system. The governor also established the Office of Emergency Services (Cal OES) Fraud Task Force earlier this year to coordinate with local, state and federal law enforcement authorities to investigate and prosecute fraud schemes. That effort is being assisted by former US Attorney McGregor Scott.