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Looking behind California’s unemployment snafu

As an Assembly committee prepares to hold an oversight hearing tomorrow to probe how a computer snafu delayed unemployment insurance checks to hundreds of thousands of Californians, a new national report shows many states rely on decades-old, failure-prone technology to run their unemployment systems.

The Assembly Insurance Committee is scheduled to hold a hearing at 11 a.m. Wednesday on what went wrong when the Employment Development Department’s tried to upgrade its 30-year-old computer system at Labor Day. State workers have been struggling ever since to clear the backlog of claims for checks that never arrived.

This is hardly surprising, according to the National Employment Law Project’s new “State of Disrepair” report: California might be the poster child, but this problem is nationwide. The report lays blame at the feet of chronic federal underfunding, and says that since the Great Recession’s start, millions of unemployed workers have suffered unnecessary payment delays and application problems.

“Federal underinvestment in state unemployment IT systems doesn’t save money in the long run. Not only do unemployed workers suffer when systems fail, but the government misses out on productivity gains and cost savings,” Rebecca Dixon, NELP policy analyst and the report’s lead author, said in a news release. “Because a majority of these systems still run outdated programming languages, there is a significant cost to their ongoing maintenance. Worse still, these legacy systems increase the likelihood of problems such as benefit overpayments.”

Congress for decades has failed to adjust state unemployment insurance administrative funding for inflation, employment growth, or continuing capital investments such as computer upgrades, the report notes; instead, states have cobbled together networks of computer programs and hardware that complicate reprogramming and scaling up during surges in claims. The lack of federal funding also has made it hard for states to hire enough staff to process claims fast enough.

And with federal funding cutbacks compounded by budget sequestration, more states are laying off unemployment insurance staff, even though 2012 caseloads were still 155 percent higher than they were when the recession began in 2007, the report says.

The effects seem clear. In 2007, before jobless claims increased with the recession’s onset, 84 percent of states met federal standards for timely UI payments; by 2009, only 43 percent of states met the standard, and in 2012, only 41 percent met the standard, despite a decrease in jobless claims.

Even before EDD’s Labor Day snafu, the report says, California’s FY 2011-12 call volumes were such that 17 million out of 72 million calls – 24 percent – couldn’t even access the automated phone system. Of nearly 30 million callers who asked to speak with a live agent, only 4.8 million were successful.

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Boxer, Feinstein support Obama’s tax deal

Both of California’s U.S. Senators voted in favor of the tax cut and unemployment insurance extension package negotiated between President Barack Obama and Senate Republicans.

The Senate approved the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 on an 81-19 vote; the House rejected the plan last week, but is expected to tinker with it and vote again on it perhaps as soon as tomorrow.

U.S. Sen. Dianne Feinstein, D-Calif., issued a statement saying this is what’s needed now, and next we have to bring down federal spending.

“I have spoken with economists about this tax bill and they agreed that the package will serve as a stimulus and job creator, both of which our economy needs. But I also think we must be ready to pivot, to do those things that can curb expenditures. Our public debt is now 63 percent of GDP, and if this continues, we’re going to fall off an economic cliff,” Feinstein said.

“I may not agree with all the pieces, but Congress must consider reports like the one written by the White House fiscal commission. We need to find a course of action that can bring down this debt and bring down this deficit. This tax bill is necessary for the short term, but we must immediately begin working on long-term solutions, and that’s what I intend to do.”

U.S. Sen. Barbara Boxer, D-Calif., agreed the bill “provides much-needed tax relief to millions of struggling middle-class families and unemployment insurance to more than 400,000 out-of-work Californians who would otherwise have lost their benefits this month.

“Senator Feinstein and I fought hard to make sure the measure invests in clean energy, which will create tens of thousands of jobs in California and across the country,” Boxer said. “This package is a compromise and I strongly oppose the giveaways to millionaires and billionaires that will add to the deficit and do virtually nothing to create jobs. Given the fragile state of California’s economy, I believe it is critical to act now on a bill that will create jobs, increase economic growth and support the middle class.”

President Obama had this to say:

“Today, the Senate passed with strong bipartisan support a bill that’s a win for American families, American businesses, and our economic recovery. This vote brings us one step closer to ensuring that middle class families across the country won’t have to worry about a massive tax hike at the end of the year. It would offer hope to millions of Americans who are out of work that they won’t suddenly find themselves without the unemployment insurance they need to make ends meet as they fight to find a job. And it would offer additional tax relief to families across the country and encourage businesses to grow and hire.

“I know that not every Member of Congress likes every piece of this bill, and it includes some provisions that I oppose. But as a whole, this package will grow our economy, create jobs, and help middle class families across the country. As this bill moves to the House of Representatives, I hope that members from both parties can come together in a spirit of common purpose to protect American families and our economy as a whole by passing this essential economic package.”

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Barbara Lee, black caucus blast Obama’s tax plan

Congressional Black Caucus Chairwoman Barbara Lee has disagreed before with President Barack Obama, whom she toiled to help elect, but rarely has the rhetoric been this heated.

