Washington, D.C.—U.S. Senate Finance Committee Ranking Member Mike Crapo (R-Idaho) and U.S. Senate Health, Education, Labor, and Pensions (HELP) Committee Ranking Member Bill Cassidy, M.D. (R-Louisiana) raised concerns that the U.S. Department of Labor’s (DOL) December 2023 guidance could put U.S. taxpayers on the hook for the approximately $32.6 billion the State of California lost to fraud during DOL Acting Secretary Julie Su’s tenure as California’s Labor Secretary.  The guidance transfers the authority to decide when the federal government forgives lost federal unemployment insurance (UI) funds to California and other states.

In a May 1 U.S. House Education and the Workforce Committee hearing, Julie Su stated that the guidance only allows states “to waive non-fraudulent [UI] overpayments.”  However, the guidance allows states to apply their own finality laws to determine which lost funds they are required to pay back with nothing specifically prohibiting states from waiving funds lost to fraud.

Specifically, California’s losses in federal UI funds due to fraud have been estimated to be as high as $32.6 billion, as much as one third of the nation’s total UI fraud.  Concerningly, the California State Controller found that the state “had inadequate control over its financial reporting for federally funded unemployment insurance benefits … [the State] is unable to provide complete and accurate information” for federally funded UI accounts.  This inability to definitively account for how much was lost to fraud means that it is questionable how fraud can be a limiting factor in the Employment Development Department (EDD) determination of how much of the lost funds should be forgiven.

As California’s Labor Secretary at the time of the widespread fraud, Julie Su was directly in charge of EDD, the agency tasked with distributing UI payments to state residents. At the direction of Su, EDD waived basic fact-checking fraud prevention requirements for UI payments. This was in contradiction to DOL guidance, which clarified these protection requirements “must be adhered to” and were “critical to the operations of the UI-related CARES Act programs.” As a result of lax oversight, California lost an estimated $32.6 billion in fraudulent UI payments. In 2022, the California State Auditor found that, “[d]espite repeated warnings, EDD did not bolster its fraud detection efforts until months into the pandemic, and it suspended a critical safeguard.” The senators requested information from DOL on if and how it ensured California took all proper steps to recover these fraudulently paid funds.

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Introduction Represents Concrete Step Forward for Bill To Provide Double-Tax Relief, Strengthen U.S.-Taiwan Ties and Spur Economic Development

Washington, D.C.–Senate Finance Committee Ranking Member Mike Crapo (R-Idaho) and Chair Ron Wyden (D-Oregon), with House Ways and Means Chairman Jason Smith (R-Missouri) and Ranking Member Richard Neal (D-Massachusetts), formally introduced legislation to relieve double-taxation of investments between the U.S. and Taiwan.

“Without question, deepening ties with Taiwan and its vibrant democracy is in our nation’s best interests,” said Crapo.  “Building off of the Finance Committee’s unanimous support last month to strengthen those economic ties and encourage cross-border investment, today’s introduction in both the Senate and the House marks an important next step in unlocking opportunities to help workers and businesses of all sizes get ahead in both the U.S. and Taiwan.  In Idaho and throughout our country, our economic and strategic relationship with Taiwan is as important as ever, and I look forward to continuing our work to get this bill expeditiously passed into law.”

“It’s a no-brainer for U.S. jobs and for America’s national security to strengthen our economic partnership with Taiwan,” said Wyden.  “Today is another important step forward toward relieving double-taxation on activity between the U.S. and Taiwan, and supercharging chip manufacturing in America.  It’s not every day you see the bipartisan leaders of Finance and Ways and Means come together to introduce legislation.  I’m committed to continue working closely with Ranking Member Crapo, Chairman Smith and Ranking Member Neal to get our legislation over the finish line.”

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