A hole in the bucket: The state Labor Department needs better controls on unemployment insurance

When COVID shut down America in early 2020, millions lost their jobs and the government wisely expanded unemployment insurance — its eligibility, benefit amounts and duration. As state Comptroller Tom DiNapoli’s new audit shows, in the 365 days starting that April 1, New York paid out $76.3 billion in unemployment, 3,140% more than the benefits in the prior fiscal year.

No shame in a big increase in a time of desperate need, but DiNapoli estimates that $11 billion of the total were improper payments or fraud, mostly from identity theft. Good luck trying to recover any of the stolen money from Russian hackers or fake Nigerian princes.

The state Department of Labor, responsible for administering claims and sending out checks, was under such a crush of applicants in the dark days of the pandemic that huge wait times and backlogs developed, even as New Yorkers were becoming desperate for money to pay rent and buy food. So DOL made it easier for claims to be filed, which was correct, but invited scammers through insufficient controls and data security. Though DOL says they stopped $36 billion in fraudulent claims, the department offered no proof to DiNapoli’s auditors. Having only $11 billion disappear is admittedly better than having lost $47 billion, but it’s still a gigantic sum.

And someone has to pay for it. Albany borrowed $9.3 billion from Washington to cover its extraordinary COVID unemployment expenses and is repaying it, with interest, by tacking a surcharge on employers. But the employers didn’t cause the fraud or waste. That was the fault of the state. Why should businesses alone have to bear the penalty for the failures of the bureaucracy? Wouldn’t using the general fund, from a wider pool of taxpayers, be fairer?

We really hope that there won’t be another spell of mass joblessness (which peaked at 16% in COVID), but either way, the Labor Department must tighten the ship. Money should go out quickly to the right people and only the right people.

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