There must be accountability for state unemployment insurance COVID fraud

In 2010, a federal study reported that many state unemployment insurance systems relied on mainframe computer systems built in the 1970s and 1980s. Such systems must be programmed via ancient computer languages like COBOL, which few current IT professionals know. These systems are difficult and expensive to maintain and expand, and lack capacity, flexibility and security.

New York was one of the states whose Department of Labor used such a system. Although State Comptroller Thomas DiNapoli highlighted the same concerns in 2013 and 2015, it still does. Now, an audit from DiNapoli says New York lost $11 billion to unemployment insurance fraud during COVID-19. The time for accountability has come.

An unprecedented wave of unemployment claims arrived with COVID in the spring of 2020. In response to a potential economic inferno started by the virus, a gushing fire hose of money was rapidly deployed.

It was clear that the temporary relief programs and newly generous benefits would be catnip to fraudsters, and an extraordinary challenge for those working to keep the game honest. One emergency regulation, allowing workers to self-verify employment and wages, prompted a flood of false claims that often utilized stolen identities.

From April 1, 2020, through March 31, 2021, New York disbursed 218 million payments totaling $76.3 billion, a 3,140% increase over 2019. Spilt milk was no surprise, but the river of heavy cream snatched from state coffers is astonishing, and totally unacceptable.

Excessive fraud did not start with COVID, nor end when the pandemic eased. For several years before 2020, New York exceeded federal fraud limits. And in 2021, the fraudulent claims reached 18%, four times what the figure had been in 2019. Despite warnings, the state did not seek bids for a new computer system until 2017, nor award a contract until 2019. The $57 million system will supposedly arrive in 2023.

Meanwhile, the department still does not properly code and encrypt data for security. It has computer functions only one employee understands, and cannot determine how many fraudulent claims were paid. And the state still owes the federal government $7.7 billion it borrowed to cover claims, with business owners now receiving bills to repay the loan.

Updating technology and adopting best practices get ignored because this isn't a shiny object elected officials can boast as an accomplishment. But failing to do so erodes confidence in government, and by extension, respect and support for it.

About 30 other states have used CARES Act money to cover such borrowing. New York should do the same, at least partially, to help employers. It should also hold responsible those in the Albany bureaucracy who slow-rolled crucial technology updates. And the state must work with the federal government to recoup every stolen dollar it can.

The pandemic created challenges no system could have handled perfectly. But proper technology and best practices could have handled it far better than New York did.