The Trump administration has cancelled funding for a Department of Labor (DoL) grant program that was used to fund modernization efforts for states’ unemployment insurance (UI) systems that were overwhelmed with claims during the coronavirus pandemic.
The funding was made available to states under the 2021 American Rescue Plan Act which allocated an initial $800 million out of $2 billion to fund unemployment insurance (UI) systems modernization efforts. Congress later clawed back $1 billion of that total. The funding aimed to help states modernize their UI systems in order to better serve the public and to cut down on UI claims fraud that ballooned during the pandemic.
That funding has now been cancelled, a DoL spokesperson confirmed to MeriTalk on May 28, saying that projects being funded were judged to be “bureaucratic and wasteful” by the Trump administration.
“The Biden administration was given a historic opportunity by Congress to fix it but instead squandered it on bureaucratic and wasteful projects that focused on equitable access rather than advancing access for all Americans in need,” a DoL spokesperson said in a statement.
“We’re committed to ensuring our unemployment system is free from fraud and abuse, and we look forward to partnering with state workforce agencies on real solutions that meet the needs of American workers,” the spokesperson said.
It is unclear how much of the grant money from DoL remains unspent by states.
While DoL said funding was being wasted on equity-related projects, a report from the department showed that only around 28 percent of funds allocated to states were used for equity-related purposes.
A large portion of the funding – about $338 million, or about 43 percent – was split between supporting fraud detection and IT modernization, according to the DoL report.
Addressing UI fraud has been a hot topic in Congress in recent years – spurred on by $191 billion in relief funds that were fraudulently siphoned off from the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) which was approved by Congress in 2020 to direct $2.2 trillion in pandemic relief payments.
Only a fraction of funds lost to UI fraud during the pandemic have been recovered, with public and private sector experts pessimistic about the Federal government’s ability to recover much more of the stolen funds.