[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
EXAMINING THE ADMINISTRATION OF
THE UNEMPLOYMENT INSURANCE SYSTEM
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH,
EMPLOYMENT, LABOR, AND PENSIONS
OF THE
COMMITTEE ON EDUCATION AND LABOR
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD IN WASHINGTON, DC, SEPTEMBER 21, 2022
__________
Serial No. 117-58
__________
Printed for the use of the Committee on Education and Labor
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via: edworkforce.house.gov or www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
59-790 PDF WASHINGTON : 2025
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COMMITTEE ON EDUCATION AND LABOR
ROBERT C. ``BOBBY'' SCOTT, Virginia, Chairman
RAUL M. GRIJALVA, Arizona VIRGINIA FOXX, North Carolina,
JOE COURTNEY, Connecticut Ranking Member
GREGORIO KILILI CAMACHO SABLAN, JOE WILSON, South Carolina
Northern Marina Islands GLENN THOMPSON, Pennsylvania
FREDERICA WILSON, Florida TIM WALBERG, Michigan
SUZANNE BONAMICI, Oregon GLENN GROTHMAN, Wisconsin
MARK TAKANO, California ELISE M. STEFANIK, New York
ALMA S. ADAMS, North Carolina RICK W. ALLEN, Georgia
MARK DeSAULNIER, California JIM BANKS, Indiana
DONALD NORCROSS, New Jersey JAMES COMER, Kentucky
PRAMILA JAYAPAL, Washington RUSS FULCHER, Idaho
SUSAN WILD, Pennsylvania FRED KELLER, Pennsylvania
LUCY McBATH, Georgia MARIANNETTE MILLER-MEEKS, Iowa
JAHANA HAYES, Connecticut BURGESS OWENS, Utah
ANDY LEVIN, Michigan, Vice Chairman BOB GOOD, Virginia
ILHAN OMAR, Minnesota LISA McCLAIN, Michigan
HALEY M. STEVENS, Michigan DIANA HARSHBARGER, Tennessee
TERESA LEGER FERNANDEZ, New Mexico MARY MILLER, Illinios
MONDAIRE JONES, New York VICTORIA SPARTZ, Indiana
KATHY MANNING, North Carolina SCOTT FITZGERALD, Wisconsin
FRANK J. MRVAN, Indiana MADISON CAWTHORN, North Carolina
JAMAAL BOWMAN, New York MICHELLE STEEL, California
SHEILA CHERFILUS-McCORMICK, Florida CHRIS JACOBS, New York
MARK POCAN, Wisconsin BRAD FINSTAD, Minnesota
JOAQUIN CASTRO, Texas JOSEPH SEMPOLINSKI, New York
MIKIE SHERRILL, New Jersey
ADRIANO ESPAILLAT, New York
KWEISI MFUME, Maryland
Veronique Pluviose, Staff Director
Cyrus Artz, Minority Staff Director
------
SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR, AND PENSIONS
MARK DeSAULNIER, California, Chairman
JOE COURTNEY, Connecticut RICK ALLEN, Georgia,
DONALD NORCROSS, New Jersey Ranking Member
SUSAN WILD, Pennsylvania JOE WILSON, South Carolina
LUCY McBATH, Georgia TIM WALBERG, Michigan
ANDY LEVIN, Michigan JIM BANKS, Indiana
HALEY M. STEVENS, Michigan DIANA HARSHBARGER, Tennessee
FRANK J. MRVAN, Indiana MARY MILLER, Illinios
ROBERT C. ``BOBBY'' SCOTT, Virginia SCOTT FITZGERALD, Wisconsin
(Ex Officio) VIRGINIA FOXX, North Carolina (Ex
Officio)
C O N T E N T S
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Page
Hearing held on September 21, 2022............................... 1
OPENING STATEMENTS
DeSaulnier, Hon. Mark, Chairman, Subcommittee on Health,
Employment, Labor, and Pensions............................ 1
Prepared statement of.................................... 5
Allen, Hon. Rick, Ranking Member, Subcommittee on Health,
Employment, Labor, and Pensions............................ 6
Prepared statement of.................................... 8
WITNESSES
Costa, Thomas, Director, U.S. Government Accountability
Office..................................................... 10
Prepared statement of.................................... 12
Dixon, Rebecca, Executive Director, National Employment Law
Project (NELP)............................................. 44
Prepared statement of.................................... 46
Weidinger, Matt, Senior Fellow, American Enterprise Institute 62
Prepared statement of.................................... 64
Robinson, Veronica, Private Citizen, Philadelphia,
Pennsylvania............................................... 76
Prepared statement of.................................... 78
ADDITIONAL SUBMISSIONS
Chairman DeSaulnier:
Submitted testimony dated September 21, 2022, from Julia
Simon-Mishel........................................... 83
Ranking Member Allen:
Supplemental Statement of Matt Weidinger................. 122
EXAMINING THE ADMINISTRATION OF
THE UNEMPLOYMENT INSURANCE SYSTEM
----------
Wednesday, September 21, 2022
House of Representatives,
Subcommittee on Health, Employment, Labor, and
Pensions,
Committee on Education and Labor,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:18 a.m.,
2175 Rayburn House Office Building, Hon. Mark DeSaulnier
(Chairman of the Subcommittee) presiding.
Present: Representatives DeSaulnier, Courtney, Norcross,
McBath, Levin, Stevens, Scott (Ex Officio), Allen, Walberg,
Banks, Harshbarger, Miller, Fitzgerald and Foxx (Ex Officio).
Staff present: Brittany Alston, Operations Assistant;
Melissa Bellin, Professional Staff; Ilana Brunner, General
Counsel; Rasheedah Hasan, Chief Clerk; Sheila Havenner,
Director of Information Technology; Max Moore, Policy
Associate; Veronique Pluviose, Staff Director; Jessica
Schieder, Economic Policy Advisor; Dhrtvan Sherman, Staff
Assistant; Michele Simensky, Oversight Counsel-Labor; Banyon
Vassar, Deputy Director of Information Technology; Sam Varie,
Press Secretary; ArRone Washington, Clerk and Special Assistant
to the Staff; Tanisha Wilburn, Director of Labor Oversight and
Counsel; Cyrus Artz, Minority Staff Director; Caitlin Burke,
Minority Professional Staff Member; Michael Davis, Minority
Legislative Assistant; Cate Dillon, Minority Director of
Operations; Trey Kovacs, Minority Professional Staff Member;
Hannah Matesic, Minority Director of Member Services and
Coalitions; Audra McGeorge, Minority Communications Director;
Eli Mitchell, Minority Legislative Assistant; Ethan Pann,
Minority Press Assistant; Gabriella Pistone, Minority Staff
Assistant; Krystina Skurk, Minority Speechwriter; Katy Roberts,
Minority Staff Assistant; Kelly Tyroler, Minority Professional
Staff Member; Joe Wheeler, Minority Professional Staff Member.
Chairman DeSaulnier. Welcome everyone. The Subcommittee on
Health Employment Labor and Pensions will come to order. I note
that a quorum is present. I also note for the subcommittee that
Mr. Takano of California and Mr. Jacobs of New York are
permitted to participate today in today's hearing with the
understanding that their questions will come only after all
members of the subcommittee on both sides of the aisle who are
present have had an opportunity to question the witnesses.
The subcommittee is meeting today to hear testimony on
Examining the Administration of the Unemployment Insurance
System.
This is a hybrid hearing pursuant to House Resolution 8 and
the regulations thereto. All microphones, both in the room and
on the platform will be kept muted as a general rule to avoid
unnecessary background noise. Members and witnesses will be
responsible for unmuting themselves when they are recognized to
speak, or when they wish to seek recognition.
When members wish to speak or seek recognition, they should
unmute themselves and allow a pause of 2 seconds to ensure the
microphone picks up their speech. I will ask that members
please identify themselves before they speak. Members who are
participating in person should not be logged on to the remote
platform in order to avoid feedback, echoes, and distortion.
Members participating remotely will be considered present
in the proceeding when they are visible on camera, and they
should be considered not present when they are not visible on
camera. The only exception to this is if they are experiencing
technical difficulty and inform the committee staff of such
difficulty.
If any member experiences technical difficulty during the
hearing, you should stay connected on the platform. Make sure
you are muted and use your phone to immediately contact the
committee's IT director whose number was provided in advance.
Should the Chair need to step away again for any reason,
another majority member is hereby authorized to assume the
gavel in the Chair's absence.
In order to ensure that the committee's 5-minute rule is
adhered to, staff will be keeping track of time using the
committee's digital timer and will be broadcast in the
Committee room on the television monitor. The Committee room
timer will not be in use. Members are asked to wrap up promptly
when their time has expired.
Finally, while the recent items from the Office of
Attending Physician has made mask wearing optional at this
time, please note that we have in our midst, at both the member
and staff levels, individuals who are immunocompromised and/or
who have immediate family members who are immunocompromised as
well, or who are not vaccinated either due to medical reasons,
or because the vaccine is not yet available to children under 6
months of age.
Therefore, the committee strongly recommends that masks
continue to be worn out of this concern for the safety of the
unvaccinated, or immunocompromised committee members, staff,
and their families.
Pursuant to Committee Rule 8(c), opening statements are
limited to the Chair and the Ranking Member. This allows us to
hear from our witnesses sooner and provides all members with
adequate time to ask questions. I now recognize myself for the
purpose of making an opening statement.
Thanks again everyone, our panelist members for joining us.
Today we are meeting to discuss the importance of the
unemployment insurance system and steps the Department of Labor
and Congress can take to make improvements of the
administration of the system.
Since 1985, the unemployment insurance, or UI system, has
helped millions of Americans who have lost their jobs support
themselves and their family until they can find new employment.
This social safety net is particularly important during times
of economic downturns, like the COVID-19 pandemic.
As we all know, COVID-19 caused record unemployment. During
the first week of March 2020, there were fewer than 300,000
initial UI claims. By the last week of March 2020, there were
more than 6 million new UI benefit claims, that is 300,000 to 6
million within just a few weeks.
In response to the pandemic and the record unemployment,
Congress passed the CARES Act, which among other actions gave
three new temporary UI benefit programs to expand the state's
capacity to provide UI benefits to workers. The CARES Act
provided programs undoubtedly helped to prevent the country's
economic collapse, supported 53 million workers, and put over
870 billion dollars back into the economy.
In fact, according to the Department of the Government
Accountability Office, expansion of unemployment programs
during adverse times, such as COVID-19, created overall
economic stability, prevented detrimental outcomes from
worsening, and had limited effects on worker's incentives to
return to work.
Unfortunately, the implementation of these programs, in
conjunction with this surge of the UI benefit claims,
exasperated many of the long-standing challenges in inequities
in the UI systems. For example, people with limited internet
access, people with disabilities, people with limited English
proficiency, and other marginalized communities faced steeper
barriers to accessing their benefits.
While the UI system is a critical program, it has helped
millions of workers in our economy during tough times. Congress
should examine the challenges to the system that were made much
worse by the pandemic to help improve the administration of the
UI system. These improvements would help to better serve
workers and employers before the next economic downturn.
When I was in the California State Legislature, I was Chair
of the Labor Committee during the Great Recession, and we had
many challenges. We worked with our Republican administration
to try to in a bipartisan way make the system more efficient
and understand that there were ebbs and flows to the economy,
and we should be prepared for challenges like the Great
Recession and the pandemic.
