What California Could Have Done with the $30 Billion the EDD Lost to Fraud

Dinner with Gavin, anyone? Or everyone?

Thanks again to the California Globe for running this piece. Check out the website at: https://californiaglobe.com/

It is, sadly, a fact of life that the public has become so inured to the vapor trail of zeroes involved in governmental financial mismanagement that sometimes those big numbers lose their meaning.

Take, for example, the loss to fraud of $30 billion by the California Employment Development Department.

While estimates of the actual amount – an exact amount will never be known – range from $12 billion to more than $40 billion, experts in the field tend to coalesce around the $30 billion figure.  It must be noted that that did not have to happen, that the EDD’s systems could have been fixed quickly and cheaply 15 months ago, preventing the vast majority of the loss.  Sadly, it must also be noted that that money is never coming back; while law enforcement may occasionally tout the seizure and re-sale of the Ferrari a person bought with the ill-gotten gains from filing 147 fraudulent claims, an overwhelming percentage of the funds were stolen by organized international criminal syndicates and has disappeared permanently into the ether.

To put the scale of the problem into perspective, it may be helpful to consider what else, besides giving every resident $750 directly, could have been done with that $30 billion.

First, if the state hadn’t lost it to fraud California would not currently owe the federal government the $24 billion it borrowed to keep its system solvent.  That would mean that businesses across the state would not be faced – as they are currently – with paying additional money into the unemployment system to cover the debt.  While the issue is not completely settled, it now stands that each employer will have to pay an extra $21 per year per employee, with that number expected to grow each year until it reaches $420 per year per employee in 10 years.  This extra fee will damage already struggling small businesses in particular and definitely put a kink in California’s overall economic climate and at a competitive disadvantage compared to other states (at this point, the much-touted state budget surplus is not being touched to repay the funds).

So what else could the money have been spent on?

In no particular order, here’s a list:

Note on methodology – While the comparison numbers below may be somewhat rounded they are, in fact, extremely well-grounded and are based upon reviews of business and government, etc. websites and other reliable sources of information.

·         Every business in the state could have received a grant of $30,000 to help recover from the pandemic.

·         Every student entering both the UC and CSU systems this fall could have had their tuition waived for the next four years.

·         Every homeless person in the state could have been handed a check for $180,000, enough to live quite comfortably indoors for three to five years (depending upon their choice of location and/or form of addiction, as the case may be).

·         Phase 2 of the high-speed rail system – the parts that run from Los Angeles to San Diego and from wherever in the Central Valley to Sacramento – could be completed.  It should be noted that, according to its initial promises, the entire system – when the federal dollars are included -  could have been completed for that amount.  It must also be noted that, at a current projected cost of $154 million per mile (or $29,000 per foot or $2,400 per inch), it may only cover about two-thirds of Phase 2 costs.  Finally, it must be noted that anything involving high speed rail and time and/or money numbers are incomprehensibly dubious to begin with.

·         Every mile of highway and freeway in the state – there are about 26,000 miles – could have been repaved.  Or, about 500 miles of new urban freeways could be added – take your pick.

·         Depending upon what type of energy source (gas, hydro, sun, wind, etc. or some combination thereof) is chosen, the state’s electricity generation capacity could have been increased by about 20 percent, so no more blackouts.

·         Through the projected per-acre cost estimates vary widely based on the type of terrain,, the money could have spent to clear underbrush – thereby lessening fire risk – from about 8 million acres of publicly-owned forest land.  That translates to 40 percent of state’s entire forested area.

·         Basing the estimate off of the inflation-adjusted cost of construction of the last major reservoir built in the state, California could have added about 12 more water storage facilities the size of Diamond Valley Lake.  That would have increased statewide water storage capacity by more than 10 percent, so no more water shortages (depending upon how much water would continue to flow into the ocean for environmental purposes).

·         The salaries – but not the benefit packages – of every teacher in the state could have been covered for an entire year.

·         Approximately 20,000 hospital beds could have been constructed, increasing the state’s capacity by about 25 percent (looking at you, COVID).

·         There would be two options to address illegal immigration, depending upon your political viewpoint.  The money could have gone to complete a wall from the Pacific Ocean to the Gulf of Mexico, with some left over to address, one supposes, the more problematic parts of the Canadian frontier.  If one is inclined to address “root causes,” as our Vice President has called for, sending the funds to Guatemala, El Salvador, Nicaragua, and Honduras would have provided a one-year increase to their aggregate Gross Domestic Product by about 15 percent.

·         The pay and benefits of the state’s 150,000 law enforcement officer and firefighters could have been covered for an entire year.

·         Each nurse in the state could have been sent a $50,000 “thank you for working during the pandemic” check.

·         Speaking of COVID, each Californian who was diagnosed with the virus could have been paid $7,500.  On a sadder note, the family of each person who died of COVID could have been given a check for $450,000.

·         Staying in the health care realm, the $30 billion could have covered the cost of every organ transplant procedure conducted in the state – for this and for the next 20 years.

·         The funds could also have spent on providing, at no cost to them for the next four years, the expensive but lifesaving drug therapy regimen for each of California’s 140,000 residents diagnosed with HIV.

·         Burdened by student loans and that B.A. in sociology you have isn’t exactly burning down the doors of human resources departments?  $30 billion would have cut the student debt load of every California who has one of those loans by 20 percent, every month, forever.

·         At a cost of about $5 million per mile, approximately 25 percent of the state’s entire high-voltage electricity transmission grid could have been placed underground.  Assuming it would be done in the right locations, the risk of wildfire would drop dramatically.

·         Maybe investing the funds would be a wise idea.  California could have bought Southwest Airlines (three times), 12 million shares of Google (making it one of the top five shareholders of the company), about 4 percent of Facebook, or maybe even 13 percent of Coca-Cola.

·         Oh, and don’t forget the state could buy all of the seven most valuable NFL franchises -  the Dallas Cowboys, New England Patriots, New York Giants, LA Rams, the 49ers, the New York Jets (one has to ask why), and the Chicago Bears.  Or just the Cincinnati Bengals – fifteen times.

·         If the funds were put into a typical charitable endowment, it would generate somewhere in the billion-dollar range annually for good causes.

·         The First Partner, Jennifer Siebel Newsom, could – based upon the inflation-adjusted budget of her film “Miss Representation” – make a new movie each and every day for the next 80 years.

·         We could have paid for about 65,000 people, the equivalent of the entire population of Lake Elsinore, to take a trip to space on Virgin Galactic.

This is by no means an exhaustive list, but it does show exactly how massive the fraud was (and is) and how the EDD’s utter failure at every level to act directly impacted the lives of everyone in the state.

Oh, and one more thing:  $30 billion dollars is about exactly what it would cost for every Californian to have dinner – tax and tip included, though you may have to stick to the lower-middle of the wine list – at The French Laundry.

Just tell them Gavin sent you.