State audit agencies reported unparalleled challenges faced by their workforces in providing pandemic-related unemployment insurance benefits, according to a new report released Dec. 16 by the Pandemic Response Accountability Committee (PRAC).
Created by legislation within the 2020 CARES Act, PRAC provides oversight of more than $5 trillion in government pandemic relief programs and spending. The group’s mission is to promote transparency and use data to detect fraud, waste, abuse, and mismanagement, and to support and coordinate independent oversight of pandemic relief spending.
PRAC is comprised of inspectors general from 22 Federal agencies ranging from the Department of Agriculture to the U.S. Postal Service. The group’s executive director, Robert A. Westbrooks, is a former IG himself with the Pension Benefit Guaranty Corporation.
While PRAC’s new report, entitled “Key Insights: State Pandemic Unemployment Insurance Programs,” did not reveal any startling new ground, it does collect in one report and dramatically illustrates the pandemic and its impact on state unemployment programs and IT systems. The report also provides a helpful update on Federal stimulus funding for U.S Department of Labor and state UI systems – which until now has been somewhat obscure.
Surges in Claims, Fraud
PRAC reviewed more than 40 reports from 16 state auditors to see how states handled jobless benefits during the pandemic. PRAC’s snapshot of findings is compelling beginning with the fact that in April 2020, the unemployment rate hit 15 percent – the highest rate since 1948.
The Federal government responded by making $716 billion in unemployment benefits available to states through three new programs:
- The Federal Pandemic Unemployment Compensation (FPUC) program which added a weekly supplement of $600 to the amount individuals received in state unemployment. This supplement was later reduced to $300, and in all totaled $439 billion;
- The Pandemic Unemployment Assistance (PUA) program which expanded eligibility to workers who could not receive traditional unemployment benefits − self-employed workers, gig workers, freelancers, and independent contractors. Additional pandemic relief legislation allowed these benefits to last for up to 79 weeks, totaling $130 billion; and
- The Pandemic Emergency Unemployment Compensation (PEUC) program which extended the length of time that individuals can receive unemployment benefits. Generally, benefits are available for up to 26 weeks, but the PEUC program enabled individuals to claim them for up to 79 weeks. The total cost for PEUC was $84 billion.
This rapid growth in unemployment numbers along with the enhanced UI benefits caused the surge in claims which overwhelmed state workforce agencies.
For example, Louisiana had claims for unemployment benefits increase by 3,536 percent between January 2020 and April 2020; Oklahoma paid out 10 times the unemployment benefits that it does in a typical year; and Washington state received 180,000 claims during one week in March 2020 versus normal weekly claims rarely top 10,000.
The processing of claims was likewise affected. In Ohio, it took more than 70 days to process nearly half of the first unemployment benefit payments, and many other states reported similar backlogs.
Then there was the fraud. Here’s just a sampling: one of the new unemployment insurance programs didn’t require proof of income or identity; Arizona paid $1.6 billion in benefits to individuals that applied using a stolen identity; and California estimated that it sent $800 million in benefits to 45,000 individuals in prison.
UI Assistance Funding
The report does provide some greater detail with regard to Federal stimulus funding for state UI programs and their IT systems. The $2 billion provided as a part of the American Rescue Plan Act grants broad authority to the Department of Labor to help states address these challenges by using the funds to prevent and detect fraud, promote equitable access, and ensure timely payment of benefits.
The department is using the funds to tackle common problems facing the system in the short-term while also working to address long-term challenges by improving state processes and building a modern, modular IT system that will make the UI system easier to access, better prepared to prevent fraud, and more resilient to prepare for future surges in initial claims.
PRAC states that other reforms to the UI system will need to be handled through comprehensive legislation, using the principles laid out above. The Department of Labor has begun to spend this funding by carrying out work on several tracks to address systemic shortcomings in access.
The first is direct assistance to the states through “Tiger Teams.” The department is addressing these challenges by sending experts directly to the states, to work hand in hand with states to identify solutions. Despite ongoing efforts to add staff, deploy innovations and address backlogs, many states’ backlogs are persisting. With this funding steam, the Labor Department will be able to support states more comprehensively to address these issues.
The department has begun deploying these teams of experts into an initial six states on a voluntary basis – Colorado, Washington state, Kansas, Wisconsin, Virginia, and Nevada – to help identify process improvements that can speed benefit delivery, address equity, and fight fraud.
Secondly, the Labor Department is providing tools to states to help address immediate fraud concerns by facilitating more effective ID verification. Identify verification is a critical tool in paying unemployment benefits to eligible individuals. Yet too few states have the resources, expertise, and capacity needed to address effectively the wide-ranging attacks that the UI system has experienced from organized criminal enterprises. The nature of fraudulent activity in UI will continue to be highly dynamic and states will require additional support and continuous monitoring for evolving threats. To that end, the department recently made identification verification services available to states to purchase.
Third, the department is developing IT solutions to modernize antiquated state technology by centrally developing open, modular technology solutions that can be adopted by states as needed.
The pandemic has underscored states’ desperate need for technological support and improvements. Many state systems are operating on outdated technology, which made it difficult for them to respond rapidly to changes in law and economic conditions. This problem will be addressed by centrally developing open, modular technology solutions that states may adopt as part of ongoing modernization and improvement efforts. The department hopes to provide software to support end-to-end administration of UI, including benefit delivery, employer tools and appeals.
Finally, the department will be providing direct grants to states to promote timeliness and equity and to fight fraud. Most states lack the resources they need to manage the current volume of claims quickly, accurately, and equitably. As a result, far too many workers, underrepresented populations, those with limited English proficiency, or low-income claimants face barriers in accessing unemployment insurance.
To address that challenge, the Labor Department plans to make $700 million in grants to states available to promote equity and fight fraud. These grants will be designed to help states improve their UI systems to ensure benefits go to workers who need them.
The report’s final words are critical: all of these funds, all of these programs, are an important down payment. However, the longstanding problems this pandemic further exposed can only be addressed through comprehensive UI reform led by the Federal government and their state partners, supported by their IT vendor stakeholders.
And it will take many times more than $2 billion.