The Department of Labor needs additional resources to help
protect the integrity of the UI system, like strengthening its
fraud prevention measures, to stop fraud by sophisticated
criminal syndicates. We must provide states with resources to
address the gaps in the UI system, the technological
infrastructure to prevent improper payments and fraud, to
ensure better service delivery, and improve access to the UI
system, especially when states most need the increased demand
for UI benefits during these economic downturns.
Finally, to address the longstanding inequities and
barriers to access the UI system, the Department and State
agencies should proactively eliminate barriers, expand UI
access for all workers, including those who have historically
been ineligible to receive UI benefits. To help implement these
reforms, the Department of Labor used funding from the American
Rescue Plan to create the Office of Unemployment Insurance
Modernization.
I am impressed by the work the office has completed to
date, particularly in the procuring more equitable distribution
of benefits. Thank you again to our witnesses, and I look
forward to discussing how we improve the administration of the
UI system which remains an invaluable backstop for both workers
and our economy.
I would now like to recognize the distinguished Ranking
Member for the purpose of his opening statement, Mr. Allen, you
are recognized.
[The Statement of Chairman DeSaulnier follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Allen. Thank you, Mr. Chairman, and thank you for
holding this hearing, very important hearing today. Obviously
because of COVID-19, the pandemic, we had economic shutdowns,
and the Nation experienced historic levels of unemployment job
loss.
In response, Congress created three new federally funded
temporary unemployment insurance programs under the Coronavirus
Aid Relief and Economic Security Act, called the CARES Act,
which was bipartisan legislation. This legislation temporarily
expanded eligibility, increased benefits, and extended benefit
duration.
Democrats chose to continue to pay expanded benefits under
the expensive and partisan American Rescue Plan Act.
Recognizing that the vast majority of Americans had the
opportunity to return to work, Republicans fought against this
extension, and Democrats ignored our concerns.
What were the consequences of this unnecessary continuation
of these expanded benefits? Record unemployment payouts and
fewer workers returning to work. In fact, we have all been in
our districts over the August work period, and we see help
wanted signs everywhere, which highlights this very, very
critical issue.
During the 18 months between March 2020, and September 21,
the expanded unemployment program cost, or UI program cost,
approximately an astounding 900 billion dollars, almost a
trillion dollars. That is more debt on the backs of our
children and grandchildren.
More unemployment checks were sent out in this 18-month
period than were paid out across the 6-years during and
following the Great Recession. Republicans resisted ARPA's
extension of benefits because of perverse incentives it
created. Two-thirds of those who collected increased
unemployment benefits under the CARES Act earned more than when
they were working.
When the Federal Government pays people more money not to
work than they were making while employed, most people choose
to stay home or drop out of the workforce. Democrats argue that
this expansion should become permanent. Republicans completely
disagree.
Expansion of these unemployment, or UI programs, was meant
to be a robust, but temporary change to the unemployment system
during an unprecedented emergency. The President himself has
declared that COVID is over, and it is time to return the UI
system back to normal operations.
Get people back to work. Unemployment insurance is supposed
to provide a temporary safety net for workers between jobs. We
do not need another welfare system. Under this massive
expansion, widespread fraud occurred in the UI system. The
fraud has been so rampant that the Government Accountability
Office has put DOL and the UI system on its high-risk list.
According to DOL's own Office of Inspector General, OIG,
potential fraud payments could be as high, or even higher than
186 billion dollars as of March 2022. According to the
Washington Post, only 4 billion of these fraudulent claims have
been recovered. Nonetheless, the Biden Administration issued
guidance allowing states to ignore suspicious overpayments, and
to excuse DOL from reporting fraudulent overpayments and
amounts recovered.
The Biden Administration should assist states to recover
stolen money, not putting roadblocks in their way, or
encouraging them to ignore fraudulent behavior. The OIG
regularly reports on specific examples of fraud it detects. In
one recent case a man attempted to defraud the Illinois
Department of Employment Security of more than 4 million in
State and Federal unemployment insurance by stealing the
identities of elderly Illinois residents.
He then laundered the UI checks by purchasing salvaged
automobiles that he and his co-conspirators then shipped to
Nigeria. It was even reported that in California the State
approved millions of dollars that went to prisoners, exposing
further vulnerabilities in our unemployment system.
DOL and State UI systems struggled to process claims,
implement new programs, and provide adequate customer service
to states and claimants. There are clearly major shortcomings
in the system that must be addressed. The bottom line is, DOL
and the states must make significant reforms to their
implementation of the UI system.
GAO gave DOL 21 recommendations, and it has yet to
implement any of those recommendations. The American Rescue
Plan Act included 2 billion for DOL to address the
administration of the UI system, and Republicans want to ensure
that the Biden Administration is spending that money wisely.
We must demand transparency and accountability. The
mistakes made during the pandemic should not be repeated, and
taxpayers should never again be cheated out of billions of
dollars. In closing, President Biden even said that the
pandemic is over, as I stated earlier.
It is time we stop funneling even more taxpayer dollars
into a flawed system, and in fact you know, we do not know
whether they are going to pay for us here. In order for our
workforce to reach pre-pandemic levels we must ensure that
unemployment insurance only serves as a bridge for people to
find a job and lift themselves up.
We should focus on policies that will spur economic growth
and give folks the opportunity to do what God created them to
do. I look forward to hearing your testimoneys, and with that
Mr. Chairman I yield back.
[The Statement of Ranking Member Allen follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman DeSaulnier. Thank you, Mr. Allen, appreciate that
perspective. I look forward to working with you as always on
remedies. Without objection, all other members who wish to
insert written statements into the record may do so by
submitting them to the committee clerk electronically in
Microsoft Word format by 5 p.m. on October 5th.
I am now happy to introduce and thank our witnesses. First,
Mr. Thomas Costa is a Director in the U.S. Government
Accountability Office, or GAO's, Education, Workforce and
Income Security Team. He oversees worker protection safety,
employment and training issues. Mr. Costa joined GAO in 2005.
Ms. Rebecca Dixon is the Executive Director of the National
Employment Law Project, or NELP. She has an expertise in
occupational segregation, program management, unemployment
insurance, and workplace equity issues. Ms. Dixon joined NELP
in 2010.
Mr. Matt Weidinger is a Senior Fellow and Rhodes Scholar at
the American Enterprise Institute.
Ms. Veronica Robinson is a private citizen who was born and
raised in Philadelphia. She is a mother of two sons, and a
lifelong worker with experience in a variety of industries,
including her work as a classroom assistant in the Philadelphia
School District, as a home health aide, and as an ambassador
for the Southeastern Pennsylvania Transit Authority, or SEPTA.
Ms. Robinson lost her job at SEPTA at the onset of the
COVID-19 pandemic.
Again, we really appreciate the witnesses for participating
today. Look forward to your perspective and your testimony. Let
me remind the witnesses that we have read your written
statements, and they will appear in full in the hearing record.
Pursuant to Committee Rule 8(d) and committee practice, each of
you is asked to limit your oral presentation to 5 minutes, a
summary of your written statement.
Before you begin your testimony, please remember to unmute
your microphone. During your testimony staff will be keeping
track of time, and the timer will be visible to you at the
witness stand.
Please be attentive to the time, wrap up when your time is
over, and remute your microphone. We will let all the witnesses
make their presentation before we move to member questions.
When answering a question please remember to unmute your
microphone. The witnesses are aware of their responsibility to
provide accurate information to the subcommittee, and therefore
we will proceed with their testimony. Let me first recognize
Mr. Costa. Mr. Costa, you are recognized for 5 minutes.
STATEMENT OF MR. THOMAS COSTA, DIRECTOR, EDUCATION, WORKFORCE,
AND INCOME SECURITY TEAM, GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Costa. Thank you, Mr. Chairman. Chairman DeSaulnier,
Republican Leader Allen, Chairman Scott and members of the
subcommittee, thank you for the opportunity to discuss the
challenges and risks facing the unemployment insurance system.
The Federal Government and states work together to manage the
UI programs. States design and administer their own UI programs
while the Department of Labor oversees states' compliance with
Federal requirements.
However, the UI system has faced long-standing challenges
with service delivery and program integrity, which worsened
during the COVID pandemic. In June, we added the UI system to
our high-risk list because we found these challenges posed
significant risks to UI service delivery and exposed the system
to significant financial loss.
Moving forward it will be important for Labor to take a
coordinated and sustained approach, involving State and Federal
stakeholders, including Congress, to ensure significant
progress in improving the UI system's performance and
integrity. My testimony is based on our June reports, which
examined issues including first challenges related to the UI's
systems ability to respond to the needs of unemployed workers.
Two, actions needed to address key risks facing the system.
Three, potential obstacles for transforming the system, and
four, the economic effects of expanding UI benefits during
adverse times.
First, we found that the UI system faces challenges
involving its program design because each State designs its own
UI program, there are 53 State programs that differ by benefit
amounts, duration of benefit periods, and eligibility rules.
These differences have contributed to decline in access,
inconsistent levels of support, and disparities in benefit
distribution.
For example, prior to COVID the proportion of unemployed
workers filing for UI benefits was near a historic low,
dropping from 55 percent in 1958 to 28 percent in 2019. The
reasons for this drop include State restrictions on eligibility
as well as the lack of coverage for workers who are not
traditionally covered by UI, such as gig workers, self-employed
workers, and independent contractors.
In addition to challenges around eligibility, we and others
found racial and ethnic disparities in the receipt of benefits.
In particular, in two of the four states we selected for our
study we found significant disparities in the benefit approval
rates for black, American Indian, and Hispanic claimants, with
approval rates sometimes half that of white claimants.
We also found that states face challenges in providing
customer service, delivering timely benefits, implementing the
new pandemic programs, and using and modernizing their IT
systems. For example, during the pandemic some unemployed
workers experienced long waits for benefits, which caused
financial and other hardship.
States were overwhelmed by record levels of UI claims as
they simultaneously implemented the new pandemic programs. In
addition, many states were reliant on legacy IT systems that
were underfunded, inefficient, and lacked all the necessary
capabilities to detect improper payments and fraud.
Second, we identified a number of steps that Labor is
taking to address the risks facing the UI system, including
sending technical assistance teams to states, and offering UI
related grants. However, additional action is needed. We made
five new recommendations in our three UI reports in June, and
have a total of 21 open UI recommendations, including that
Labor develop and execute a transformation plan that outlines
actions to address effective service delivery and mitigate
financial risk.
Labor generally agreed with our recommendations, and we
think it is critical that Labor implement our, and related
Inspector General recommendations. We also convened a panel of
stakeholders with UI expertise to identify options for
transforming the system. Panelists had a wide variety of
suggestions, including changes to program design to better
target support. Improvements to IT systems, and ways to enhance
program integrity. These suggestions are detailed in my written
testimony and our related report.
Last, although the system faces many challenges, we found
the expansion of UI programs during adverse times, such as the
2007-2009 Recession, and the COVID pandemic helped to stabilize
the economy, prevent detrimental outcomes from worsening, and
had limited effect on the return to work.
In conclusion, it is critical to address the challenges and
risks facing the UI system. Given the important role it plays
in supporting unemployed workers and stabilizing the economy
during economic downturns, Labor has started taking some
actions to address our recommendations, but that alone will not
be enough.
Labor also needs to continue to work in partnership with
the states, and also with Congress, to address both service
delivery and program integrity. This completes my statement. I
look forward to your questions.
[The Statement of Mr. Costa follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman DeSaulnier. Thank you, Mr. Costa, so much. I will
now recognize Ms. Dixon for 5 minutes. Ms. Dixon, you are
recognized.
