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New York lost at least $11B in overpaid unemployment during the pandemic, DiNapoli says

State Comptroller Tom DiNapoli
New York NOW
State Comptroller Tom DiNapoli

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

In an interview, Comptroller Tom DiNapoli said the system has a history of issues. He said his office found in 2015 that the state’s computer system that checked IDs and handed out unemployment payments was outdated. He also said the department, then part of the administration of former Gov. Andrew Cuomo, was “very slow to implement upgrades.”

And during the pandemic, the system broke down, he said.

At the time, many New Yorkers complained that they could not get through to the department to even apply for benefits, either online or by phone.

The audit found 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 said it’s difficult to determine the exact amount because, he said, 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 overpaid through no fault of their own, others engaged in fraudulent activities that DiNapoli said were 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,” he said.

DiNapoli said 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 loan from the federal government 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 existed under the Cuomo administration, but Cuomo resigned in disgrace in 2021. Gov. Kathy Hochul was elected to a full term last week, and DiNapoli said it’s now up to Hochul to clean up the mess.

In a written response, the state Department of Labor faulted the comptroller for not taking into account the efforts of the individual workers that it said were “unsung heroes,” working 10 to 12 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 shifted blame to the federal government, which Filburn said has “underfunded the modernization of unemployment insurance programs across the country, leaving antiquated systems in place to award unemployment benefits and combat fraud.”

Karen DeWitt is Capitol Bureau chief for the New York Public News Network, composed of a dozen newsrooms across the state. She has covered state government and politics for the network since 1990.