An audit report issued today by the Comptroller’s office shines some overdue light on the state’s (mis)handling of the avalanche of unemployment insurance (UI) claims it received and paid out during the Covid-19 pandemic.

It’s the result of an investigation that was reportedly begun way back in May 2021. The long delay in the report’s issuance, according to the Comptroller, is largely attributable to slow-rolling by the Labor Department, which took up to six months in some cases to respond to information requests.

That’s no surprise. The report has been highly anticipated in part due to a dearth of data from the Labor Department.

Unlike her peers in many other states, Labor Commissioner Roberta Reardon has steadfastly refused to this day to provide the public or the Legislature an estimate of how many billions in fraudulent unemployment insurance (UI) claims her office paid out during the pandemic.

That’s despite the state having paid out 218 million UI claims totaling over $76.3 billion from April 2020 through March 2021 —a 3,140 percent increase over the prior year — through a legacy mainframe system that uses COBOL and other outdated program languages, and various workarounds to which the agency resorted.

In January 2021, California officials reported that $11.4 billion in unemployment insurance benefits the state had paid out since the pandemic’s onset —roughly ten percent of the total — involved fraud. Another 17 percent of payments were under investigation.

Shortly thereafter, on February 2, 2021, Reardon was asked at a Joint Legislative hearing how much New York had paid out in fraudulent claims. She refused to provide an estimate of how much actual or suspected fraud had occurred —or even to share data the Labor Department held that addressed the question.

Reardon did, however, report that her agency had detected and avoided $36 billion in fraudulent claims.

But that claim lacked grounding, according to the audit report issued today, which said agency officials could not support it with data or analyses when called on the carpet to do so during the Comptroller’s investigation.

Agency officials, according to the report, also could not explain why the federal government’s Benefit Accuracy Measurement statistical sampling program estimated that the fraud rate for New York’s UI program rose from 4.5 percent two years earlier to 17.59 percent during the April 2021 through March 2022 period.

The report further found via sampling that DOL incorrectly overpaid many claims and paid claims with traditional UI system funds that should have been paid out using temporary federal CARES Act funds, an error that “can also affect potential assessments on businesses that are taxed to fund the UI program…”

Attributing claims to the traditional UI system that should be paid with other federal funds can further hike the surcharges New York state employers are already being forced to pay due to the roughly $8 billion in outstanding debt New York’s UI trust fund currently owes the U.S. Treasury.

So, Empire State businesses, along with state and federal taxpayers, could be among the victims paying the tab for the UI fraud that Commissioner Reardon remains loath to quantify.

About the Author

Peter Warren

Peter Warren is the Director of Research at the Empire Center for Public Policy.

Read more by Peter Warren

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