STATEMENT OF MS. REBECCA DIXON, EXECUTIVE DIRECTOR, NATIONAL
EMPLOYMENT LAW PROJECT
Ms. Dixon. Good morning, Chairman DeSaulnier, Ranking
Member Allen, and the members of the subcommittee. Thank you
for the opportunity to testify today. I am Rebecca Dixon,
Executive Director, the National Employment Law Project.
NELP is a non-profit research, policy, and capacity-
building organization that for more than 50 years has sought to
strengthen protections and build power for workers in the
United States, including those who are unemployed.
Unemployment insurance programs played a crucial role
during the pandemic as a lifeline, not only for unemployed
workers and their families, but for entire communities,
businesses both small and large, and the Nation's economy as a
whole.
Unemployment benefits enabled 4.7 million people to avoid
poverty in 2020, and 2.3 million in 2021, in particular by
covering workers who traditionally would be ineligible for UI,
an estimated 1.1 million black workers, and 1.2 million Latino
workers and their families avoided poverty in 2020.
Before I go any further, let me lay to rest on pernicious
untruth about pandemic UI benefits. These programs did not
cause worker shortages. The GAO conducted an extensive
literature review of over 30 recent empirical studies,
including those comparing states that cutoff benefits
prematurely.
All of those studies demonstrated that UI benefits had
limited to no effect on workers returning to work.
Collectively, the pandemic unemployment programs covered
additional workers who would not have received benefits,
including those in occupations disproportionately occupied by
women, people of color, older workers, and people with
disabilities.
It provided much needed extra weeks of benefits to all, but
particularly to black men who experienced notably longer
durations of unemployment than their white counterparts.
They made up for extremely low benefits in states that have
high proportions of black and Latino workers, which tend to pay
the lowest benefits in the Nation.
Despite the substantial advances toward equity and pandemic
UI, compared to regular UI, GAO details that white workers have
far more success accessing pandemic UI benefits than black
workers, just as they do in the regular benefit program.
As we all know--we all know that many workers had to wait
months, weeks, even longer, to receive UI benefits that they
were entitled to, and this was because even before the pandemic
struck virtually every State was working with antiquated
technology systems, deficient staffing and resources.
For the past 40 years Congress has either level-funded, or
decreased funding for UI administration, including a 21 percent
decline in the decade leading up to the pandemic.
The 2 billion dollars in funding that Congress provided as
part of the American Rescue Plan for DOL to improve UI delivery
was a critical first step, but only that. DOL is off to a good
start with those funds for equity grants, tiger teams, and
claimant experience pilot programs and a navigator pilot
program.
The DOL and the State UI programs need increased and
sustained funding and staffing if they are to function as they
should. DOL and Congress must also do what they can to mandate
and ensure that UI applications, websites, and materials are
not needlessly complex and confusing, that they are translated
into sufficient languages to reach states populations of
workers, that UI websites are optimized for use on mobile
devices.
All technology updates must be done with the worker
experience at the center and making sure that these sites are
optimized for a good user experience. Many of the same factors
that undermine inequitable access also make the U.S. system an
appealing target for organized crime during the pandemic.
The spike in fraudulent UI claims during the pandemic, was
primarily the result of criminal enterprises engaging in
identity theft fraud. The system was particularly vulnerable,
given the age, need of new UI benefits and haste, and the
inadequate staffing levels in offices across the country.
Congress can remedy these problems by appropriating
sufficient funds to all states to have and maintain adequate
technology, staff, and to authorize more effective, permanent
UI programs for times of economic emergency, so that they can
be pre-programmed and ready to go, and not have to be built
from scratch every time there's a crisis.
Congress and Department of Labor must also ensure that
states appropriately balance equitable timely access to
benefits for eligible workers, the need to prevent and detect
improper payments and fraud.
Passing the recently introduced Guaranteeing Unemployment
Assistance and Reducing Deception Act, by Congressman Horsford
would help to achieve this goal, and balance mandating DOL to
set new performance standards in key areas for access.
Workers deserve access to UI, whether the entire economy
has shutdown, or just their workplace, and where they used to
be employed. There is a particular urgency to fix UI before the
next recession takes hold. Congress must learn from the
experience and build on the success of pandemic unemployment
benefits while also securing the system's failing
infrastructure, thank you.
[The prepared statement of Ms. Rebecca Dixon follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman DeSaulnier. Thank you, Ms. Dixon. I will now
recognize Mr. Weidinger for 5 minutes you are recognized.
THE STATEMENT OF MR. MATT WEIDINGER, SENIOR FELLOW, AMERICAN
ENTERPRISE INSTITUTE
Mr. Weidinger. Thank you, Mr. Chairman. Chairman
DeSaulnier, Ranking Member Allen, Chairman Scott, members of
the subcommittee, thank you for inviting me to testify before
the subcommittee this morning. My name is Matt Weidinger, and I
am a Senior Fellow at the American Enterprise Institute.
I previously worked for two decades for the House Ways and
Means Committee, including for a number of years as the staff
director of the subcommittee, having the jurisdiction over the
Nation's unemployment insurance system.
I will make three points basically summarizing my written
testimony. First, Congress on a bipartisan basis, and with good
intentions, legislated a massive benefits response to the
pandemic, which actually increased the administrative strains
on the system.
Second, those strains made the system more vulnerable to
enormous fraud that we have witnessed. Third, Congress has
since taken steps that help minimize that abuse, and those and
other measures should be built into the continued response to
this crisis and future recessions.
First off, starting in March 2020, Congress responded to
the unfolding pandemic with unprecedented Federal benefit
expansions which several members have discussed, including
$600.00 per week supplements, and an entirely new program
benefiting millions of individuals never before eligible for
unemployment checks.
State and Federal claims quickly rose to a record 33
million in June 2020. In all, over the entire span of the
Federal programs 1.6 billion weeks of unemployment checks were
paid, and while temporary, Federal programs were in operation
that cost Federal taxpayers, just Federal taxpayers, 700
billion dollars.
For someone collecting just average weekly UI benefits,
State and Federal benefits could reach a total of $46,000.00,
that highlights both the record support available to unemployed
Americans, as well as the enormous target that criminals saw
for fraud.
State agencies were faced with two crises at once,
responding to the massive surge in demand for regular State
unemployment benefits, while also standing up these new Federal
programs for millions of additional recipients. My second point
is those strains and the key Federal program features,
contributed to the fraud inflicted on the system.
The new PUA programs proved especially problematic. It
offered benefits to millions never before eligible for State UI
benefits or known to State UI agencies. Program features like
allowing individuals to self-certify their eligibility, and not
requiring proof of prior work, or even confirmation of
identification, made it highly vulnerable to abuse.
Criminals pounced on those vulnerabilities, and as a result
we saw massive, and still only partially understood increase in
fraud. The Department of Labor has reported that an improper
payment rate of 18.7 percent. That understates likely--true
likely unit spending.
First, it omits the enormous spike in both spending and
likely fraud at the start of the pandemic, and second, it does
not include the elevated improper payments under the PUA
program, which was the most abused by almost all accounts.
Citing just the 18.7 percent rate, the Department of Labor's
Inspector General testified in March that at least 163 billion
dollars could have been paid improperly with a significant
portion attributable to fraud.
Other experts estimate losses could reach 400 billion
dollars, and arguably constituting the greatest theft of tax
dollars in U.S. history. For a sense of scale, 163 billion
dollars is the equivalent of all UI program spending in six
typical non-recessionary years.
My third point is that while initially slow to react,
Congress has taken steps to address the biggest loopholes.
Bipartisan December 2020 legislation required new PUA claimants
to provide proof of prior employment, and states were required
to verify the identity of claimants.
Those changes were followed by rapid declines in initial
claims for PUA benefits. In New York State, for example, PUA
claims dropped by a stunning 92 percent after anti-fraud
initiatives were implemented. Those, and other program
integrity features like matching against data bases of
prisoners, new hires, and those claiming benefits in other
states should be standard practice.
There is much left to do. Only a tiny fraction of the
misspent money has been recovered. Unfortunately, given the
international criminal organizations behind many attacks, much
will likely prove unrecoverable, but policymakers should also
recognize that states have little incentive to recover misspent
Federal funds.
Legislation to overcome that disincentive would allow
states to retain 25 percent of any recoveries of misspent
Federal pandemic funds, which states could then devote to
modernizing their systems. That offers potential gains for
rightful recipients and taxpayers alike.
The Biden Administration included 2 billion dollars for
system modernization in the American Rescue Plan, some of which
is devoted to improving program integrity. Congress should ask
hard questions about the enduring results of those one-time
efforts, while conducting a thorough evaluation of the long-
term administrative financing needs of this system.
Preventing a repeat of the pandemic fraud we just witnessed
will require dedicated and consistent effort from both State
and Federal officials, but in the end, deserving recipients,
and the taxpayers that support the system will be the greatest
beneficiaries. Thank you, Mr. Chairman. I will be happy to
answer questions.
[The prepared statement of Mr. Weidinger follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman DeSaulnier. Thank you. I appreciate your
testimony, and I agree with much of it, so look forward to
working with you. Ms. Robinson, you are recognized for 5
minutes. Yes, the floor is yours Ms. Robinson.
STATEMENT OF MS. VERONICA ROBINSON
Ms. Robinson. Thank you. Good morning, everyone. My name is
Veronica Robinson. Thank you for this opportunity to be here
today to talk to you about my experience with unemployment
during the time of the pandemic.
During the time of the pandemic, early February I started a
new job, and by the time the end of March I was laid off of
that job due to the pandemic. I tried to apply for regular
unemployment because I had just started that job and it was not
any time in, I was not able to put into unemployment, so I was
able to find out by Facebook Live, about Philadelphia Legal
Assistance hosted by Ms. Julia, giving information on how to
apply for a PUA program, which I had no knowledge about at that
time. I tuned into that Facebook Live with her and gained a lot
of knowledge and for the information. I applied to Legal Aid,
Philadelphia Legal Aid Assistance for help. That was Julia. She
was able to help me a great deal during this time of all the
challenges that I faced, which were quite a bit.
I filed for the PUA program, but I had to do it on my cell
phone, which is a very difficult task to get done. The format
is for a bigger screen, like a laptop or computer, and I just
had my cell phone. There were a lot of things, the way things
were worded that were sometimes would trip you up, and
misleading. The format itself is hard to, you know, achieve
that on a cell phone.
It was difficult, but eventually I got through with the
help of Ms. Julia's help from Philadelphia Legal Assistance.
The application was submitted, and she had someone from the PUA
program to get me caught up because by that time I had fell
behind with my weeks.
Then the fall of 2020 happened. I had some fraud issues
that were on my account when I was going over some
transactions, which I normally would keep track of my spending
and everything. I saw something that did not look right, so I
called the U.S. Bank Card and talked to a customer service
person, which informed me that there was some fraudulent
transactions on my accounts that happened outside the U.S.
They asked me whether I had been outside the U.S., did I
know anyone, and I do not, and I have never been outside the
U.S. They informed me that they would do an investigation but
ensured me that I would get my $2,000.00 back once the
investigation was completed. It would take about at least a
month or so.
During that time they had to deactivate my card. They said
they were sending a new card. I waited for that card, but it
did not show up. I contacted Ms. Julia, and she looked into it
and got the card sent to me. I was able to get back into my
account to be able to access the money that I still had there,
but it did put a strain on me because, you know, you still need
to get things on a weekly basis.
Eventually they got done with the investigation and
returned my $2,000.00 to me. By that time, I had fell behind
because I was not able to continue on with the weekly benefits.
