The United States Department of Labor told all 50 states on Wednesday to step up unemployment insurance fraud controls or risk losing more federal money for those programs. Acting Labor Secretary Keith Sonderling said the department was “officially putting governors on notice.”
“The American people will no longer tolerate the blatant waste, fraud, and abuse of their hard-earned tax dollars — no state should allow it either. If states allow it, they will suffer the consequences,” Sonderling said. The Labor Department said it would send further directives in coming weeks.
California Illinois New York
The warning singled out California, Illinois and New York in the announcement. Marissa Saldivar, a spokesperson for Gavin Newsom, said, “Meanwhile California outperforms other states in addressing fraud,” while JB Pritzker said, “The Trump Administration continues to govern by press release.”
The department said poor oversight, outdated technology, weak identity verification and lax controls have “allowed unprecedented fraud to flourish.” The announcement lands as the department keeps pressure on state unemployment systems tied to the COVID-19 pandemic and the public health emergency, with consequences from that period still playing out.
Government Accountability Office
Government audits of a sample of cases from last year suggested that nearly $1 in $9 in the programs was an overpayment, but most of those overpayments were for reasons other than fraud. The overpayments varied by state and many involved work-search requirements or eligibility disputes after someone left a job.
The Government Accountability Office estimated that fraud accounted for between 11% and 15% of the amount paid out through unemployment insurance programs from April 2020 through May 2023. That span covered the last months of Donald Trump’s first term and more than half of Joe Biden’s time in office.
U.S. Department of Labor Wednesday
The practical pressure for states is federal money: the department tied continued support to stronger anti-fraud controls, which leaves each state facing the same choice on its unemployment program administration. States that fall short will now be waiting on the next directives from the Labor Department, and the open question is how much funding could actually be withheld if a state does not comply.
