We now have a rough idea of what New York’s outdated unemployment insurance system cost the state in the first year of the Covid-19 pandemic. At least $11 billion in fraudulent payments were made, according to an audit by state comptroller Thomas DiNapoli.
That number — as staggering as it is — does not reflect the human cost of the state Department of Labor’s management failures that have left New Yorkers laid off by the pandemic to fend for themselves.
We have not forgotten their stories: the restaurant dishwasher rationing sandwiches for his three children when the money ran out; the machinist raising scratch chickens; the titular clerk who called the Department of Labor 4,000 times in two weeks before obtaining the disclosure; the salesman who was called back after midnight while he was asleep; and the thousands of desperate, frustrated and trapped people who resorted to complaining on social media and even calling on journalists for help as they watched their bank balances dwindle and their bills pile up.
The anguish of New Yorkers who have been unable to collect their unemployment benefits is due to the colossal failure of a state agency to do the inglorious job of maintaining backbone systems. No one gets a photo shoot for this – but not doing it has real consequences for real people.
There is no doubt that Covid has placed unprecedented demands on the Department of Labour. Governor Andrew Cuomo’s lockdown order in March 2020 put millions of New Yorkers out of work in one fell swoop. Labor call centers were overwhelmed by a 13,480% increase in volume and initial unemployment claims rose 2,666%. Applying for unemployment benefits is confusing on a good day; the changing rules for federal pandemic unemployment have only complicated matters.
None of this absolves the Department of Labor of its inability to get the right technology in place when the pandemic hit.
The department knew its decades-old unemployment insurance system was vulnerable. It had been warned in 2010 that it ran on old mainframes and outdated programming languages. It took the state nine more years to hire a consultant to build a new unemployment insurance system from the ground up. The four-year, $57 million project began 10 months before the pandemic and is now expected to be completed in fall 2023.
The old unemployment insurance system has caved under the pandemic overload. It could not be extended to meet increased demand. It wasn’t secure. It was inflexible, requiring on-the-fly workarounds that compromised fraud controls and allowed crooks to collect benefits they weren’t entitled to. Real people who needed help couldn’t get it because their identity was stolen.
At first, Cuomo called the backlog “annoying delay.” As complaints grew, he asked Google to develop a more user-friendly interface and expand the system’s capacity. Thousands of state workers have been temporarily assigned to unemployment insurance call centers. But as the pandemic entered its second year, New Yorkers reapplying for unemployment benefits ran into a system that was still broken.
The fixes came slowly. It took until February 2021 for the Labor Department to tighten identity verification requirements. Multi-factor identification – you know, the SMS or email confirmation your bank, credit card or social network needs to make sure you’re who you say you are – rolled out in September last. It’s not rocket science.
Labor Commissioner Roberta Reardon claimed her department prevented $36 billion in fraudulent payments. The agency couldn’t back that up with data, DiNapoli said. He also complained that the Department of Labor blocked auditors for months before releasing information. This is unacceptable.
Adding to the human cost of the Department of Labor’s mismanagement, New York employers now have to foot the bill. The state had to borrow $9 billion from the federal government to cover unemployment claims, both legitimate and fraudulent. This money must be reimbursed, with interest, by the employers who contribute to the system. That equates to $200 per worker, according to an estimate by the Empire Center for Public Policy, an Albany think tank.
Now that we know how much was stolen from unemployment insurance during the Covid, who will be responsible? What other government agencies are vulnerable to outdated technologies and poorly maintained systems? We await action from the state legislature and Governor Kathy Hochul.
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