Ms. Julia got the lady from the PUA program to get back in
touch with me and set them back up again. That was a great deal
of help.
By the spring of 2021, I believe, I was doing my weekly 1
week and there were this weird question that came up asking
about my citizenship all of a sudden. I could not understand
why, but they would not give me an option to say I was a
citizen. It kept giving some other weird options.
I contacted Ms. Julia, and she looked into it and said
there was a glitch, some sort of glitch in the program that it
was affecting other people just as well as it was affecting me.
Another issue that came up with the PUA program, so I faced
many challenges during that time, you know, not being able to
get to my funds, fraud, and just the format itself, the way
things are set up with unemployment.
They really--I think it would be beneficial if they tried
to make it more simpler, not only the process, but the wording
of the questions and things that they ask. I am really thankful
for the PUA at that time. It was a life-saving source of income
for me because I was not able to work. No one was really, you
know, very few people and only those that had certain jobs at
that time.
I look forward to trying to, you know, help with anything
that I can to make the system better, and I thank you for this
opportunity today to be a part of this process.
[The prepared statement of Ms. Robinson follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman DeSaulnier. Thank you, Ms. Robinson. We really
appreciate your testimony, and your personal experience is
invaluable to Congress to hear about. Members, under Committee
Rule 9(a), we will now question witnesses under the 5-minute
rule. I will be recognizing subcommittee members in seniority
order. Again, to ensure that member's 5-minute rule is adhered
to, staff will be keeping track of time. Please be attentive to
the time. Wrap up when your time is over, and remute your
microphone.
I now recognize myself for 5 minutes and will start with
Mr. Costa. Thank you, Mr. Costa, for your comments and your
work in this field. I look forward to working with you and the
ranking member to see if we can make this system sustainable
for the next time we need to ramp up.
In California, having spent a lot of time on criminal
justice reform, the largest inmate population in the country,
because we are the largest State, but also because of three
strikes laws. The legislative analysist told us, and the
Supreme Court ordered us to take a quarter of our prisoners and
get them out of the prisons they were in, many of whom I have
visited.
One of the key things that I am worried about is how
prisoners in the California Corrections Department were able to
access and be examples of fraud. How can we help states like
California to identify and prevent fraud and also do it in a
cost-effective way. During the recession with Governor
Schwarzenegger, our LA Office told us that we were spending too
much money on fraud prevention, given what the scale was.
Getting this right is important, and I think we can do this
in a bipartisan way. Could you tell us what you could recommend
to avoid this fraud in the future, particularly for this
population?
Mr. Costa. Thank you, Mr. Chairman. Yes, so the prisoners
were able to access the program because of insufficient
controls in the state's system, so there was not enough data
matching, and the system did not have the capacity to do the
data matching they needed to do, which was not unique to
California.
There were a number of states that struggled with having
systems that were up to date enough that they could handle some
of the data matching to detect improper payments and fraud. The
Department of Labor did work out an agreement last October with
Social Security Administration to get access to prisoner
records, so that they can do better data matching, and make
that accessible to the states.
As I alluded to before, a number of states simply do not
have the IT systems in place that can manage some of these data
matchings. It is important that the states get the funding and
the support, and they contribute themselves to improve those
systems. The Federal Government is generally supportive of the
administrative side of the State systems, while the states
actually implement and deliver benefits.
Chairman DeSaulnier. Mr. Costa, I really appreciate that.
Did you look at minimum caseloads? During the recession, bill I
am very proud of authoring and passed into law we required
mortgage services to have an income case clause so we can
manage the service providers better, and it really helped us
with the recession in that instance with private service
providers.
Could we do the same thing for states? Have evidence-based
resources, what the minimum caseloads should be for efficiency
for workers in the UI system?
Mr. Costa. We did not look specifically at that sir, but we
did hear repeatedly that there were not enough workers, so we
saw you know tremendous increases in the workload for State
workers who were managing the UI systems and handling those
cases. In many states they had to bring in workers from other
parts of the State government, or even the military to help
manage claims.
In most cases those folks needed training, and the
training--the systems are complex, and unique to each State,
and so that training can take weeks or sometimes months. While
we were in the pandemic, we didn't have that kind of time, and
so I think we saw a lot of mistakes were being made, and a lot
of challenges for people who were trying to access their
benefits.
Chairman DeSaulnier. I appreciate it, Mr. Costa. One of our
challenges with the UI in California is we a progressive
revenue stream. A lot of our revenue comes from capital gains
on successful, wealthy individuals, and that ebbs and flows in
an inverse proportion to the economy.
Governor Brown and Governor Newsom appropriately put more
money in resources, but still is not sufficient. Ms. Dixon, in
my view, I would like to ask you to describe appropriate
balance between preventing fraud and making the system have
integrity and ensuring that the claimants can receive timely
benefits. Got a lot of stories about this like Ms. Robinson,
trying to access, getting frustrated and giving up. Could you
respond to that?
Ms. Dixon. Sure. We definitely have seen an increase in
focus on eligibility fraud, and the Department of Labor
discriminates between eligibility fraud and identity fraud--
identity theft fraud. The fraud that we saw in the pandemic was
primarily identify theft fraud. In the regular program it is
relatively uncommon.
One of the things that Congress could do is stand up these
programs in advance, so that there is not this rush to do quick
programming, because in the regular program the time has been
taken to put in place things that prevent fraud. We need to be
careful not to overcorrect for this by putting in place things
like facial recognition, identification that really do thwart
workers, and you know we know that facial recognition is not as
accurate for black or Native American workers.
Really making sure that we balance, making sure that we get
benefits paid in a timely manner.
Chairman DeSaulnier. Thank you, Ms. Robinson. I appreciate
all the responses to my questions. My time is up. Before
yielding to the ranking member, I would like to submit for the
record a statement from Ms. Julia Simon Michael, a supervising
attorney with Philadelphia Legal Assistance who helped Ms.
Robinson with her PUI benefits. Her statement connects Ms.
Robinson's experience to the broader issues within the system
and the unemployment insurance system.
[The information of Chairman DeSaulnier follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman DeSaulnier. I now recognize the Ranking Member for
the purposes of his questioning the witnesses, Mr. Allen.
Mr. Allen. Thank you, Mr. Chairman. I think we have known
for some time that particularly 2002, the last time we balanced
our Federal budget, we had a labor participation rate in this
country of 67 percent, and it has declined substantially since
then. It was actually at a low of 62.7 percent in 2018. It
ticked up in 2020, about 3 points, and of course the
participation rate during COVID dropped to 60 percent.
As of August of this year its back up about 2 percentage
points. Mr. Weidinger, you explained in your testimony that
State and Federal benefits could have reached $46,000 for an
individual collecting the national average weekly unemployment
benefit between April 1, 2020, and September 6, 2021.
Did individuals receiving unemployment benefits collect
more in unemployment than they earned while working, and why
should policymakers be wary of implementing a UI system with
benefits that exceed prior earnings, particularly when we have
a declining workforce in this country and the alarm bell is
going off?
Mr. Weidinger. Thank you, Congressman. The answer to your
question is yes. Studies suggest that while the $600.00
supplement was payable, as many as two-thirds of all recipients
of unemployment benefits received more in benefits than they
earned previously while working. That later dropped to $300.00
per week for a number of weeks in late 2020, and throughout the
first part of 2021.
Even at $300.00 a week, about 40 percent of recipients
continued to receive more in benefits than they earned while
working. That is quite contrary to the historic nature of the
UI system, which is designed to provide partial wage
replacement, and that is you know, that exists for a whole
number of reasons.
Including to provide incentive for individuals to go back
to work, the nature of the program is provide people the
wherewithal to search for new jobs after they are laid off
through no fault of their own. The system has never before
provided anything close to complete, or even more than complete
wage replacement for individuals.
A system that does so, especially outside of the
extraordinary circumstances of the pandemic, which is why the
$600.00 benefit was initially designed, really risks--it
invites trouble. The problems include lengthier stays on
unemployment, atrophying skills for workers, increasing
mismatch when people go back to work, labor shortages, all
those sorts of things.
Mr. Allen. Well obviously, we need to address you know the
workforce shortage in this country. We have known about it
declining for some time. COVID exacerbated the situation. Mr.
Weidinger, on the American Rescue Plan Act, it has made about 2
billion available for DOL to fix the UI system.
What steps should DOL take to make life hard on the
fraudsters, and easy for legitimate claimants? Have you looked
into that, and is DOL making the reforms you think are needed?
Mr. Weidinger. Sure. DOL in short, I think should work with
the states to prevent the things that were the biggest problems
that we just witnessed. Some of those involve identity theft,
they involve things like matching against obvious data bases,
like prisoners, that should not be optional as was suggested by
the administration's regulation in October of last year.
It should be mandatory. There is no reason that states
should have the option not to match their benefit data bases
against prisoner rolls.
Mr. Allen. Yes, how do states legally do that?
Mr. Weidinger. Well, California, among I think more than a
dozen states actually opted to not do that.
Mr. Allen. Yes.
Mr. Weidinger. There was research I believe around 2016-
2017 that found something like two-thirds of the states did
that sort of matching, and the matching is not perfect, right?
These data bases are not necessarily complete, but they are
something. At the very least states should be matching their
State data bases of benefits against State inmates.
Even the states were not doing that. In California that
resulted in the Attorney Generals wrote a letter in November
2020 that suggested that a billion dollars, mostly Federal
money, because that was mostly the money that was going in the
system, had been lost to prisoners claiming benefits in
California alone.
Other studies found that 42 million dollars of California
money had been paid to inmates in other states, so you know,
some of it boils down to will, much of it boils down to
administrative capacity, but the long and short of this is
these systems should be able to do both.
They should be able to serve deserving recipients while
making sure that individuals who should not be collecting
benefits are not.
Mr. Allen. That is, I mean it is hard, I mean you cannot
make this stuff up can you? I mean and you know what we are
trying to do is help those who need help, and boy did this
thing get out of hand. Thank you, Mr. Weidinger, and I will
yield back.
Chairman DeSaulnier. Thank you, Mr. Allen. I have been
notified that one of our witnesses would like to take a short
break, so I would ask committee staff, we are only going to do
5 minutes to accommodate the witness's request. I will ask
committee staff for 5 minutes and we will recess just for 5
minutes to accommodate the witness.
[Recess.]
Chairman DeSaulnier. Thank you everyone. I hope our
witnesses are all feeling better, and we will proceed. I will
now recognize the gentleman from the great State of
Connecticut, Mr. Courtney for 5 minutes. Mr. Courtney, the
floor is yours.
Mr. Courtney. Thank you, Mr. Chairman, thank you, Mr. Allen
for holding this hearing and to the witnesses. I think this is
a really important event to really get best practices and learn
the best lessons in terms of the experience our country just
went through.
Ms. Dixon, in your testimony you described some of the ways
Congress stepped up to provide more workers unemployment
insurance during the pandemic. One of the provisions in the
bipartisan CARES Act was to provide 100 percent Federal
reimbursement for shared work arrangements.
A shared work, or a work share program allows workers to
receive partial unemployment benefits when their employer has
reduced their hours, essentially allows the employer to keep
workers, and the workers also to keep connected to their jobs,
even when they cannot continue to pay or receive full-time
wages.
In Connecticut, which is one of the 26 states that has
shared work. For those employers who know about it, and workers
who know about it, it is a very popular program. Unfortunately,
there is about 1 percent participation because of lack of
awareness, and because the system is all manual. It takes 30
days to process getting involved in this.
