Audit Finds Half of Pandemic Unemployment Assistance Benefits in Illinois Were Stolen

"... An audit released on June 16 of the Illinois Department of Employment Security found that half of federal Pandemic Unemployment Assistance (PUA) benefits the agency paid out during the height of the pandemic were stolen. The report by Illinois’ auditor general states that the Illinois agency, which administers both state and federal unemployment benefits, paid $3.6 billion in federal PUA benefits during state fiscal year 2021. The report describes “overpayments associated with ID theft and traditional fraud within the PUA program” as “unprecedented.” Specifically, the audit states that ID theft overpayments under the PUA program totaled over $1.8 billion—or 50.4 percent of the $3.6 billion in PUA payments...."

Matt Weidinger, "Audit Finds Half of Pandemic Unemployment Assistance Benefits in Illinois Were Stolen,"American Enterprise Institute, June 23, 2022, https://www.aei.org/poverty-studies/audit-finds-half-of-pandemic-unemployment-assistance-benefits-in-illinois-were-stolen/

Audit Finds Half of Pandemic Unemployment Assistance Benefits in Illinois Were Stolen

An audit released on June 16 of the Illinois Department of Employment Security found that half of federal Pandemic Unemployment Assistance (PUA) benefits the agency paid out during the height of the pandemic were stolen.

The report by Illinois’ auditor general states that the Illinois agency, which administers both state and federal unemployment benefits, paid $3.6 billion in federal PUA benefits during state fiscal year 2021. The report describes “overpayments associated with ID theft and traditional fraud within the PUA program” as “unprecedented.” Specifically, the audit states that ID theft overpayments under the PUA program totaled over $1.8 billion—or 50.4 percent of the $3.6 billion in PUA payments.

Federal officials regularly confirm that the temporary and now-expired PUA program was uniquely subject to fraud and abuse. US Department of Labor Inspector General (IG) Larry Turner noted in his March 2022 Congressional testimony that PUA “posed the greatest risk to the UI system,” continuing warnings the IG issued about the program starting in May 2020, just weeks after its creation. Turner stated the elevated fraud risk was driven by “PUA’s expanded coverage” to groups not traditionally eligible for unemployment benefits, as well as the program’s allowing claimants to “self-certify their eligibility” for benefits. Earlier this month, the nonpartisan Government Accountability Office similarly raised concerns over the self-certification process used by PUA, while arguing the unemployment benefits system overall remains at “high risk” for fraud and abuse.

As state reports like this start to emerge, official national estimates of PUA misspending remain unavailable. Turner’s testimony qualified his estimate of a shocking $163 billion in misspending across all pandemic unemployment benefit programs by adding that the real total is “likely higher” since that figure does not include elevated abuse under the PUA program. Counting such elevated abuse, outside experts have estimated pandemic unemployment benefit losses to fraud could total as high as $400 billion. For comparison, all benefits paid out under the nation’s unemployment benefits system in calendar year 2019 totaled under $30 billion.

News accounts suggest the Illinois Department of Employment Security has blamed “insufficient and flawed federal guidance” as well as “a hastily constructed program put together by the Trump administration” for their extraordinary PUA misspending. They are right about the “hastily constructed” part, but that ignores the reality that the PUA program was designed by senior Democratic lawmakers. On March 12, 2020, current Senate Majority Leader Chuck Schumer (D-NY) and Finance Committee Chairman Ron Wyden (D-OR) introduced the “Pandemic Unemployment Assistance Act,” which proposed creating the unprecedented PUA program. That legislation was subsequently included in the massive CARES Act President Donald Trump signed into law two weeks later on March 27, 2020. Upon Senate passage, Schumer stated he “conceived” of the unemployment benefit expansions in the new law, which he dubbed “unemployment insurance on steroids.” Those expansions included the unprecedented benefits for “the self-employed and workers in the gig economy” offered by the PUA program.

A review of the legislative text reveals that the Schumer/Wyden bill is almost identical to the eventual CARES Act PUA policy. Indeed, the only major difference involves the proposed duration of the PUA program. Under the CARES Act, PUA was originally authorized through December 26, 2020, and subsequent extensions continued the temporary program until it expired nationwide on Labor Day 2021. Under the Schumer/Wyden bill, PUA would have operated until six months after the COVID-19 public health emergency expired; the most recent renewal of that determination was issued in April 2022. That means that, under the Schumer/Wyden bill, PUA—and presumably its extraordinary losses to fraud—would still be continuing even today.