Unemployment Insurance Fraud Is Soaring and It Needs to Be Addressed
- Since the pandemic began, California has paid billions in fraudulent unemployment payments. It is estimated that $ 63 billion in improper payments was made nationwide.
- Congress needs to ensure that there is more fraud protection.
- Congress should hold hearings on this nationwide issue before more tax dollars are wasted.
- Congressman Michelle Steel is serving in her first term as the California 48th District Representative.
- Kevin McCarthy serves as Republican leader of the US House of Representatives, where he represents California's 23rd Congressional District.
- This is a split opinion. The thoughts expressed are those of the author.
- You can find more articles on Insider's business page.
When the pandemic broke out, US unemployment spiked almost immediately. Mandatory bans meant businesses were closed and employees were sometimes unemployed overnight. To deal with the aftermath, Congress passed trillions of dollars in relief supplies and funded a new program called Pandemic Unemployment Assistance (PUA). PUA is designed to help those who are normally not eligible for unemployment benefits, such as gig workers, independent contractors, or the self-employed.
Unfortunately, the program was also abused. Many states, like our home state of California, have not implemented any security precautions in administering the program, and fraudulent jobless claims have skyrocketed across the country. These payments to those who shouldn't qualify have cost $ 63 billion since the pandemic began, according to a report by the Department of Labor's inspector-general.
In 2013, long before COVID-19 was a household name, the California State Department of Employment Development (EDD) received a $ 2 million grant to pay for and install a new fraud detection system. With the grant provided by the Department of Labor, the state was able to partner with Pondera Solutions, whose mission is "to combat fraud, waste and abuse in major government programs". The system appeared to be working and, according to a former EDD employee, it succeeded in exposing "an amazing amount of fraud".
Then the state switched off the system for no reason.
And last year, under the leadership of Governor Gavin Newsom, California Employment and Human Resources Secretary Julie Su, and California Employment Development Director Rita Saenz, California, paid fraudulent claims of at least $ 11.4 billion fraudulent payments could amount to more than $ 30 billion. That means 1 in 4 taxpayer dollars that California spent on unemployment benefits could have been fraudulent. This is a gross abuse of taxpayers' money and speaks of a worrying trend emerging in states across the country.
And the problem was particularly acute in the PUA program. Since its inception in April 2020 - when the unemployment rate in California reached 15.5% - 95% of the $ 11.4 billion fraudulent payments have been made through this new program.
The Department of Labor has warned states, including California, of the potential for fraud in the PUA program and made federal funds available for the specific purpose of combating this fraud. California alone received approximately $ 260 million from the federal government to administer its PUA program, plus an additional $ 2 million in federal funding last year to fight fraud, and another $ 2 million earlier this year for the same Purpose.
The PUA funds should help those hardest hit by COVID-19 - not criminals and scammers. The widespread fraud in the PUA program will undoubtedly become one of the largest fraud scandals in California history, yet the California leadership continues to lack transparency and refuse to provide any new information about this clear abuse of taxpayers ’money.
To add insult to injury, we recently learned that the state is funding an EDD call center that routinely ignores calls from Californians. According to CapRadio, EDD received "about 4 to 5 million calls every two weeks, and employees answered about 10% of them" last fall, with more than 73 million calls unanswered as of September 2020. Despite a lack of responsiveness, the state still paid $ 55 million to keep the call center running.
That said, using taxpayers' money, the state paid the call center about 75 cents for every call they ignored. There are now millions of Californians waiting to get access to the benefits they are entitled to.
The state of California stands ready to receive $ 42.63 billion from Washington's latest trillion dollar spending plan, but the bill did not provide additional fraud protection. To counteract the grotesque mismanagement of taxpayers' money, we cited the Republicans of the California house in a letter to the Newsom administration last month expressing our frustration over fraudulent COVID-related unemployment benefits payments made by the state of California and were recently revealed during an audit. Taxpayers deserve reassurance that their tax dollars will not continue to be wasted.
This accountability need is also being debated at the federal level, and Republicans on the Ways and Means Committee have requested a hearing on this national issue. This is an important step in ensuring that victims of fraud have access to the benefits they need while ensuring that they don't have to pay taxes on benefits they never received.
The Biden administration should make good governance and control over taxpayers' money a priority, especially as it begins to spend nearly $ 2 trillion in new and unnecessary spending.
Republicans in Congress fight for hard-working taxpayers. This fight is not just about keeping more of your hard-earned money where it belongs - in your wallet - but also about ensuring transparency about how taxpayers' money is spent. Californians and Americans everywhere deserve accountability.
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