I guess you know in terms of you know one of the lessons
from what we just went through, and one of the hopefully
initiatives from U.S. DOL is to really boost awareness, and
also speed up you know the ability of firms to use this
arrangement, which again is kind of common place in Europe. I
was wondering if you could sort of talk about that a little
bit.
Ms. Dixon. Sure. Thank you for the question. This program
is really an untapped resource. There is no reason why it
cannot be available for all 50 states, and widely used when
there is an economic downturn. We know that when people lose
their jobs most of those are permanent, and they become
disconnected, so there are so many benefits to this program.
One of the things that I am aware of is that Department of
Labor is working to automate the process to make it easier for
employers to take advantage of that program, and that should
help with the uptake, in addition to all of the ways in which
Congress has tried to incentivize this for employers to take
advantage of it.
Mr. Courtney. Well, thank you. I mean anecdotally--I mean
what I have heard, you know, on the ground was just that the
re-employment rate was much faster and higher when people were
you know in a shared work program, and hopefully you know we
will take that lesson to heart moving forward.
You know there has been some discussion about the American
Rescue Plan funding that is again, trying to help U.S. or
Departments of Labor to sort of size up and speed up their
process in terms of fraud and prevention detection. Connecticut
is one of the states that participated in the Tiger Teams
Initiative, which is one of the ARP funded programs, which
again was about really trying to boost detection of fraud.
I just have a quick statement from the administrator of the
program, which again was funded through the American Rescue
Plan. The initiative established the Connecticut Department of
Labor's integrity warehouse and data flow to prevent and detect
bad actor unemployment activities.
This invaluable technology project allowed CTDOL to
identify 30,000 bad actor claims within 6 weeks of going live
and prevented unemployment insurance payments to criminals. As
CTDOL and its customers benefit from this initiative, we will
be preparing for additional Tiger Team concepts and expansions
without a doubt, a very positive experience, and one that
provides an amazing return on investment.
Again, Mr. Costa, you referred to again, some of the
initiatives in ARP, and this obviously is feedback along with
many others, which we have heard good results from. Is that
again the type of practice that we want to see kind of become
sustainable and long-term?
Mr. Costa. Yes, we were very heartened to see the work of
the Tiger Teams, they are going out to I think eventually all
the states, but they are addressing a number of issues, both on
the technology side as well as the equity side and customer
service side, so looking at a whole host of problems that many
states encountered during the pandemic, and even before the
pandemic.
I think it is a positive step. There is more to be done. I
think this is going to be a long-term process. One of our
concerns is that the Department of Labor's Modernization Office
is supposed to be temporary in nature, and we think it probably
needs to be a more permanent, at least you know we are going to
have problems for a long time. It is going to take a long time
to address these issues.
Mr. Courtney. No, and I think that is the purpose of this
hearing is to really find ways to keep you know the best
practices moving forward. However, I mean now at least with
Tiger Teams, there is sort of a knowledge reservoir that is
building up. Again, I think that is going to provide a
sustainability of its own.
Mr. Costa. We hope so as well. One of our recommendations
was that the Department look at lessons learned, both on the
customer service side to help states with that, but also to
plan for a future crisis, so that we do not start from ground
zero of the next crisis, and hopefully those Tiger Teams can
help lay some groundwork to set that up.
Mr. Courtney. Great. Thank you. I yield back, Mr. Chairman.
Chairman DeSaulnier. Thank you, Mr. Courtney. I now
recognize the distinguished Ranking Member from North Carolina,
Ms. Foxx.
Ms. Foxx. Thank you, very much, Mr. Chairman. Mr.
Weidinger, the Washington Post reported that a mere 4 billion
of the estimated 163 billion in misspent unemployment benefits
have been recovered as of March 2022. This is less than 2.5
percent of benefits that were misspent.
Meanwhile, in February 2022, the Biden DOL issued guidance
allowing states to apply blanket waivers to forego recovery of
overpayments. Given the staggering amount of misspent taxpayer
dollars, is this DOL guidance appropriate, or responsible?
Mr. Weidinger. There are significant concerns that the
waivers are overly broad and will result in significant fraud
being forgiven. If you actually read this Department of Labor
guidance, it goes to State errors.
When states paid benefits to individuals despite their
telling the State that they were not searching for work. When
the states overpaid somebody despite the individual providing
them information that suggested they should have been paid too
little.
That is part of the broader discussion here, that the
administrative side of this system is not capable of handling
some of the most elemental ways of determining eligibility for
benefits, and so embedded in especially many of those PUA
benefit payments and waivers of recovery of misspent PUA
dollars, are all these concerns, that the wrong individuals got
benefits.
If you waive the recovery, you could be waiving recovery
for individuals who defrauded the system to get on in the first
place, so I think that is the nature of the concern about the
waivers. There is a broader concern behind all of this, and
that is under the way the system operates today states really
have very little financial incentive to go after this pandemic,
especially Federal misspending in the first place.
If they do, they are going to spend State administrative
time and resources, hire investigators and all that. If they
recover Federal dollars, they will pass those immediately on to
the Federal Government.
There are proposals that have been introduced in Congress
that change that dynamic that say of the Federal pandemic
misspent money, if states recover some of it, they get to keep
some of that to improve their own systems, and that obviously
has promise for both benefit recipients and also taxpayers in
terms of promoting more recovery of the misspent money.
Ms. Foxx. Thank you, Mr. Weidinger. In December 2021, the
White House stated the improper payment rate in a Federal State
unemployment insurance program totaling 18.71 percent from July
2020 to June 2021. This is roughly five to 8 percentage points
higher than during a normal 12-month period.
Is this White House estimate accurate, or is it
understated, and why?
Mr. Weidinger. It is accurate as far as it goes, but it
misses a whole lot, and the White House statement actually
admits exactly that. It omits several things.
First, it starts in July 2020. The months before that saw
the peak in terms of claims and benefits being paid out, and
those months included most of the months that the $600.00
supplement was added, creating the biggest target for criminals
to try to defraud the system, so that is problem No. 1, it
omits that.
Problem No. 2 is maybe even a bigger problem. It omits the
elevated improper payment rate under the pandemic unemployment
assistance program, the program that was the most subject to
fraud.
If you talk with contractors who came after the fact to try
to help the states improve their identity verification and
improve making sure that that system was paying the right
people the right amount of benefits, they regularly say 50, 60,
70 percent of PUA benefits were misspent.
If you are missing that difference between 18.7 percent
averaged overall, and whatever the PUA missed spending rate is,
the 18.7 percent is going to be significantly low. That is one
of the reasons why many people look at the system and say well
the Department of Labor's Inspector General said 163 billion
dollars based on the 18.7 percent improper payment rate is what
we know.
The Department of Labor Inspector General was quick to add
it is at least that given these factors that the 18.7 is likely
a low ball compared to what we will ultimately find, and why
many people think that it could end up costing 400 billion
dollars in misspending over the pandemic.
Ms. Foxx. One more quick question. Some advocate for moving
to a one size fits all unemployment insurance administered by
the Federal Government, however the system has been run by the
states forever. How does maintaining a system where states lead
in decisionmaking administration of the UI system help American
workers and the economy?
Mr. Weidinger. It is a terrific question. I will not be
able to give it proper justice. One of the things is states
target benefits to their local labor market, and the nature of
individuals who are working there, and try to match those up,
so people are able to return to work relatively quickly.
One thing that has not been talked about very much today is
the cost of all this. If the Federal Government comes behind
and forces states to pay ever higher benefits for longer for
more people, states will be forced to raise payroll taxes on
employers.
Some estimates suggest that payroll taxes could quadruple
if some of the forced benefit increases that have been
contemplated by some of these proposals were imposed on states,
especially red states I would argue, are likely to face the
worst of that because those tend to be the places where
benefits and taxes tend to be lower.
The Federal Government comes behind and says everybody must
raise benefits and ultimately taxes to this level. The states
that proceed from the lowest level will be forced to make the
biggest increases, and workers ultimately will lose wages
because that is where the effective higher payroll taxes
ultimately are felt.
Ms. Foxx. Thank you very much. I yield back, Mr. Chairman.
Chairman DeSaulnier. Thank you, Congresswoman Foxx. I now
recognize the distinguished member from Georgia, Congresswoman
McBath.
Mrs. McBath. Thank you, Chairman DeSaulnier. Thank you so
much for hosting this hearing and thank you to all of our
witnesses this morning for your testimony, and for taking time
out of your busy schedules to be with us, and I also have read
your testimoneys.
This is a very critically important issue for working
people. Unemployment insurance is a promise that has been made
to the American people, and it is a promise that we need to
keep. It is a promise that when you lose your job through no
fault of your own, that you have something to fall back on as
you get back up on your feet.
We know how difficult that has been in particular, as we
have been coming through COVID-19. You will have enough to fill
your car with gas, to make that next interview, or take your
family to the skating rink on kid's skate night, you know, a
free night. Those are some of just the normal things that
people are looking for to be able to preserve that normal
family life while they continue to search for a new job and new
employment.
Enough to make sure that they are shielding their kids from
knowing that mom and dad actually are struggling to figure out
just how they are going to make ends meet, how they are going
to pay their rent, or how they are going to be able to make a
payment on their mortgage as that day comes to fruition.
As we have discussed in this hearing today, Congress
stepped in to support and supplement State UI programs in
response to the massive layoffs that we had during COVID-19 and
increased economic hardship across the country for so many
families.
These programs were enacted by Congress to run through
September 4th of 2021, to support working families through the
height of the pandemic. However, it has been up to the
individual states to choose whether or not they were going to
continue to participate, and how long they would do so.
In my home State of Georgia, I am sad to say that the
Government and Labor Commissioner, they made a decision to
refuse Federal dollars that had already been allocated for
these working families in Georgia, and then prematurely stopped
participating in all the Federal unemployment programs that
were enacted by the CARES Act and the American Rescue Plan,
including the Federal Pandemic Unemployment Compensation and
Pandemic Unemployment Assistance Program.
My question is for Ms. Veronica Robinson. Ms. Robinson, you
mentioned in your testimony that you filed for benefits until
the PUA Program ended in September 2021. As I mentioned earlier
Georgia, my State, ended the pandemic UI benefits early in late
June 2021.
That actually left months of extended benefits on the table
for working families in Georgia that they did not have access
to. Can you describe that impact of not receiving the
supplemental income on you and your family if Pennsylvania had
ended the PUA and other Federal UI benefits early?
Ms. Robinson. Sure. Thank you for that question, Mrs.
McBath. That would have affected me in a very negative
financial way. I have already said during the pandemic I
recently moved into an apartment at that time, my son and I.
Having those resources, and for as long as they went, up until
September 2021, was a lifesaving resource for us.
It allowed me to get the furniture that I needed, some
appliances that I needed, that I did not have at the time when
I moved in. Just the ongoing day-to-day basis of paying
utilities, my rent, being able to buy food, and you know all
the basic necessities that you need for day to day living,
transportation getting to doctor's appointments, you know
trying to look for work as well.
My son is not in school anymore because he is you know, he
is a young adult, he is at this time, 22 that year, but still
they made it possible for him as well, his own you know, he was
getting to put gas in his car that he was able to attain during
that time, to get a car to try to do some, you know searching
for work and things like that.
Just taking care of himself as well, which helps me as
well, and contributing to the household. The overall just
having the resources, the funds that you needed, that you would
have had if you worked on the PUA. Normally we would be
working, but because of the pandemic it happened to everyone.
It was allowing most people to be able to work because of the
situation. It would have been very hard.
