This article originally appeared in Governing on May 15, 2024.

Four years after Congress passed the CARES Act and opened up crucial assistance to jobless workers, costly unemployment insurance system malfunctions remain unresolved. During the COVID-19 pandemic, state UI agencies experienced an overwhelming surge of benefit applications. Criminals took advantage of this disarray, ultimately stealing as much as $135 billionInadequate communication between states and poor use of available data verification networks, in particular, made it difficult to distinguish between legitimate claimants and fraudsters.

State UI agencies have begun addressing an array of technical shortcomings, but Congress still has not addressed a core problem that prevents them from making durable investments in program integrity: decades of declining and volatile federal support for UI administration.

Every year, state UI agencies attempt to plan around congressional base allocations — discretionary funding for administration that is topped up quarterly only when the workload for core functions exceeds expectations. But these amounts have not kept up with inflation. As I outline in a new report, since 2007 the inflation-adjusted base funding sent to states annually for UI administration has declined by $900 million. This amounts to a 27 percent reduction that has forced agencies to understaff and delay crucial system upgrades.

Furthermore, states cannot rely on stable funding levels from one year to the next. Since administrative allocations are based on workload projections, the total amount states receive drops as the economy improves. So just as agencies finally regain capacity to focus on system improvements, funding that could go to updates is stripped away.

U.S. Department of Labor officials and the Government Accountability Office have determined that such long-standing fiscal issues left state agencies unable to handle the high volume of applicants and defend against criminal operations during the pandemic. Although Congress attempted to counter the influx in claims with a quick infusion of administrative funding, the support came too little too late. Agencies could not address years’ worth of neglected maintenance within weeks. A more dedicated funding stream was, and remains, necessary to avoid similar breakdowns in the future.

Full article here.