Nothing finds cracks in a pipe like a surge of water pressure, and nothing exposes the weak spots in a government agency or program like a crisis. It’s a lesson that could cost state unemployment agencies around the country as much as $26 billion, according to one official’s estimate.
It’s not clear what the Massachusetts or New Hampshire share of that loss could be. But, in Massachusetts, state officials this past week reported finding 58,616 fraudulent claims for benefits filed in the last four months. The state says it’s pulled back $158 million worth of such claims. Still not clear — because the state didn’t say — is how much was paid to fraudsters that hasn’t been recovered.
Certainly, pressures on the Massachusetts Department of Unemployment Assistance have been extraordinary, and not just because of a pandemic that forced a closure of the economy and a tidal wave’s worth of jobless claims — upward of 1.6 million — from March 8 through the end of June.
Added to that, the state was among the first targeted by what the U.S. Secret Service described in May as a “well-organized Nigerian fraud ring exploiting the COVID-19 crisis to commit large-scale fraud against state unemployment insurance programs.”
Unemployment offices weren’t the most secure setups before all of this started. Testifying to Congress last month, Labor Secretary Eugene Scalia noted that fraud is such a persistent issue that federal law requires states to keep an “improper payment rate” of no more than 10%. In other words, if as many as 1 in 10 benefits is bogus, the federal government deems the system to be healthy.
The damage from this broken unemployment system isn’t just the bleed of government funds, which is considerable. In Massachusetts, anyway, the state’s scramble to button up its process, in part, has delayed many workers in need from getting cash quickly. Others with legitimate claims, and proper identification, have been turned away by a bureaucracy suddenly sensitized to scammers lurking in the shadows.
At some level, it’s probably unfair to criticize the work of an office simply overrun with requests and targeted by a sophisticated network of foreign fraudsters. But unemployment bureaus, here and elsewhere, are essential to protecting workers and back-stopping the economy. So is fixing the leaks, as we’re now seeing in dramatic fashion.