Mrs. McBath. Thank you so very much for your candid
honesty. I appreciate it.
Chairman DeSaulnier. Thank you, Congresswoman. I now
recognize Mr. Walberg from the great State of Michigan.
Mr. Walberg. Thank you, Mr. Chairman. Thanks to the
panelists for being with us today. The amount of State and
Federal spending on unemployment insurance programs in response
to the COVID-19 pandemic was unprecedented.
I would hope that ultimately history will show us that
regardless of our good intentions, we made it worse, and
hopefully we will learn that should another situation arise
like this, we do not do it the same way, and ultimately shut
down our world, our country, our business, our government the
way we did.
During the 18 months between March 2020 and September 2021,
the expanded UI program cost around 900 billion dollars. More
unemployment checks were sent out in this 18-month period than
were paid out across the 6-years during and following the Great
Recession.
A Federal response on this scale was necessary at the onset
of the pandemic to support hard-working Americans who through
no fault of their own, were displaced from work primarily by
what we did and what we said. Now, however, the economy is open
again. We have an extremely tight labor market. Every day I
hear from businesses in my district who are struggling to fill
open, good paying jobs.
The focus of this hearing should also be on how to better
enable workers to move back from unemployment and into the
workforce. Additionally, we need to hold accountable those that
abused the UI system during the pandemic. Unemployment fraud
takes resources away from American workers who need assistance,
and lines the pockets of fraudsters.
Mr. Weidinger, DOL's Office of Inspector General noted that
during the pandemic at least 163 billion dollars as you have
said, could have been paid improperly, with a significant
portion attributable to fraud. How does this compare with the
level of fraud during the years when there is a more minor
downturn in the economy?
Second, did UI systems experience similar problems during
the Great Recession?
Mr. Weidinger. Thank you, Congressman. Typically, UI
program misspending is about 10 percent. It varies around that
level. In most non-recession years that is set mostly against
State benefits, which are the benefits that are paid when there
is not a recession or the aftermath of a recession.
For example in 2019, UI benefit spending was 27 billion
dollars, 10 percent would be something on the order of 3
billion dollars in misspending. Significantly it was very
different in terms of the misspending at that point, much of
what in normal years is misspending is somebody collects
unemployment benefits, they go back to work, and they fail to
report that to the system and overpayment results.
After the overpayment results much of that money can
actually be recovered by offsetting future unemployment
benefits, or income tax refunds. This, as several of the
witnesses pointed out, has been a totally different experience
where identity fraud, and sort of specific efforts, including
by international criminal organizations to defraud the system
overwhelmed the system, and resulted in some of the huge
numbers that we have talked about.
It is a difference of time, in terms of what is going on
now, in addition to a different of amount.
Mr. Walberg. Okay. You mentioned in an answer to an earlier
question that the actual fraud can be closer to 400 billion
dollars or more. I understand that less than 2.5 percent of
these improper payments have been recovered. What needs to be
done to ensure states and Department of Labor can recover these
misspent claims, if that is possible?
Mr. Weidinger. As I discussed with the Ranking Member Foxx,
there are a number of things that can be done. Unfortunately, I
suspect given the nature of the fraud this time, including
because much of it, the majority, some estimate as much as 70
percent might have been driven by international criminal
organizations, much is not going to be able to be recovered.
However, there are things that policymakers can do. For the
amounts that can be recovered, the system should be geared to
encouraging states, which both pay benefits and are responsible
for recovering both State and Federal misspent money, that they
have financial incentives to do that.
They do not currently have that. I referenced legislation
that would offer states a 25 percent bonus of any future
pandemic Federal misspending that they recover. Currently, if
they recover a dollar, they have to send it all back to the
feds. This would allow them to keep 25 cents of that dollar of
recoveries, and use it to improve their systems, and prevent
future fraud.
Those are some of the kinds of things that policymakers
could do, so far, they have not done that. I am afraid that a
significant amount of whatever the ultimate number is 163
billion, 400 billion, is going to not going to be recovered.
Mr. Walberg. Okay. Thank you. Mr. Chair, I yield back.
Chairman DeSaulnier. Thank you, Mr. Walberg. I now
recognize another distinguished gentleman from the State of
Michigan, Andy, the floor is yours, Mr. Levin.
Mr. Levin. Thank you so much, Chairman DeSaulnier for
convening this important hearing, and in the burst of
bipartisanship, I love the 25 percent idea. You know
unemployment insurance is really one of the most successful
government programs since its inception during the Great
Depression.
It has been and continues to be a vital tool to stabilize
the economy and support working families during times of
economic uncertainty. Congress stepping in and creating these
temporary UI programs to supplement and support the regular UI
system helped save the U.S. economy from collapse during the
COVID economic crisis, full stop. It was an extremely important
thing that we did, and it helped untold numbers of families.
The GAO report examining the UI system is important so that
we can conduct our oversight role. However, its findings need
to be examined in context, so that the UI program can function
better and help those in need. I agree that fraud--we cannot
accept any amount of fraud, and especially in the context of
the pandemic related expansions of the program.
We have got to learn the lessons that are there and
improve. That problem is also related to the need for larger
and better trained workforce. In State after State who service
UI to the need to improve State IT systems, and the need to
address racial and ethnic disparities in administering UI.
Meeting all these needs requires more investment in the UI
system, and any attempts to curtail the problem would harm
working families, and harm our economy. Mr. Costa, there have
been persistent criticisms about the design of the UI system.
For example, because 53 different states and territories each
administer their own UI programs, and therefore set their own
benefit amounts, duration for benefits, and other eligibility
requirements, this has caused inequality within the system.
Can you explain how the current design of the UI program,
and variation across states, has contributed to both declining
worker access and to disparities in benefit distribution?
Mr. Costa. Thank you, sir. Yes. First, let me just start by
saying there has been a 32 percent drop in Federal funding for
UI administration between 2010 and 2019, and that you mentioned
talking about the UI systems, the IT systems, that drop affects
those systems and what we heard repeatedly from the states.
Speaking to the eligibility issues, the states can change
eligibility requirements. States can define who constitutes a
worker. They define who constitutes an employer. For example,
and they also get to define who gets excluded from the system.
Students can get excluded from the system. Elected
officials can get excluded from the system, but you also have
other issues where people who are in contingent work in some
states might be defined as workers, and other states might not.
That will reduce the access for some people to the system
because they are not having employer taxes taken and being paid
into the system to provide them that unemployment insurance.
We also found that there were issues with inequities around
race and ethnicity, and those varied by State. We were not able
to determine the cause of that. In some cases, it could have
been systemic issues, systemic issues around race, or it could
be that fraudsters were targeting specific ethnic or racial
groups, or more likely it was both.
Mr. Levin. A lot of work could be done there. All right.
Let me try to squeeze in one more question. Ms. Dixon, it is my
understanding that you participated as one of the stakeholder
panelists offering feedback to GAO on how the UI system could
be transformed and improved. One of the observations from the
panel noted that funding as we just heard, has been a
longstanding challenge.
In fact it was--it decreased by about 32 percent, adjusting
for inflation in the last decade. Can you address how the lack
of robust funding for State UI administration over time has
weakened the system by contributing to understaffing, the
reliance on outdated technology systems, and deficiencies in
the agencies' ability to deliver timely benefits to claimants,
and what should Congress do about all this.
Ms. Dixon. Absolutely. Staffing is a critical issue. In the
states the folks who run those offices, they wanted to get
benefits to workers immediately, but they were understaffed,
and had been under invested in.
These are complex programs, complex jobs, and they require
training and so, making sure that they have trained staff.
Training might take 6 months and having to cram all that into 1
week contributed to the overpayments and the fraud issues that
we saw. We want to make sure that technology is updated and
invested in.
When I did a report on technology back in 2013, at that
time the UI systems were on average 25 years old.
Mr. Levin. Oh my.
Ms. Dixon. That was a while ago. That kind of gives you a
picture of the way we have not invested consistently across
time to improve these systems, and to make sure that they can
keep up with the claims load and to get benefits paid on time.
Mr. Levin. Thank you. Mr. Chairman, my time is expired. I
just would observe that no one in the private sector would
allow--consider a company to have a chance to be successful if
they relied on 25 or 30-year old IT systems. Thank you so much.
I yield back.
Chairman DeSaulnier. Thank you. We will now recognize the
gentleman from Wisconsin. Mr. Fitzgerald the floor is yours.
Mr. Fitzgerald. Thank you, Mr. Chair. Mr. Weidinger, the
Department of Labor Office of Inspector General reported in
March 2022 that fraud within the unemployment insurance program
has resulted in 163 billion in taxpayer losses.
When you put this together with the roughly 84 billion in
fraudulent idle loans, and 4.6 billion in the PPP loans, which
actually received significant underwriting and oversight from
the financial institutions throughout the Nation.
This whole thing looks like it is going to cost about 250
billion dollars due to poor program just oversight. I also sit
on the House Small Business Committee which has oversight right
now on PPP and idle, and with the SBA Inspector General
testified to before the committee in January, he said that the
OIG in partnership with the US Secret Service has recovered 4.2
billion in fraudulent loans in Fiscal Year 202021.
The recovery rate is obviously very weak, and I think until
we found out that DOL kind of was still working on this, but
had only recovered this 4 billion, you know, can you tell us, I
mean what are the things do you see that could be done, or that
Congress should be doing when it comes to other than completely
just avoiding SBA direct loans in the future, what other things
could we do to lower this fraudulent rate that we have
experienced under COVID?
Mr. Weidinger. Well, Congressman, thanks for the question.
It is much of what you are hearing about and what you read
about in terms of fraud in all these programs, comes from two
combined factors. The pandemic, which was an extraordinary
event that disrupted all sorts of stuff, but especially within
the context of the UI system.
The pandemic alone drove State unemployment benefit
payments to levels that states probably could not have handled,
right? That State systems were breaking down just trying to pay
State benefits in the weeks after the pandemic struck.
From early March 2020 they went from roughly 2 million
around the country to something like 18-19 million, just the
State side of this system within a couple of months.
Then along comes Congress. As I said in my opening
statement with the best of intentions, and air drops several
new programs into the mix and says, hey states, in addition to
everything else you are doing, run these programs providing
millions of new individuals that are not known to you like in
the UI side of the house, benefits and make sure that you do it
right, and make sure it is paid promptly and all that.
Some of the answer, especially going forward, should be if
Congress wants to run these sorts of programs, do not plan--do
not air drop them on states and expect things to work out,
especially in the middle of a pandemic. The pandemic was much
worse than a typical recession, but that only made things all
the worse.
Then you complicate that with the underlying administrative
financing issues that go back, quite frankly decades in this
system, and that just makes it all worse. You all are having
this hearing after the fact, asking what could we do that would
have made things different.
That is sort of a dynamic involving the 2 billion dollars
that the Biden Administration included in the American Rescue
Plan in terms of one-time funds. To fix these things requires
enduring long-term attention to make sure that states can do
the things you want them to do, and pay eligible recipients in
a timely fashion, and keep the people who should not be
collecting benefits away from benefits.
Mr. Fitzgerald. Yes, and I would just add that what we
heard from law enforcement too was these are some of the most
difficult cases to actually track, and they certainly do not
have the resources to put forward because quite honestly a lot
of these applications were online application, a little bit of
followup.
In some instances, checks showed up out of the blue in
mailboxes without having any contact with the person that
originally applied for the dollars related, especially in the
PPP program. I appreciate your comments.
