It's official, California is a banana republic.
In an effort to save operational costs, California's Employment Development Department will no longer issue checks for unemployment, disability, or paid family leave payments. Instead claimants will receive a pre-paid Visa debit card. The sole issuer of these debit cards is Bank of America:
“We’re pleased to help the state of California provide an easier and more efficient way for unemployed individuals, as well as customers with disabilities, to receive their benefits,” said Margaret Scopelianos, Treasury Solutions executive for Specialized Industries, including government card programs, at Bank of America.
I bet they're pleased! Some context:
A record $22.9 billion in total unemployment benefits were paid in
2010, along with approximately $4.3 billion in Disability Insurance and Paid Family Leave benefits. Initially the savings will be approximately $4 million a year....
That was a total of $27.2 billion last year. (This year it will be even more.) I checked out BofA's merchant services website, but they don't post any specific information on how much they charge for merchant fees. However, typical merchant fees for Visa transactions are around 2%, with the issuing bank taking the lion's share of 1.75%.
Do the arithmetic: 1.75% of $27.2 billion is $476,000,000. Just to be clear, in order to save $4 million the state of California has given one (criminal, albeit as of yet un-indicted) bank a monopoly to extract nearly half a billion dollars in rents. Nothing I could find on EDD's website addresses any conditions or limitations, if any, the state will impose on BofA in return for the monopoly. I would have thought a better deal could have been negotiated with a sizable chunk of that 1.75% going back into the state's coffers. Neither could I find anywhere any explanation of how BofA was chosen. This appears to be a bald-faced case of legalized corruption. I suspect some government official(s) will soon resign--or retire with their pension(s)--and move into a very comfortable sinecure within BofA, the fucking fucks.
Who pays? First, that $476 million comes out of the pockets of California businesses. Second, claimants will be susceptible to additional fees associated with debit cards. More and more small businesses are charging a debit card transaction fee at the point of sale. This will transfer some or all of the merchant fee rents onto claimants. Card holders will also face fees if they withdraw cash from ATMs other than those owned by BofA.
To be fair, claimants, once they are issued a card, can avoid using it for purchases by having the funds direct deposited into their own bank accounts, though it is not clear from reading EDD's information whether or not a fee will be charged for this option.