In decades past, California was known as a land of immense productivity and innovation. Defense companies, tech firms, and entrepreneurs of every stripe flocked to the beautiful state and its pleasant climate. Now, however, it’s been transformed from a land of productivity to a land of wasteful welfare spending. Fraudulent, wasteful welfare spending, to be exact.
According to an Open The Books article in RealClearPolicy, “California has shelled out at least $20 billion in fraudulent unemployment benefits since the beginning of the pandemic, 11 percent of all benefits paid in the Golden State.” For perspective, the article’s author notes that “That is more than the 2021 budgets of Delaware, Maine and Montana combined.”
That RealClearPolicy article is based on a report from the LA Times, which originally broke the news that California paid tens of billions of dollars in fraudulent welfare benefits in the past year. According to the LA Times article:
California has given away at least $20 billion to criminals in the form of fraudulent unemployment benefits, state officials said Monday, confirming a number smaller than originally feared but one that still accounts for more than 11% of all benefits paid since the start of the pandemic.
State officials blamed nearly all of that fraud on a hastily approved expansion of unemployment benefits by Congress that let people who were self-employed get weekly checks from the government with few safeguards to stop people who were not eligible to receive them.
Apparently, the fraud in California was so rampant that at least $810 million in benefits went to people who were in prison, including dozens of infamous killers on death row.
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Or, at least, the benefits were approved to go to people claiming the names of those infamous killers.
It’s unclear, however, if the benefits actually went to those imprisoned murderers or if checks were approved to people who submitted fraudulent benefit claims with a fake name attached. The latter appears more likely, as $2 million in benefits went to people claiming to be Senator Dianne Feinstein and the sheer scope of the problem suggests that the unemployment insurance claims were sent by fraudsters rather than the criminals themselves.
Reacting to the fraud, California lawmakers imposed stricter identity verification controls that they say have prevented $120 billion in fraudulent payments.
Still, the scale of the fraud is difficult to comprehend. To help put it in perspective, “Assemblyman Tom Lackey,” the LA Times reports, “brought along an illustration of 29 dump trucks filled to the brim with $100 bills representing just over half of that money lost to fraud.”
While the scale of the fraud in California was the largest at $20 billion, other states struggled with the same issue.
A report from the Department of Labor, for example, gave a conservative estimate that “by [the CARES program’s} end, $87.3 billion in UI benefits could be paid improperly, with a significant portion attributable to fraud” and noted that that $87.3 billion figure was likely low, as it’s based on a 10% fraud rate when the actual improper payout rate is likely far higher, perhaps as high as 15% or even 19%. If the 19% estimate is accurate, that would mean that nearly 166 billion taxpayer dollars were sent to fraudsters in the form of improper unemployment insurance checks.
And that higher rate isn’t an unreasonable estimate. In Arizona, for example, an AP report found that “nearly 30% of the $16 billion in unemployment insurance payments sent out by Arizona since the start of the coronavirus pandemic” were sent to scammers. That means that in Arizona, which is hardly a large state, between $4.3 billion and $4.4 billion in welfare checks was sent to scammers and fraudsters.
So, while California’s incompetence is the easiest to point out given its massive scale, the Golden State was hardly alone in paying out massive sums to fraudsters.