From CalMatters investigative reporter Lauren Hepler:

California has a new unemployment and disability payment contractor after the state’s multi-billion-dollar pandemic fraud panic. The Employment Development Department hopes it will be the end of an era of brazen scams, which wreaked havoc for laid-off workers and fueled police busts involving stacks of ill-gotten debit cards issued at the department’s direction by then-contractor Bank of America.

EDD tells CalMatters that on Monday it plans to begin notifying 850,000 benefit recipients of the new payment provider: Money Network, an electronic payment company owned by finance tech company Fiserv. Money Network may sound familiar; it was also tapped by the federal government and Gov. Gavin Newsom to pay out COVID-era stimulus funds, which attracted its own waves of debit card scams.   

Money Network won the EDD contract after a competitive bidding process. It comes as the agency embarks on a five-year, $1.2 billion tech overhaul known as EDDNext.

The contract will primarily be paid for through a debit card revenue-sharing agreement, similar to the EDD’s previous deal with Bank of America. The agency will also pay $32 million over five years for Money Network to offer a long-discussed direct deposit option to workers’ bank accounts, which the EDD says will launch in spring 2024. 

In mid-January, people receiving unemployment, disability and paid leave benefits from the EDD will be mailed new Money Network debit cards. Payments will officially begin on these cards on Feb. 15. Anyone who still has a Bank of America EDD debit card will have until April 15, 2024, to spend the money. 

In the meantime, fraud analysts tracking an uptick in attacks on government benefit debit cards — not just California’s unemployment program, but also food assistance and others — will be watching to see what lessons have (or haven’t) been learned from the pandemic. The new EDD cards will include both security chips and tap-to-pay options common in consumer credit cards.

Still, the EDD is advising cardholders to be vigilant: “Beware of scammers. We will never request your personal information by text message, e-mail or on social media.”

Learn more about what went wrong during the pandemic in Lauren’s year-long investigation.

Speaking of delayed relief: Tens of thousands of Californians are still awaiting aid from the COVID-19 rent relief program. But as CalMatters housing reporter Ben Christopher explains, the program may run out of money before it can help the remaining eligible applicants.

The $5.2 billion program launched in 2021 to help Californians pay down rental debt they accumulated during the pandemic. Though it stopped taking new applications in 2022, more than 70,000 households still have applications pending. The program has enough funding to cover a little more than 14,000 people — meaning the remaining 80% of the total applicant pool is out of luck. 

That’s devastating news for tenants and landlords alike who may ultimately wait in vain for relief to come. As one graphic designer and single mother told Ben: “I’m trying to find a way to freelance or do whatever I can do to get the money to just pay it myself… I can’t sit and depend on it and wait because it’s been two years.”

For more about California’s overtapped rent relief program, read Ben’s story.

From CalMatters economy reporter Levi Sumagaysay: 

California faces a $26 billion revenue shortfall in 2022-23 and a $58 billion shortfall through the 2024-25 fiscal year, the state’s Legislative Analyst’s Office said Friday in an updated forecast.

Total income tax collections fell 25% in 2022-23, the office said, citing data after receipt of tax filings, delayed several months by a deadline extension from both the state and the feds for taxpayers affected by last winter's storms.

“This decline is similar to those seen during the Great Recession and dot-com bust,” the report authors wrote. 

They attributed the drop to a slowdown in investment in California companies because of higher borrowing costs due to the Federal Reserve’s repeated interest hikes. One of the big effects of that is the number of California companies that went public in 2022 and 2023 declined more than 80% from 2021. The office also pointed to stock market woes in 2022 as a factor. Those factors, combined with home sales that the analysts said have fallen by half in the past couple of years — also due to higher interest rates — have cooled the state’s economy. 

All of that has pushed the state’s unemployment rate up to 4.8%, with the number of unemployed workers climbing nearly 200,000 since the summer of 2022, the office noted. 

Though the Legislative Analyst’s Office has yet to release its analysis of the projected shortfall’s impact on the state budget — that will come this week — politicians were quick to react. 

State Republicans slammed Democrats, who control state spending.

• Sen. Roger Niello of Fair Oaks, budget committee vice chairperson, in a statement: “Hopefully, the majority will see it is time for a more realistic budget strategy, instead of throwing money at a laundry list of projects that sounds nice on the national television debate stage.” 

