Glitch cuts off 80,000 Californians from unemployment checks

About 80,000 jobless Californians have been cut off from unemployment benefits because of a computer glitch that could take weeks to resolve.

The Employment Development Department upgraded its 30-year-old system over Labor Day weekend with the aim of streamlining benefits processing. But the new system malfunctioned, forcing state workers to approve payments manually. That has created a massive backlog snaring 15% of claims filed since Sept. 1.

State officials say they’re working around the clock, but can’t say when they’ll catch up. The EDD has apologized on social media and is notifying affected Californians by mail.

But that’s little consolation to those whose benefits have been delayed. Many are falling behind on rent, car payments, and other bills and fault the EDD for its lack of action.

“They say they’re very sorry, but sorry doesn’t pay all the late fees we’re being charged due to their negligence,” said Tanya Cain, 43, who was laid off from a construction firm in late July. “A landlord doesn’t understand why you can’t pay the rent. They just understand you’re not paying it.”

Cain is owed about $1,500 in back payments. She has borrowed money to stay afloat but is down to her last $50. An automatic car insurance payment is about to hit her bank account, which would leave her overdrawn.

The computer snafu is the latest problem to plague the EDD, which has been forced to reduce services in recent months because of federal budget cuts. The agency no longer answers its unemployment hotline in the afternoons, and its regional jobs centers have lost some funding.

Loree Levy, a spokeswoman for the EDD, said officials expected some hiccups with the system upgrade “but we didn’t know it’d be to this magnitude.”

“We are well aware of the hardship this has created for people,” Levy said. “It’s requiring our utmost attention.”

Out-of-work Californians file their benefits claims by phone, mail or online. The new computer system was aimed at shortening the time needed for approval by automating much of the backroom administrative work.

The new system inadvertently flagged thousands of claims for additional review, Levy said, creating a logjam in the already taxed system. She said hundreds of EDD employees have been working overtime to process the outstanding claims by hand.

From Friday to Sunday, state workers approved $31.7 million in unemployment benefits, the agency said. Offices are normally closed Sunday, but the agency typically processes an average of $17.5 million in benefits Fridays to Saturdays.

“We think we’re finally through the worst of it,” Levy said.

Still, it’s a black eye for the agency tasked with providing employer-funded benefits to the state’s jobless. Legislators around the state, who are currently on recess, said their offices have been fielding calls and emails from residents who are not getting unemployment payments.

A spokesman for Gov. Jerry Brown referred inquiries to the EDD.

“Some are angry and upset. Some simply need the checks so they can pay the bills,” said state Sen. Ted Lieu (D-Torrance). “If this is prolonged, then it will cause ripple effects for people who can’t pay their living expenses.”

Lieu said his office was doing what it could to help constituents by calling the EDD about individual cases. He blamed part of the problem on the federal budget cuts known as sequestration.

“The EDD lost an enormous number of positions,” he said.

In 2010, at the height of California’s unemployment when 1.5 million people were receiving unemployment payouts, the agency had 3,210 workers processing claims, according to the EDD’s Levy. There are now 2,182 workers processing 770,000 unemployment claims.

The EDD has been criticized in the past for being slow and unresponsive to unemployed Californians.

A state audit last year found that in the fiscal year ended June 2012, more than 17 million calls to the EDD — 24% of all calls made — went unanswered. And of the nearly 30 million calls in which individuals asked to speak with an EDD agent, 84% were unsuccessful.

The agency says it was hampered by the sharp rise in claims caused by the lingering effects of the recession and has since instituted changes recommended by auditors.

One economist said the state government has an obligation to send checks on time so people dependent on those payments can buy food and pay for necessities.

“It’s a serious and critical situation,” said Sung Won Sohn, an economist at Cal State Channel Islands. “Many people receiving benefits, they live check to check. If it’s delayed even a day, it could mean that they can’t eat.”

The EDD’s recent troubles come as the state’s labor market has cooled and the jobless rate has ticked up. The agency reported last week that the state unemployment rate in August rose to 8.9%, the second straight monthly increase.

Despite an improvement in employment levels in recent years, 4.7 million people in the U.S. have been unemployed for 27 weeks or more, according to the Labor Department. The long-term unemployed account for 38% of all those still looking for work.

Californians waiting for unemployment checks are expressing outrage on social media, posting complaints on the EDD’s Facebook page.

One woman wrote: “You guys are horrible, been waiting too long... Sold my wedding band Friday just to get through the weekend, and it’s now Monday, still [nothing].”

Others are sharing tips on how to get an agent on the phone, listing various phone numbers to get patched through. Some posts have included information on how to get emergency food and aid from nonprofit groups.

Cutting through the red tape has been frustrating for former insurance agent Bonnie Schultz, 61.

The Banning resident said she depends on the $450 she gets each week to pay her $988 monthly mortgage. She has already missed a payment on her homeowner insurance and can barely fill her gas tank.

Getting an answer to when her claim will be processed has been a chore. Schultz said she called EDD numerous times without reaching anyone.

“Why have they not sent us something in the mail at least saying there’s a problem?” she said. “This is insane.”

ricardo.lopez@latimes.com

shan.li@latimes.com

Twitter: @rljourno, @byshanli