California’s UI System Is a Disaster. The Buck Stops With Julie Su.

California’s Julie Su could be up for a big promotion. As Joe Biden assembles his cabinet in advance of January, she’s reportedly on a list of candidates to be labor secretary. But a look at Su’s recent track record should call her qualifications into question. 

Under Su’s leadership, the state’s Labor and Workforce Development Agency — which handles the pandemic unemployment system — has experienced “the most significant fraud on taxpayer funds in California history.” Following months of delayed or unpaid unemployment insurance benefits, it’s come to light that the agency paid out almost $1 billion in fraudulent benefits to California prison inmates. 

Unfortunately, this disaster looks like it was a long time coming. Su acknowledged that there were issues with the state’s unemployment insurance system back in April. She even took ownership of the problems: “I need to own the things that we are not doing right. We need to fix those things, we need to make sure that we are accurate, that we are timely and that we are providing services.” But it seems not enough was done to right the ship. 

Su blamed an outdated system for the delays and malfunctions that countless Californians experienced when trying to access their UI benefits. But the state of the system was well-known prior to the coronavirus crisis. A $30 million Employment Development Department modernization program was launched four years ago; however, it was inexplicably being reported as still “in the planning stages” when the pandemic hit.

To remedy some technological issues, the EDD signed a two-month $11.1 million no-bid contract with Deloitte Consulting in April to fix its call center. But halfway through the contract, Californians were still struggling to get through. Some reportedly called more than 600 times without getting the help they needed. Despite seeing little improvement, the state awarded a second no-bid contract to Deloitte for $5 million in May. As Assemblyman David Chiu noted then: “The idea that we would choose a contractor who has previously mismanaged a similar project doesn’t strike many of us as a very smart choice.“

Even after spending $15 million, things weren’t going much better by July. At a hearing, state lawmakers and their constituents criticized the EDD’s “persistent failure to deliver unemployment insurance benefits.” By September, continued delays and fraud led lawmakers to call for an emergency audit of the EDD — which unearthed this latest disaster.

Millions of dollars in fraudulent benefits went to California prison inmates, including 100 who are on death row. Meanwhile, as many as 1.8 million Californians experienced a delay in their unemployment benefits due to an influx of applications. 

These fraudulent payments aren’t the only black mark on Su’s record. She also stood by for years while countless California businesses were unfairly targeted by lawsuits under the Private Attorneys General Act, a California law that encourages extortionate behavior by trial attorneys. That means businesses already struggling during the current pandemic are exposed to these harmful and often frivolous lawsuits. The LWDA’s failure to properly review all PAGA claims has directly led to the current broken system.  

Despite all this, Su is considered a front-runner to lead President-elect Joe Biden’s Labor Department. In fact, women leaders from labor-backed groups in California sent a letter to Biden endorsing Su. They referred to her as a “critical leader during the COVID-19 crisis.” But the hundreds of thousands of hardworking Californians who were left waiting for UI benefits at the height of the pandemic may not agree with that assessment.

Having already secured the backing of the state’s many labor organizations, it’s possible Su is biding her time until a better opportunity comes along. But the people of California deserve better.

Su should focus on her current job of fixing the state’s broken bureaucracy, instead of looking for her next role as Biden’s labor secretary. After all, this UI disaster doesn’t suggest she is ready for a promotion any time soon.

Tom Manzo is the founder of the California Business and Industrial Alliance.

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