We now have a rough idea of how much New York’s antiquated unemployment insurance system cost the state during the first year of the Covid-19 pandemic. At least $11 billion in fraudulent payments went out the door, according to an audit by state Comptroller Thomas DiNapoli.
That number — staggering as it is — does not capture the human cost of the state Department of Labor’s management failures that left New Yorkers thrown out of work by the pandemic to fend for themselves.
We haven’t forgotten their stories: the restaurant dishwasher rationing sandwiches for his three kids as the money ran out; the machinist raising chickens to scrape by; the title clerk who called the Labor Department 4,000 times in two weeks before getting through; the retail worker who got a call back after midnight, when he was asleep; and the thousands of desperate, frustrated and trapped people who resorted to complaining on social media and even calling news reporters for help as they watched their bank balances dwindle and their bills pile up.
The anguish of New Yorkers who couldn’t get their unemployment benefits owes to the colossal failure of a state agency to do the unglamorous work of maintaining back-end systems. No one gets a photo op for that — but failing to do it has real consequences for real people.
There’s no question Covid placed unprecedented demands on the Labor Department. Govt. Andrew Cuomo’s lockdown order in March 2020 put millions of New Yorkers out of work all at once. Labor’s call centers were swamped by a 13,480% increase in volume and initial claims for unemployment increased 2,666%. Applying for unemployment benefits is confusing on a good day; shifting rules for federal pandemic unemployment only complicated matters.
None of that absolves the Labor Department from its failure to have the right technology in place when the pandemic struck.
The department knew its decades-old UI system was vulnerable. It had been warned back in 2010 that it ran on old mainframes and outmoded programming languages. It took nine more years for the state to hire a consultant to build a new UI system from scratch. The $57 million, four-year project began 10 months before the pandemic and is now due to be completed in fall 2023.
The old UI system buckled under the pandemic overload. It could not be scaled up to meet increased demand. It was not secure. It was inflexible, requiring on-the-fly workarounds that compromised fraud controls and allowed scammers to collect benefits to which they were not entitled. Real people who needed help couldn’t get it because their identities had been stolen.
At first, Cuomo dismissed the backlog as “an annoying delay.” As complaints grew louder, he asked Google to develop a more user-friendly interface and to expand the system’s capacity. Thousands of state workers were temporarily assigned to UI call centers. But as the pandemic entered its second year, New Yorkers reapplying for jobless benefits encountered a system that was still broken.
The fixes have come slowly. It took until February 2021 for the Labor Department to tighten identity verification requirements. Multi-factor identification — you know, the text or email confirmation your bank, credit card or social network requires to make sure you are who you say you are — rolled out just this past September. This isn’t rocket science.
Labor Commissioner Roberta Reardon claimed that her department prevented $36 billion in fraudulent payments. The agency was not able to back that up with any data, DiNapoli said. He also complained that the Labor Department stonewalled auditors for months before turning over information. This is unacceptable.
In addition to the human cost of the Labor Department’s mismanagement, New York employers are now stuck with the bill. The state had to borrow $9 billion from the federal government to cover jobless claims, both legitimate and fraudulent. That money has to be paid back, with interest, by the employers who pay into the system. That works out to $200 per worker, according to an estimate from the Empire Center for Public Policy, an Albany think tank.
Now that we know how much was stolen from the unemployment insurance system during Covid, who will be accountable for it? What other state agencies are vulnerable to outdated technology and poorly maintained systems? We await action from the state Legislature and Gov. Kathy Hochul.
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