The Department of Labor (DoL) is pivoting to a new unemployment insurance (UI) modernization plan after Congress cut the program’s funding in June as part of the debt ceiling compromise.
The department’s UI modernization program aims to strengthen state UI systems and prevent fraud. However, the Fiscal Responsibility Act of 2023 cut the UI program’s funding from $2 billion to $1 billion, leaving approximately $500 million remaining in available funds.
In an Unemployment Insurance Program Letter sent to states on July 13, DoL details its new plan. The approach includes three new funding opportunities to strengthen the UI program, as well as an opportunity for states to participate in a National ID Verification Offering both online and in-person.
“The department remains committed to leveraging the remaining funds to support meaningful transformation in the UI system so workers and the economy can continue to rely on it to deliver benefits and protect taxpayer dollars,” the letter says. “The department is deploying the remaining funds in concert with a government-wide focus on combating identity fraud in government programs, which intensified during the pandemic and continues.”
During the COVID-19 pandemic, Congress created four new UI programs. Evidence suggests that the total amount of fraud in these programs was over $60 billion, but that number could be even higher.
DoL’s new modernization approach aims to protect the UI system from fraud, while promoting equitable access and increasing timely access to benefits.
“The vulnerability of the UI system to fraud is a symptom of systemic challenges, especially the condition and design of IT systems, which were unable to fully respond to the huge increase in claims and exponential growth in complex fraud attacks during the pandemic,” the letter says. “The development of resilient IT systems that can continuously adapt to changing conditions and integrate evolving fraud prevention technologies needed to protect the program is a critical component of a comprehensive program integrity strategy.”
DoL is setting aside $100 million in grants for states to use towards fraud prevention and recovery efforts, $200 million for states’ IT modernization projects, and $77 million to implement recommendations from DoL’s “tiger team” initiative – which features experts who analyze state UI systems.
The other funding will go towards the National ID Verification Offering. States can use the funding to offer new government-operated ID verification services – either online through the General Services Administration’s (GSA) Login.gov, or in person at participating U.S. Postal Service (USPS) retail locations.
States need to tell DoL if they’re interested in the National ID Verification Offering by August 18.