The Covid-19 pandemic revealed how many of the same problems remain unsolved.
As the United States enters hurricane season, it is worth reflecting on Katrina, the devastation it caused, and the haphazard government response. The 2005 storm forced an estimated 1.5 million people to evacuate their homes while FEMA failed to efficiently deliver emergency supplies to the affected areas. At the same time, state-administered benefit programs struggled to disburse payments to eligible individuals, leading the Government Accountability Office and the Department of Labor to investigate what went wrong. Policymakers can still learn important lessons from those agency evaluations almost 20 years later.
Several state-administered programs, including unemployment insurance (UI), were inadequately prepared for disasters and “struggled to ramp up capacity quickly to try to meet demand,” according to the GAO. Since these programs lacked suitable delivery options to help “expedite services” after Hurricane Katrina, officials needed to ease up program rules to send benefits out faster.
States were permitted to approve disaster unemployment benefits (FEMA-funded, state-run) based on self-reported employment details from applicants, who had a three-month window to provide documentation (up from a typical three weeks). Louisiana even decided to automatically send out 12 full weeks of benefits to claimants while suspending weekly reporting requirements. More improper payments occurred as a result, including individuals receiving unemployment benefits from multiple states. In a later memo, the DOL Inspector General confirmed that Louisiana and Mississippi had “basically nonexistent” controls for determining the initial eligibility of disaster unemployment benefit claimants.
Programs administered by the Social Security Administration, namely Social Security and Supplemental Security Income, did not experience similar administrative collapses after Hurricane Katrina. The SSA had disaster plans ready, allowing it to handle a surge in requests for immediate payments with limited errors and even to set up temporary offices if necessary. Furthermore, the SSA had the requisite staff flexibility to direct workers toward a range of urgent tasks.
SSA benefit management stood out from the state UI administration in other technical ways. Before Katrina, the SSA had internet services and an 800 phone number to assist with benefits applications, while Louisiana and Mississippi still mandated in-office visits to submit UI claims. Those states had to quickly adopt new application methods and allow claims to be submitted to call centers in response to the disaster. However, the operating phone lines were overwhelmed with calls. The Louisiana and Mississippi UI programs needed the U.S. Department of Labor to step in and forward residents’ phone calls about claims to centers in other states. Those arrangements took weeks to set up.
The SSA’s proficiency, and state agencies’ limitations, extended to electronic data exchanges. SSA workers could readily share and access documentation to help verify claims across the nation or recreate lost paper files, whereas states were less capable of communicating with each other. State agencies assisting Louisiana and Mississippi to process UI claims could not always access the necessary applicant information.
“Where have I seen this before?”
The accumulation of state UI program failures after Katrina may appear familiar because they parallel the issues seen early in the Covid-19 pandemic. States were far from ready for the burst in unemployment benefit claims and unable to process applications on time. Eligibility rules were relaxed to get payments to Americans faster — an appropriate decision given the options available, but one that made for a much higher rate of improper payments.
Congress has held hearings this session to determine what led to so many pandemic payment errors, with a specific focus on benefit fraud, a subset of improper payments. Federal agencies determined that the main type of pandemic UI fraud was from multistate claimants, which would have been much less possible if state agencies were effectively sharing data and able to check whether claimants were applying in more than one state.
The siloing of state UI programs was particularly problematic during the pandemic, but it was nothing new. Insufficient data sharing has plagued the UI network for years. After Hurricane Katrina, GAO officials suggested that “more sharing of information across programs and states would be useful” and “help reduce programs’ vulnerability to fraud and abuse during emergencies.” But it wasn’t until after the Covid-19 pandemic that every state opted to use the national Integrity Data Hub to verify claims, and many still don’t participate in each data service provided by the National Association of State Workforce Agencies despite their utility. Almost two decades later, the programs still are not adequately set up for success.
A lot of blame has been directed at the state agencies, but Congress is ultimately responsible. Leaving key upgrades and maintenance decisions largely up to the states has set the nation up for significant processing issues and benefit fraud in the event of unexpected emergencies. It is well past time to mandate and invest in better federal standards for UI programs.
Short of a comprehensive overhaul, Congress needs to provide more support to state agencies. The Department of Labor has provided useful guidance to states via its Tiger Teams alongside an uptick in funding, but the federal response must incorporate additional legislative measures. States still lack sufficient staff resources and struggle to process initial claims at the requisite speeds. That’s not surprising considering that the inflation-adjusted value of federal funding for UI administration remains well below the level provided to states when Katrina hit.
Yet, efforts to prevent fraud and ensure smoother benefit delivery have hit a roadblock. Congress recently stripped away one billion dollars previously approved for UI modernization and anti-fraud efforts. That defunding measure is on track to be the defining UI reform policy of this legislative session.
Barring a change of course, the U.S. unemployment system will continue to perform short of its potential and remain unprepared for the next crisis. This decision would be a major unforced error given the ample forewarning:
If the past is a prologue to the future, an MUE [mass unemployment event] can be expected to occur about once every fifteen years. … Lest it appear that the focus is on floods, hurricanes, and earthquakes, FEMA’s list of disaster includes more than seventeen manmade and natural causes of disaster from chemical spill to disease pandemics that, in the proper circumstances, are capable of producing an MUE.
– Department of Labor “National UI Disaster Preparedness Effort” study sponsored in the aftermath of Hurricane Katrina
Unless Congress wants a repeat of the administrative collapses seen after Katrina (2005) and early in the Covid pandemic (2020), legislators must finally heed these lessons and proactively set the UI system up for success.