Lee and CBC newser 12-10-10 (AP Photo)Lee, D-Oakland, and other caucus members held a news conference this morning on Capitol Hill to voice their opposition to the President’s tax plan. Lee afterward said she’s particularly angry about the President’s acquiescence to extending the Bush tax cuts for households making more than $250,000 per year, and to both lowering the estate tax’s top rate and raising its exemption amount.

“You put those together and this is an assault on the working poor and middle-income people,” Lee said. “What is so outrageous about this whole thing is we know the pain and suffering people are going through right now as a result of the bush era tax cuts.”

Such a plan means cuts from programs that people need most during these hard economic times, as well as damaging Social Security by temporarily lowering the payroll taxes workers pay into it, she said. “The American Dream is going to continue to be eroded for so many people.”

“We’re working on it, its not like were just saying ‘no,’” she added. “We’re working on some reasonable way out of this that’s not going to create more income inequality in terms of our tax structure.”

The CBC’s alternative plan, unveiled during its press conference, includes a 13-month extension of Emergency Unemployment Insurance Benefits plus more aid for those Americans who have been unable to find work for more than 99 weeks; a payroll tax holiday or equivalent payment, such as a tax-rebate check, with guarantees that Social Security won’t be deprived of revenue; and targeted tax relief through a two-year extension of the Bush-era tax cuts for hardworking middle- and low-income families and extending the enhanced provisions included in the American Recovery and Reinvestment Act for the Earned Income Tax Credit, the Child Tax Credit, and the American Opportunity Tax Credit.

Members said the CBC proposal will cost less than half of the President’s proposed trillion-dollar compromise.

Most of the Bay Area’s House delegation has spoken out against the President’s plan, but not Rep. Jerry McNerney, D-Pleasanton, who was the only local member to vote last week against the Democrats’ plan to extend the tax cuts for the middle class but not for the rich. His office didn’t immediately respond to a query today as to where he stands on the President’s plan.

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Assembly chairs move to shore up EDD

The chairs of several Assembly committees said today they’re providing $2 million in new aid – freed up by a 10 percent cut in the Assembly’s operating budget – to California’s beleaguered Employment Development Department, which is being swamped by an average of two million calls per day during peak times.

“These tough economic times require shared sacrifice,” said Assembly Labor and Employment Committee chairman Sandre Swanson, D-Alameda. “We are committed to doing all we can to help Californians in need.”

“Our job is to help people maintain in between their employment, become gainfully employed and contribute to the economy by being consumers and then supporting business and the growth of the economy.”

With California’s unemployment rate at 9.3 percent — and apparently climbing — EDD will use the money to conduct unemployment-insurance seminars in major rural and urban areas; provide personal computers to One-Stop partners; buy remote-access equipment; and support a public information campaign with new outreach technologies.

“When people are out of work in these trying economic times, we need to be responsible by funding programs that create jobs and help Californians find jobs,” said Assembly Insurance Committee chairman Joe Coto, D-San Jose, whose panel oversees unemployment compensation. “This new funding will be critical in getting people the benefits they earned.”

Meanwhile, the state’s coffers continue to ring hollow. More on that, after the jump…
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Swanson: We need an unemployment fix, fast

Assembly Labor and Employment Committee Chairman Sandré Swanson, D-Alameda, says lawmakers are going to have to work across the aisle to fix California’s unemployment insurance fund, which will be broke by January.

He apparently means lawmakers should be talking about raising the payroll tax that employers pay on each worker to bankroll the state unemployment fund. And for Legislative Republicans presumably still smug about preventing any tax increases in this year’s budget fiasco, that’s going to be a tall order.

The Assembly Insurance Committee and the Assembly Budget Subcommittee on State Administration held a joint hearing today to examine why we’re in this fix and what should be done about it; Swanson issued a statement soon afterward.

“This fund is critical to ensure that workers who have lost their jobs through no fault of their own are able to pay their bills and put food on the table while they look for work,” he said. “The current funding crisis threatens the solvency of that fund and we must address it as quickly as possible.”

Swanson cited a report showing the state unemployment fund will be $1.6 billion in the red by 2009’s end of 2009 and $3.5 billion short a year after that. But the situation might be even more dire: That report assumed a 6.4 percent unemployment rate and a 6.6 percent rate for 2009, but unemployment already had risen to 7.7 percent as of August.

California has the lowest taxable wage base allowed by federal law — $7,000, a figure that hasn’t changed since 1983 — but 42 states now tax more than the first $7,000 of employee earnings. In fact, federal law requires a base maximum tax rate of at least 5.4 percent for state unemployment insurance taxes; California is right at that federal minimum.

“The testimony by the Employment Development Department presented today candidly admitted that the current funding system is ‘broken,'” Swanson said in his statement. “While the current economic downturn has certainly exacerbated the problem, it is clear that the root of the problem is structural — the current system is not funded properly to get through tough economic times when there is more demand on the fund.”

If the fund runs dry, the state must borrow from the federal government and later pay it back, perhaps with interest — and federal law says that interest can’t come from the unemployment fund, so our already deficit-plagued general fund could be put at risk. That could amount to an $85 million general-fund liability by 2010, Swanson said.

So lawmakers had better find some kum-ba-yah territory on this issue quickly, he said, and the Bush Administration and Congress had better find a way to work assistance for unemployed workers into the next economic stimulus package.