Assembly Speaker Robert Rivas, a Democrat from Salinas, said in a statement that “California is more prepared than ever to navigate this latest challenge,” and that he is committed to a 2024 budget that “protects classroom funding and prioritizes support for core health care, safety net and public safety programs.”

A spokesperson for Gov. Newsom did not immediately return a request for comment.

Reminder: This year, the Legislature and governor had to cover a $30 billion-plus budget deficit, after two years of record surpluses fueled in part by federal COVID aid.

From CalMatters homelessness policy reporter Jeanne Kuang:

The governor’s signature new mental health courts opened in Los Angeles County on Friday, and the program appears to be off to a slow start in seven other counties that first launched in October.

Those first seven counties received 126 petitions over the past two months from family members, first responders and behavioral health providers, including county workers. If accepted, a civil court judge orders a treatment plan and requires county mental health departments to provide it. Nine petitions have been dismissed, said a spokesperson for the state Health and Human Services agency.

The state estimates between 7,000 and 12,000 Californians are eligible for the program, which is reserved for those with a narrow set of diagnoses for psychotic disorders, including untreated schizophrenia. Mental health officials in Orange County, one of the first seven counties to launch CARE Courts, had predicted they would receive more than 100 petitions a month. 

But announcing the Los Angeles County launch on Friday, Health and Human Services Secretary Mark Ghaly said he’s not concerned there are fewer petitions than expected, explaining it gives counties more time to prepare for future cases. The cases so far are in various stages, from newly filed to further along in the process where the person with the condition is discussing treatment options with the county. 

• Ghaly: “That is building up capacity to take on more volume over the months to come.”

State and local officials expect the program to make a dent in the number of unhoused people living on the streets with severe mental illness, though a person need not be homeless to qualify. More than 171,000 people were homeless in California in 2022, with about two-thirds of them living outside. A UC San Francisco statewide study of homelessness this year found that more than a quarter of unhoused people surveyed had been hospitalized at any point in their lives for a mental health problem; in 2019, the homeless services authority in Los Angeles estimated a quarter of the city’s homeless adults had a severe mental illness.

Ghaly’s agency could not say how many of the petitions received so far are for unhoused people, nor did it immediately give more details about the cases, citing privacy laws.

How far can a $53 million investment go? When it comes to California’s literacy rates, apparently it can go pretty far.

As CalMatters K-12 education reporter Carolyn Jones writes, after a nonprofit public interest firm sued the state in 2020 claiming that too many Black, Latino and low-income students were not learning to read, California poured millions into targeted literacy programs at the state’s 75 worst-performing elementary schools. The result, according to a Stanford Graduate School of Education study released Sunday, was a dramatic boost in literacy among third-graders in the program.

Not only did the program improve reading rates (“at warp speed,” said the attorney behind the lawsuit), it also offered evidence that the so-called “science of reading” approach — which emphasizes language comprehension and phonics — is a more effective technique to teach reading compared to other methods.

One Los Angeles County school, Joshua Elementary, was among the schools targeted in the grant. Five years ago, fewer than 3% of its third graders met or exceeded the state’s reading standards, making it one of the lowest-performing schools in California, if not the country.

Last year, the number of third-graders meeting the standard nearly doubled.

• Krista Thomsen, the district’s director of curriculum, instruction and assessment: “Our data is still low, but we are seeing vast improvements. What we are seeing now is teacher buy-in, because they’re seeing success teaching kids how to read…. The entire staff understands that literacy is a moral imperative.”

Read more about the state’s Early Literacy Support Block Grant program in Carolyn’s story.

CalMatters Commentary

CalMatters columnist Dan Walters: Gov. Newsom criticized Ohio Republicans for trying to change voting rules to stop an abortion rights measure, but he’s doing the same thing to kill a measure to make it more difficult to raise taxes.

Bonus Walters: It was Gavin Newsom vs. Ron DeSantis in a televised debate Thursday night. Those who watched the Dallas vs. Seattle NFL game got a better show.

Gov. Newsom deserves credit for going on Fox News to push back aggressively against the GOP, argues Garry South, a veteran Democratic strategist who has managed four campaigns for California governor.

Two views on restricting LGBTQ books in California libraries:

When parents question certain materials, it isn’t about banning books or encouraging hate, writes Todd Maddison, co-founder of parent advocacy groups the Parent Association and San Diego Schools.

Policies and book bans that target LGBTQ students threaten them and send the wrong message about tolerance, writes June Paniouchkine, a UCLA student and an at-large board member for the Stonewall Democratic Club of Los Angeles County.