I mean I think yes, it is a message for every Member of
Congress that the closer and the quicker you kind of create a
program like this, when there is no oversight kind of at the
local level, whether it be the State level, or working with
associations within those states, you are just going to have
to--you are going to continue to experience this level of
fraud.
Mr. Weidinger. Yes, and that is also within the bounds of a
system where the states really do not have much incentive to
guard the door in terms of benefits going out, and certainly no
incentive to try to help the feds by recovering benefits on the
back end.
Mr. Fitzgerald. Very good. Thank you. I yield back Mr.
Chair.
Chairman DeSaulnier. Thank you, Mr. Fitzgerald. I now
recognize the gentleman from New Jersey, Mr. Norcross.
Mr. Norcross. Thank you, Chairman. I appreciate you holding
this hearing, incredibly important. We are hearing the stories
that we all experienced on a local level, and that is the
challenges of the massive unemployment hitting a system that
was not designed for it.
We have to remember it was about keeping people alive and
making sure they had the basics. The idea of this hearing is
exactly what we should be doing. What worked, what did not, how
can we make it better? That drives the questions that I am
going to pose.
I come from the construction industry. Construction in
general tends to be the highest users of the unemployment
system by the nature of the work. There are ebbs and flows you
know from one contractor to another, you are laid off. We just
saw that explode during the pandemic.
Throw in self-employed, those folks who never used it
before, and you just taxed a system that was not designed. I
think that experience has taught us a lot, that when you dealt
with State unemployment offices they were overwhelmed, you
could not get ahold of people.
I know it is part of the Pandemic Recovery Act, the PRA, we
put quite a bit of money aside for upgrading of the State
systems. Obviously, that is well overdue.
What I also understand that there was additional moneys put
aside to help navigate that system, whether it is those with
language barriers or others, that somebody that is well
respected within that group will help navigate the system,
particularly when the State unemployment offices are not there.
We heard the stories of never seeing a recipient, and those
who are exploiting the system. Ms. Dixon, I want to talk to you
as somebody who has looked at systems. The idea of building
trades in general, creating an entity within themselves because
right now individual business agents, people from the unions,
other--if they happen to know it, they help out where they can.
Creating a system of a navigator, which there are grants
now going to community groups, opening that up to the unions
and the building trades so that they will have a trusted
individual who understands the system, not only where they are
going--the unemployment system, but who is applying those folks
from the trades.
Have you looked at this because in our area we had a small
non-profit, literally that is all they did is help navigate
that program for those frustrated individuals who are
unemployed and broke. That in its own way generically just
coming up from the beginning worked really well, but there were
will some barriers.
Have you looked at that to see how that potentially can be
an asset to the system as a whole?
Ms. Dixon. What we know from the research before the
pandemic is that workers who were in a union prior to losing
their job are more likely to actually apply for and receive
unemployment benefits. One of the critical reasons is because
labor unions are deeply rooted in their workplaces. They are
deeply rooted in the community.
In this catastrophic situation where there was so much
information coming at workers, they were able to help them in
critical understanding filings, deciphering the process, and
you know I would assume also mutual aid right, in the sense
that that is what you need to do in other times.
Then I would say you know it is not lost that they also
supported helping get the CARES Act passed, to provide this
support for working people. Unions are critical in helping you
know folks who they are connected to, get connected to these
benefits.
Mr. Norcross. Chairman, I just suggest we might look into
this because A, it helps the surge, which the idea of getting
benefits that you have contributed to is exactly what it is
designed for. Nobody is trying to game the system. It also
helps those State unemployment offices because it is usually a
member missed something, and that hands on I think it will
bring those stress levels down.
I think looking beyond just community groups might be a
good idea. With that I yield back.
Chairman DeSaulnier. Thank you, Mr. Norcross. Of course, we
always follow your recommendations. With that I would like to
recognize the distinguished member from Tennessee,
Congresswoman Harshbarger for 5 minutes. The floor is yours.
Mrs. Harshbarger. Yes. Thank you, Mr. Chairman. I will
start by asking Mr. Weidinger, traditional unemployment
benefits are financed through workers and employers paying into
a U.S. system through payroll taxes. I know as a small business
owner for 36 years that we have paid our fair share of that.
How were these expanded, or how were the expanded pandemic
related unemployment benefits financed, and the second part of
the question is who ultimately pays for misspent and
unrecovered unemployment benefits?
Mr. Weidinger. Thank you for that question. The answer is
the Federal side of this system was entirely funded by general
revenues. There may have been some you know residual money from
Federal trust funds that in the initial days was spent on
benefits.
All of the CARES Act, and the various other benefits that
were legislated by Congress and extended several times, were
they came from Federal general revenues, and they were
basically run through the Federal trust funds.
That all was added to the deficit. Of the 700 billion
dollars plus that was used to support Federal benefits, the
Federal pandemic benefits between roughly March 2020, and
September 2021, if 163 billion, 400 billion, something in
between was misspent, that came from Federal general revenues,
and Federal taxpayers are on the hook for that.
It was all added to the deficit, so you know, people may
wish that away, but that money has to be supported somehow,
either now or in the future.
Mrs. Harshbarger. Do you know how much, or do you have a
total dollar figure on how much was misspent, or I mean that
is--it is hard to tell. I mean I do not know if we have a
number on that, a dollar amount or not. Do you?
Mr. Weidinger. I am sorry, a dollar amount on what? Oh,
misspending?
Mrs. Harshbarger. On the misspending, yes. On the
misspending.
Mr. Weidinger. Right. We have discussed that. The
Department of Labor's Inspector General has conservatively
estimated that 163 billion dollars of the entire amount, that
is the Federal and State spending, which is a total of 900
billion dollars or so.
163 billion dollars at least was misspent, however the
Inspector General qualified that by saying it is at least, and
what that means is there are other sources of misspending that
are not included in that figure.
As I included in my written testimony, some experts
estimate that as much as 400 billion dollars was misspent with
significant amounts of that attributable to fraud.
Mrs. Harshbarger. Good Lord. Well, another thing in your
written testimony sir, you stressed that individuals should not
be allowed to self-certify for eligibility for the UI benefits.
Why should unemployment benefit programs require proof of prior
employment before benefits are distributed to claimants?
Mr. Weidinger. Well, because precisely because these are
unemployment benefits. They are payable to individuals who are
unemployed. That definition was expanded significantly in the
Pandemic Unemployment Assistance Program to include people not
who previously had a work history and paid into the system, but
who could not go to work for various reasons attributable to
the pandemic.
Again, those were general revenues that supported those
pandemic unemployment assistance benefits, and that is very
different from the nature of the regular State UI program that
you started out describing, where individuals, they work for an
employer, the employer pays payroll taxes into the system.
Every economist, right, left and center will say that
really comes out of workers' paychecks, and that establishes a
connection, an eligibility for benefits, so that when the
individual is laid off through no fault of their own, they can
collect benefits from the system.
PUA was an entirely different model in the sense that it
was created by the Federal Government, grabbed general
revenues, paid guaranteed minimum benefits to individuals
regardless of their prior connection to work, and their amount
of work in many cases, and did not include key features of the
regular unemployment system like experience rating, and you
name it.
There is a whole lot that PUA did not do that happens in
the normal course of the UI system, and as my testimony
recounts much of those differences explain a significant share
of the openness to fraud that the PUA system displayed.
Mrs. Harshbarger. I guess, where do we go from here, to
know that there is 163 billion, probably 400 billion, I do not
know. I do not know. That is a lot of money unaccounted for
fraudulently used. I know my time is about up, sir, and I
appreciate your answers. Mr. Chairman, I yield back.
Chairman DeSaulnier. I appreciate that and the work you do
to resolve some of the issues that you brought up. Now we will
recognize the distinguished member from Michigan. We are going
to go back to the Michigan delegation, Ms. Stevens, the floor
is yours for 5 minutes.
Ms. Stevens. Thank you so much, Mr. Chair and thank you
again to our distinguished panelists for taking the questions
today. The global COVID-19 pandemic put many of our country's
most critical social safety nets to the test, illuminating the
invaluable nature of our employment insurance system in
preventing economic collapse, and undoubtedly exposing some of
its flaws.
I am a Democrat. I am in the party of jobs. Jobs equals
people. Allow me to share my gratitude to the Michigan
Unemployment Insurance Agency recently getting awarded the 6.8-
million-dollar grant from the Department of Labor to make it
easier for workers in underserved Michigan communities to
access jobless benefits.
Congratulations. We look forward to seeing your
improvements and continued delivery for Michiganders. Workers
who have been historically experiencing of difficulties
applying for benefits were on urban areas where residents have
had limited internet access, and those with language barriers
will be benefited by the grant to the Michigan Unemployment
Insurance Agency.
Ms. Dixon, how can the Department of Labor continue to help
states remove the technological barriers that certain
unemployed workers face, whether due to lack of broadband
access, or inaccessibility of websites?
This was obviously very palpable to me as a Member of
Congress trying to service my constituents in a host of ways
during the early days of COVID-19. How are we getting in touch
with individuals with certain disabilities to ensure that there
is equitable access to the UI system?
Ms. Dixon. Sure. I think it is, I have to say unprecedented
the amount of support that Federal Department of Labor is
providing to states on these issues. I have been one of the
people who have advocated for that over the years, so it is
really good to see that.
It is really good to see the funding that Congress
appropriated. Simply updating the technology is not enough. We
have long argued that workers are put at the center of
modernization efforts, so prioritizing customer centric design,
and user experience testing. Not just automating the processes
but making sure that workers can actually access the systems
that are being developed.
We know that that is what happens in the private sector,
which is why we do not have the similar issues when we are
trying to access our bank accounts, and things of that nature.
Really making sure that we are taking into account what workers
are faced with, that we are optimizing systems for mobile
phones. That we are putting in place ways to reset your
password that do not require you to have to wait 2 weeks in the
mail to get a password to get in.
There are fixes that we can do that are more immediate, and
then there are the long-term fixes, but all of those fixes need
to be focused on making sure that customers can actually use a
system and get the benefits.
Ms. Stevens. Right. Mr. Costa, in the GAO report, which was
very well done by the way, so congratulations to you and your
team on that about the implementation of pandemic unemployment
assistance, programmatic efforts. You included findings that
there were racial and ethnic disparities in the receipt of
these benefits in a few states that were examined in the
report.
Can you explain what it means--what this means? What does
this mean for there to be racial and ethnic disparities in the
recipiency rates for benefits? Was the GAO able to determine
the reason or reasons for the disparities in the states that it
examined? If not, why not?
Mr. Costa. Thank you, Congresswoman. What that means is
that the percentage of people of certain ethnic groups, or
racial groups that applied for loans, and actually got through
the process, so we heard a little bit earlier about the
difficulty of actually getting through the process to make--to
submit your application.
The percentage of people who got through the process and
were approved could vary wildly depending on the State you were
in. In some states the similarities were similar, and other
states they were wildly different.
We looked at four states in particular, and in two of those
four states we saw that benefit approval rates for African
Americans, American Indians, and Hispanics were sometimes half
that of white claimants.
We were not able to determine the cause of that, but we did
recommend that the Department of Labor look more deeply into
these racial and ethnic disparities, and identify the
challenges there, and see what needs to be done to address
that.
Ms. Stevens. Well, thank you. With that, Mr. Chairman I am
out of time. I would also like to thank Ms. Robinson for her
testimony here today as well. I yield back.
Chairman DeSaulnier. We will now recognize the gentleman
from Indiana. Mr. Banks, the floor is yours.
