Two Republican senators launched a formal inquiry Thursday into improper unemployment insurance payments across New York, California, and Massachusetts, targeting the three Democratic-run states for a combined $1.3 billion in potential fraud and mismanagement.
Sens. Bill Cassidy (R-LA) and Tim Scott (R-SC) sent letters to Govs. Kathy Hochul, Gavin Newsom, and Maura Healey demanding answers by June 24. New York faces the largest individual exposure: up to $666 million. California clocks in at roughly $482 million. Massachusetts adds $145 million more.
“Unfortunately, fraudsters deceived states into distributing billions of dollars in benefits annually,” the senators wrote. “That money then ends up in the hands of overseas criminals instead of the people it is intended to help.”
The problems in New York didn’t start with the pandemic. The senators pointed out that state leadership was alerted to systemic weaknesses in the unemployment insurance system as far back as 2010. When COVID hit, fraud claims tripled. The state’s improper payment rate surged to 17.59 percent for the 12-month period ending March 31, 2022. As of March 2023, the rate had dropped to 7.38 percent, still nearly double the pre-pandemic low of 4.51 percent. New York had the highest improper payment rate in the country.
The $666 million figure covers both overpayments and underpayments flagged in state and federal audits.
Cassidy and Scott offered one particularly stark example of the system’s failures: a former congressman collected $24,000 in unemployment insurance while employed. The senators were referring to former Rep. George Santos (R-NY), who later pleaded guilty to unrelated fraud charges.
“During the pandemic, New York’s comptroller reported that state leadership had been aware of issues with its unemployment insurance system since 2010,” the senators wrote to Hochul. “This preceded a threefold increase in fraud claims.”
Hochul’s office fired back. “The claims made by Senators Scott and Cassidy are patently false,” a spokesperson said. The governor’s team argued the data the senators cited includes payments that were considered accurate based on information available when they were made, and insisted the state Department of Labor has since upgraded its anti-fraud systems.
“We continue to work with our law enforcement partners to pursue criminals and hold perpetrators accountable while ensuring workers receive the benefits to which they are entitled under law efficiently,” the spokesperson added.
Cassidy chairs the Senate Committee on Health, Education, Labor and Pensions, which stood up a fraud task force earlier this year. The panel has also launched separate probes into potential abuse of federal child care funding and student aid programs.
All three states have until June 24 to answer a list of questions from the senators, including how they measure unemployment insurance fraud, what safeguards are in place, and how benefits are distributed in the first place. Representatives for Newsom and Healey did not immediately respond to requests for comment.
The inquiry pulls data directly from the Department of Labor’s unemployment insurance payment accuracy database, giving the senators a paper trail that will be difficult for the governors to wave away entirely. Whether Hochul’s “patently false” rebuttal holds up under that scrutiny remains to be seen.
