State Labor Department must deal with unemployment insurance fraud

There are more questions than answers regarding the alarming pandemic-related unemployment insurance fraud that occurred across New York. So a House Oversight Committee investigation will be a welcome step, if it remains a focused, nonpartisan attempt to get to the bottom of deeply troubling shortcomings in the state system.

That doesn't negate the State Labor Department's obligation to clarify how much fraud occurred and why. The agency needs to improve its administration of unemployment insurance and use technology to prevent fraudulent claims and catch those who get away with them.

That starts with determining the scope of the rip-offs. State Comptroller Thomas DiNapoli put the figure at $11 billion. State Labor Commissioner Roberta Reardon last month claimed it's a "potential of about $4 billion." Either way, it's a mind-boggling magnitude of fraud that ultimately affects state and federal revenues and employers across the state. While businesses aren't directly responsible for paying back fraudulent funds, advocates say many employers often see an indirect impact, such as in higher payroll taxes.

In her initial responses, Reardon critiqued DiNapoli for "sowing mistrust" in the unemployment insurance system and emphasized changes the department already has made. But it's the staggering rise in fraud that sowed mistrust, not the comptroller's audit. The Labor Department says 94 unemployment insurance claims were fraudulent in 2019, for about $45,843 in losses. In 2020, there were 489,604 such claims, for a loss of about $3 billion, followed by another million fraudulent claims and $1.1 billion in losses in 2021.

More detail is warranted, especially given discrepancies with the comptroller's figure. Department officials say they recognize the scope of the problem, and the work that must be done. The state has a responsibility — to taxpayers, employers, and workers who needed and deserved unemployment insurance but had difficulty securing it. A commitment to openness and accuracy, and to the businesses and employees it serves, is critical.

The "fix" isn't simple. The Department of Labor must overhaul its antiquated technology, a mainframe that should have been junked years ago. Officials say a new IT system should be in place by the beginning of 2024. They're putting a lot of faith in that modernized system. Testing and troubleshooting it is critical. But there's more to do to develop best practices.

The department's success depends on its willingness to admit its faults. Staff must be properly trained and committed to the overhaul, and to a larger culture shift. Recently promised federal dollars meant for equity and accessibility will be useful only if the department can function properly.

The pandemic exposed significant long-existent problems in the unemployment insurance program that continue to fester. There's much work to do before the Labor Department has the right answers — rather than just questions.