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State budget would cover $634 million UI interest payment; EDD seeks $124 million for modernization and $13.8 million for cybersecurity
Summary
The administration proposes a $634 million one-time general fund payment toward the federal unemployment insurance (UI) loan interest; LAO warns the program is chronically insolvent and urges structural reforms. EDD requested $124 million for EDD Next modernization work this year and $13.8 million ongoing for cybersecurity staffing and tools; the
The governor's budget includes a $634 million one-time general fund payment to cover the upcoming interest payment on the state's outstanding federal unemployment insurance loan, and the Employment Development Department requested further funding to modernize claims systems and bolster cybersecurity.
Caleb Horrell, EDD chief financial officer, told the subcommittee the $634 million payment is the administration's fiscal action for the coming year. Chaz Alamo of the Legislative Analyst's Office said the outstanding federal loan was about $21.8 billion at the time of the hearing and that the interest payment estimate is likely to increase in the May revision. LAO highlighted that California's UI program has been chronically insolvent in recent years, meaning employer contributions are not covering benefit outlays, which drives the state's reliance on federal borrowing and limits the ability to rebuild reserves ahead of future recessions.
EDD also briefed the subcommittee on EDD Next, the multiyear modernization portfolio that includes an integrated claims management system (ICMS) and other customer-service improvements. Ajit Kern, the department's lead on EDD Next, said the department has implemented several improvements already (myEDD portal, electronic questionnaires, language translations, direct deposit, chatbot, and other reforms) and is requesting $124 million for the next fiscal year to continue the effort; the ICMS selection and contract award are expected to determine much of the remaining cost and schedule.
On cybersecurity, EDD requested $13.8 million ongoing and 29 positions to maintain security staffing and tools; department witnesses described daily volumes of login activity, phishing attempts, and intrusion attempts that justify continued investment.
LAO recommended strengthened legislative oversight as EDD Next enters its most complex phase: remove extended encumbrances in budget authority, require a 30-day legislative review following final project approval for the ICMS vendor contract, request bimonthly portfolio updates from the California Department of Technology, and require quarterly briefings from EDD for legislative staff. Committee members asked for more operational data, customer usability testing plans, and clarity on the use of special funds or federal support to offset costs.
EDD said it has recovered substantial fraud proceeds in recent years and continues to pursue recoveries; the department expects the ICMS contract to account for 60%–70% of the remaining portfolio cost but noted active vendor evaluations will refine estimates.
