Federal watchdog: Unemployment programs wasted billions

A federal watchdog says billions of taxpayer dollars have been wasted through unemployment programs in the past year, and that number is likely to rise.

The Government Accountability Office released a report examining unemployment benefits during the COVID pandemic that found states and territories had overpaid by $12.9 billion between March 2020 and April 2021.

The Department of Labor was given billions to detect and prevent fraud, but that wasn’t able to stop the rampant waste and abuse uncovered by the GAO.

“The American Rescue Plan Act of 2021, enacted March 11, 2021, subsequently provided DOL with $2 billion to detect and prevent fraud, promote equitable access, and ensure the timely payment of UI benefits,” the report says. “As of May 20, 2021, DOL officials said that DOL was working to develop detailed plans for this $2 billion in coordination with the Office of Management and Budget, and noted that developing spending plans across 53 states and territories involves complex considerations.”

Only a fraction of those overpayments were fraudulent.

“During the first four quarters of the pandemic combined (April 2020 through March 2021), states and territories reported about $1.3 billion in overpayments identified as fraud across the UI programs,” the report says. “States have continued to identify overpayments in the regular UI and CARES Act UI programs, and some states have begun reporting data to DOL on recovered PUA overpayments. Overpayments are not necessarily a result of fraud, though some may be. As we reported in January 2021, DOL data show that the dollar amount of state-reported overpayments in the regular UI program increased substantially during the pandemic, coinciding with historically high numbers of UI claims. States have also reported large amounts of overpayments in the CARES Act UI programs.”

On top of that, the GAO made clear that the actual waste numbers are likely much higher. Of the 45 states and territories that have already reported some data, 7 have not yet reported on overpayments.

“However, according to DOL, states do not report these overpayments until investigations are complete and fraud has been established, which may take a long time,” the report says. “As a result, it is likely that states and territories have not yet reported substantial amounts of fraud overpayments, which could contribute to increasing amounts reported in the coming months.”

The waste of unemployment funds come as debate over federal unemployment benefits intensifies nationwide. More than two dozen states, almost entirely Republican-led, have opted out of federal $300 weekly unemployment payments, which are set to expire on their own in September if Congress does not re-up the program.

Democrats, though, have largely pushed back, arguing the payments are still needed as Americans recover from the economic impact of COVID.

Michigan has typified this conflict. Michigan’s Democratic Gov. Gretchen Whitmer vetoed a Republican proposal Tuesday that would remove the state from the payments.

Republicans, though, have argued the payments are keeping residents from returning to work, pointing to widespread job availability despite elevated unemployment.

A recent Morning Consult survey found that 1.8 million unemployed Americans had turned down job offers because they preferred to live on unemployment benefits.

“The federal unemployment payment program served an important purpose during the height of the pandemic – but those days have ended,” Michigan state Rep. Beth Griffin, a Republican, said. “Unemployment is supposed to be a temporary measure providing temporary help to people who need it. Today, there are thousands of jobs available in Michigan. Now is the time, for those who are able, to help themselves and our entire state return to normalcy by returning to work.”