Mr. Banks. Thank you, Mr. Chairman. Mr. Weidinger, in your
testimony elicited the unprecedented amount of benefits that
were billed out during the pandemic. I am quoting, ``For an
individual consistently collecting the national average weekly
unemployment benefit between April 1, 2020, and September 6,
2021, State and Federal benefits could reach $46,000.00.
By comparison, the average salary in Indiana is just over
$41,000.00.'' How seriously do these benefits contribute to
inflation and the labor shortages in key industries across the
country?
Mr. Weidinger. Thanks for that question. Just for purposes
of clarification, the $46,000.00 was payable over 18 months. I
assume your Indiana number is a 12-month total. However, the
$46,000.00, important qualifiers, it is an average.
Individuals that collected more than the average weekly
State unemployment benefit, which during the pandemic was
something like $325.00, would have gotten more than $46,000.00
had they remained eligible for that entire period of 18 months.
Plus, it is just one person for household. Many households
had more than one person collecting benefits, so multiplied by
two. Second, it does not include additional Federal support
provided during the pandemic like three courses of stimulus
checks, expansions in the child tax credit, expanded food stamp
benefits, so you name it.
This is a partial view, but like you said it compares
favorable is not quite the right word, but it is more than
earnings from work in many, many cases. A previous member asked
me about that, and there are studies that suggest that over
this period something between 40 and 67 percent of individuals
collected more in benefits than they earned from working.
I am not an economist, but on the inflation side, no less
than former Treasury Secretary Larry Summers, Jason Furman, the
former CEA Chair, talked about how especially the last course
of extensions of these things. The course attributable to the
American Rescue Plan after the recovery was well underway, and
in many states, they were starting to get you know significant
labor shortages contributed to inflation.
On the question of work, I would note that there are
studies that took a look at the question of what happened after
states, primarily Republican led states, but also the State of
Louisiana like with a Democrat Governor, started opting out of
Federal benefits in the summer of 2021.
A study by my colleague Michael Strain, as well as Harry
Holtzer and Glen Hubbard found that the flow of unemployed
workers into employment increased by around two-thirds
following the early termination of benefits in those states.
The State of reason by Governors and State officials for
why the states were opting out of benefits at that point was
because it was hampering their recovery, employers were having
difficulty finding work. It was contributing to inflation. All
of those things.
That study suggests that by ending those benefits earlier,
states were successful in increasing the flow of workers back
into the workforce, which you know, as you described is
something that employers often lament about paying people more
in benefits, especially than they earn from work.
Mr. Banks. Thank you for that explanation. With that I will
yield back.
Chairman DeSaulnier. Thank you, Mr. Banks. Now I would like
to go to Chairman Scott for 5 minutes.
Mr. Scott. Thank you. Thank you very much. Mr. Weidinger,
you indicated that the increase in claimants was unprecedented.
You also mentioned that the pandemic unemployment compensation
was a problem. Can you just say a word about why it takes more
time to process a pandemic unemployment insurance claim, or gig
workers, self-employed, or independent contractors than someone
that is already employed?
Mr. Weidinger. Well, so the reason is because the program--
individuals who were made eligible for the program were not
known to the program before. Obviously, the program did not
exist before Congress created it, yet the unemployment system,
the unemployment insurance program, the state-run program has
been around since the 1930's.
Everyone who works in your district for an employer, most
everybody participates in that program. They are in covered
work, their employer sends taxes in. When the employer lays
somebody off the system knows them.
It knows that the person worked for employer X, and the
person paid in benefits. The system contacts the employer and
says hey, did you lay this person off?
Are they eligible? If the employer answers yes, the
individual gets benefits. The PUA program was entirely
different. It basically made available benefits to a universe
of people that were not known to the system before.
Mr. Scott. Just from a labor-intensive point of view you
have to start off with all the information. You would have to
one by one, those that are already in the system. It is just
essentially a key stroke. You know how much they get, you just
could go and they start getting their checks, so it is much
easier to process those from before.
If you can, I do not know if there is a study being done in
how we could speed up the one at a time pandemic unemployment
compensations. If you can provide us that after the meeting if
you have any ideas on that.
Ms. Robinson, I understand that you have received
unemployment insurance before and during the pandemic. Can you
tell the difference, can you tell us a little bit about the
difference between the two experiences?
Ms. Robinson. Yes, I can, Mr. Scott. Thank you for the
question. The regular unemployment that I received before the
pandemic is based on what you get biweekly. It is based on your
hourly wage, it is like half of what you normally would get.
At that time, I was working a position that was $12.00 an
hour. Basically, that is half of that which is really only
$6.00 an hour, and it adds up to being not much. It still made
it very difficult to you know, to meet my responsibilities.
During that time, I tried to get like a little part-time job to
help make ends meet, but you still have to report what you
make.
Basically, it keeps me--kept me in the same position of not
really having enough still. With the PUA program it gave you
far more than what you were making. That allowed me to be able
to meet my responsibilities a lot more you know effectively,
than it did being regular unemployment because I got far more
than what I would normally get.
The stimulus only added to the help. It was a life-saving
resource at that time. I greatly appreciate that.
Mr. Scott. Thank you. Excuse me, Mr. Costa, last Thursday
on September 15th, the Department of Labor's Employment
Training Administration issued a notice reminding State
workforce agencies that they must comply with data requests
from the Department's OIG.
This is after the OIG cited a lack of direct access to UI
claimant data and wage records. Can you say a word about how
important it is for the states to comply with the OIG requests?
Mr. Costa. The Inspector General needs those requests to
help reclaim funds and do investigations as well as analyze the
data. GAO has been supportive of the Inspector General's
request to get access to that data, and I think it is important
that the states comply with that sir.
Mr. Scott. Thank you. Did I understand your testimony to
say that studies have been done, and that there was no effect
on people returning to work when the benefits were cutoff, the
Federal benefits were cutoff.
Mr. Costa. We looked at 30 different studies, peer reviewed
studies, empirical studies, 13 of those addressed that issue,
and most of those found that there was no affect, 4 of those
found that there was a moderate affect, usually targeted at
specific groups of people.
Some of the lowest income groups of people in certain
areas, like restaurant workers, where there might have been a
mild affect. For most people, most workers there was not a
noticeable effect.
Mr. Scott. Ms. Dixon, was that what you also found?
Ms. Dixon. That is correct. It is one of the saddest things
that the narrative that was out there about working people with
you know wonderful work ethics, was that they were sitting at
home to collect a payment instead of going to work. It obscured
the other reasons that folks did not return to work like lack
of childcare, you know worry about catching COVID-19, worry
about spreading COVID-19 to their families.
Real disruptions in the labor market and supply chains that
contributed to you know a slow return to work.
Mr. Scott. Thank you. Thank you, Mr. Chairman.
Chairman DeSaulnier. Thank you, Chairman Scott. That is our
last questions from committee members, other than closing
comments from myself and the Ranking Member. I want to remind
my colleagues that pursuant to committee practice, materials
for submission for the hearing record must be submitted to the
committee clerk within 14 days following the last day of the
hearing, so by close of business October 5th of 2022,
preferably in Microsoft Word format.
The materials submitted must address the subject matter of
the hearing please, and only a member of the subcommittee, or
an invited witness may submit materials for inclusion in the
hearing record. Documents are limited to 50 pages each.
Documents longer than 50 pages will be incorporated into
the record via an internet link that you must provide to the
committee clerk within the required timeframe.
Please recognize that in the future that link may no longer
work. Pursuant to House rules and regulations, items for the
record should be submitted to the clerk electronically by
emailing submissions to [email protected].
Again, I really want to thank our witnesses, all of you,
for your participation, really valuable input from all of you.
I appreciate the bipartisan constructive comments that I am
really hopeful that the Ranking Member and I can work on to
improve the system for future economic downturns and challenges
for Americans.
Members of the subcommittee may have additional questions
for you, and we ask the witnesses to please respond to those
questions in writing. The hearing record will be open for 14
days in order to receive their responses. I remind my
colleagues that pursuant to committee practice, witness
questions for the hearing record again must be submitted to the
majority committee staff, or committee clerk within 7 days.
The questions submitted must address the subject matter of
the hearing. I now recognize the distinguished Ranking Member
for a closing statement. Mr. Allen, the floor is yours.
Mr. Allen. Thank you, Mr. Chairman. I too look forward to
working with you to continue this discussion and solution to
this issue. You know during the 18 months starting in March
2020, as we have mentioned, the UI program cost over 900
billion dollars. During that time more unemployment checks were
paid out than across the 6-years during and following the Great
Recession.
This enormous funding enriched fraudsters, identity
thieves, and even prisoners. GAO has rightly put the UI program
on its high-risk list. So far DOL's Inspector General estimates
that there is 163 billion in fraud. Some experts actually
suggest it is closer to 400 billion dollars in fraud.
Through the so-called American Rescue Plan the President
and Democrats on a partisan basis provided incentives for
workers to stay on the sidelines for another 6 months. It is
clear that flaws in the UI system must be addressed. Decades
old computers, staffing challenges, and new programs resulted
in State UI programs often failed to serve legitimate
claimants.
It is also clear that these programs are vulnerable to
fraud. Less than 2.5 percent of misspent funds have even been
returned to taxpayers. It is a shame that neither DOL, nor the
DOL Inspector General are here to explain how ARPA's 2 billion
UI fund, which is intended to address the program's
shortcomings is actually being spent.
Unemployment should only serve as a bridge in between jobs,
and not be a permanent safety net to stay away from the
workforce. Republicans want to ensure the mistakes made during
the pandemic are not repeated, and billions more of taxpayers--
to taxpayers is not lost.
Thank you, Mr. Chairman, thank you for this hearing, and I
yield back.
Chairman DeSaulnier. Thank you, Mr. Allen. I want to again
thank the witnesses. I now recognize myself for closing
statement. Today our witnesses made clear that unemployment
insurance system is a critical social safety net, and able to
help supplement millions of Americans' income giving them a
critical lifeline during gaps in employment, and in times of
economic downturn.
This is particularly true, as we have learned, during
COVID. Unfortunately, the pandemic tested all of us at the
Federal level, the State level, the administration, and
Congress, and consistent with the Ranking Member's comments,
certainly we can come together. I really appreciate the tenor
of the conversation again, of this subcommittee and our members
and all the witnesses.
This is a constructive hearing that I fully expect will
lead to enactment of both more of the GAO's recommendations,
but many of your comments today. I really appreciate the
constructive tone. I appreciate the comments by the Republican
witness about saving, keeping money within the system so that
we continue to improve it.
I will tell you that I am frustrated that this has happened
again, and I will specifically say to the State of California
where I put a lot of effort into this as a member of the State
Senate, and as the Chair of the Committee of Jurisdiction
during the recession.
One point I brought up about caseloads earlier, that is not
to mandate it, but just to inform states about what the right
level is, and I also would add one of the things we learned in
California Remedy is a single point of contact.
I know we hear anecdotally of lots of people who have
difficult times emotionally, trying to access and going into
the system and being lost in the system.
It would be easier for us to manage, and I am sure Mr.
Allen agrees with this as we both are employers in our former
careers that having a single point of contact and understanding
the challenges to ramp up during these difficult times. With
that, I really want to thank again everybody. I look forward to
constructive work product as a followup to this hearing.
I want to thank our staffs on both sides, and I look
forward to again working for an action plan that we can
implement with the administration with my colleagues. If there
is no further business, without objection the subcommittee
stands adjourned. Thank you all very much.
[Whereupon, at 12:19 p.m., the subcommittee adjourns.]
[Additional submission submitted by Ranking Member Allen
follows:]
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