US unemployment system still plagued by delays 3 years after pandemic-era slowdown

Meanwhile, the CARES Act has created new programs to improve the safety net: a $600-a-week increase in typical benefits, an extension of benefits to gig workers and others who aren’t typically eligible for aid, and an increase in the duration of aid.

These programs have been renewed and transformed several times between March 2020 and Labor Day 2021.

States were initially doing all of this work — managing a deluge of applications, answering worried appeals from applicants, implementing and fine-tuning new programs, and awarding unprecedented funding — with rudimentary staff and resources.

Learn more about personal finance:
Amid layoffs at big companies, tech jobs are still hot in 2023
What Workers Need to Know About Applying for Unemployment Benefits
Despite a wave of layoffs, it’s still a good time to find a job

Administrative funding for state unemployment systems fell 21% between fiscal years 2010 and 2019, according to the GAO. (The decline was even greater [32%] taking into account inflation.)

Federal funding for these programs finally hit lows dating back to the 1970s on the eve of the pandemic, said Andy Stettner, deputy policy director in the Labor Department’s Office of Unemployment Insurance Modernization.

Funding has declined 21% over the past fiscal year, from $3.3 billion in 2021 to $2.6 billion in 2022, Stettner said.

The downward trend during this period reflects an underlying tension in the structure of the system. States get funding based on their administrative workload, such as the volume of claims the states are paying.

Right now — as in the years following the “Great Recession” — states are getting lower relative levels of federal funding due to more subdued unemployment claims. About 186,000 people filed an initial claim for benefits in the week ended Jan. 21, according to the Labor Department, fewer than the roughly 200,000 people who filed a weekly claim at the start of the pandemic.

This reduced funding is rushing headlong into a hodgepodge of leftover administrative work, some of which has been shelved as states rush to implement CARES Act programs.

It’s an upside-down situation that’s “off” from the norm, Stettner said.

“States were very threadbare at the start of the pandemic, which left them very unprepared,” Stettner said. “One of the reasons this backlog has built up: [States] had to postpone some work as all the new claims came in, and they’re just trying to catch up now. »

Part of the current administrative burden is a sort of forensic accounting of funding issued during the pandemic, said Michele Evermore, senior researcher and unemployment expert at the Century Foundation.

For example, states assess the extent to which they may have overpaid benefits, she said.

This is especially true for a CARES Act program, Pandemic Unemployment Assistance. Some state agencies were unaware that they had to reassess – on a weekly basis – a worker’s reason for eligibility for benefits, whether it was illness, caring for a sick person, childcare or a break from gig work and self-employment. Now they’re asking PUA recipients to verify that they’ve qualified for any benefits they’ve received, Evermore said.

Much of this was due to identity theft whereby criminals stole personal data to claim benefits on behalf of others.

According to the GAO, in fiscal year 2021, “inappropriate” benefit payments increased more than nine-fold, to about $78.1 billion, from $8 billion the previous year. The multi-year sum could top $163 billion or more, the Labor Department said.

Criminals are still attacking the system, experts said. They’ve also adopted new tactics, such as “bank account hacking,” in which hackers identify claimants receiving unemployment insurance and funnel their weekly cash injection into a new fraudulent bank account, Evermore said.

“There are criminals who have become addicted to this and they will keep trying,” Stettner said of the fraud.

States have cracked down by implementing various fraud checks like better identity verification. In some cases, these checks have delayed the timely issuance of legitimate requests. A claim reported for any reason should generally be reviewed by a state labor agency human.

It all amounts to a delicate balancing act: keeping funds from flowing to criminals or keeping claimants from getting too much money, while trying to quickly help people in need.

Agencies have also had to shift staff to manage backlogs in the appeals process, for example, cutting resources to ensure early payments are delivered on time, Stettner said.

The Labor Department has worked with states to automate procedures where possible to increase efficiency, Stettner said.

“Many states continue to struggle to achieve this acceptable level of performance,” he added. “It’s not a situation we want to see.”

However, he said he believed “we are moving into the final stages” of the delays.

Gwyn agrees that things are moving in the right direction. But amid fears of another impending economic downturn – accompanied by the threat of higher unemployment – ​​the unemployment system is not in a good position to react if that happens in the short term.

This result is not acquired, of course.

The Federal Reserve is raising borrowing costs for consumers and businesses in an effort to rein in the US economy to bring high inflation under control. The central bank sees a path to a so-called soft landing that avoids recession.

“What will happen to the unemployment insurance system if we have another recession?” said Gwyn. “This is a very troubling question.

“You put it all together and it’s a system that’s nowhere near ready for another recession,” he added.