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State Comptroller: NYS may have lost $11 billion through inept management of unemployment insurance

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NYS Comptroller Tom DiNapoli

New York State Comptroller is out with a report on the state’s unemployment insurance system during the COVID-19 pandemic. The audit finds that the system was woefully unprepared to handle the volume of requests in the spring of 2020, when everything shut down, and may have handed out at least $11 billion in overpayments.

Comptroller Tom DiNapoli says his office found back in 2015 that the state’s computer system that checked ID’s and handed out unemployment payments was outdated, and he says the department, then part of the administration of former Governor Andrew Cuomo, was “very slow to implement upgrades”. He says that during the pandemic the system broke down. At the time, many complained that they could not get through to the department to even apply for benefits, either on line or by phone.

The audit finds that when the money did go out, there was poor accountability and even cases of outright fraud committed against the department, resulting in a loss of at least $11 billion.

DiNapoli says it’s difficult to determine the exact amount because, he says, officials at the department were slow to give his auditors the information they needed, and in some cases, did not provide it at all.

They dragged their feet on responding,” DiNapoli said. “And very often they were not responsive.”

While some New Yorkers were over paid through no fault of their own, others engaged in fraudulent active that the Comptroller says was easy to accomplish under the outmoded system the department had for verifying identification.

The vulnerability of the system to fraud really is of great concern,” the Comptroller said.

The comptroller says the state is now working with the federal government to try to recoup some of the money.

“Clearly, a lot of work needs to be done there,” DiNapoli said.

New York also had to take out an $8 billion dollar loan from the federal governor to meet legitimate unemployment insurance payments. The state’s employers have to pay that loan back, through higher unemployment insurance taxes.

The problems with the state’s unemployment insurance system existing under the Cuomo administration. But Cuomo has resigned in disgrace in 2021, and Hochul has been elected to a full term as governor. DiNapoli says it’s now up to Hochul to clean up the mess.

In a written response, the state Department of Labor faults the Comptroller for not taking into account the efforts of the individual workers in the department that it says were “unsung heroes”, working ten to twelve hours a day, seven days a week during the height of the pandemic.

“The COVID-19 pandemic placed an unprecedented amount of stress on unemployment insurance systems nationwide. Despite this challenge, our system acted as a critical lifeline for nearly five million New Yorkers,” said the letter, signed by Susan Filburn, Deputy Commissioner for Employment Security.

The letter also shifts blame to the federal government, who Filburn says has “underfunded the modernization of unemployment insurance programs across the country, leaving antiquated systems in place to award unemployment benefits and combat fraud.

The Labor department says its half way through a four year implementation of a new multi-factor authentication system that it says will “provide top tier cyber protection for New Yorkers.”

Karen DeWitt is Capitol Bureau Chief for New York State Public Radio, a network of 10 public radio stations in New York State. She has covered state government and politics for the network since 1990. She is also a regular contributor to the statewide public television program about New York State government, New York Now. She appears on the reporter’s roundtable segment and interviews newsmakers. Karen previously worked for WINS Radio, New York, and has written for numerous publications, including Adirondack Life and the Albany newsweekly Metroland.