Congress must extend state authority to use contractors to administer unemployment benefits

Congress passes many laws; but the law enacted most often is the “law of unintended consequences.”

In just one example: unemployment insurance legislation in the COVID relief package that is currently making its way through Congress through the process of budget reconciliation.The CARES Act, passed last year, gave states the authority to hire contractors to help in processing unemployment insurance claims. States were unprepared for the huge influx of unemployment insurance claims that resulted from the unprecedented economic crisis that came about when COVID-19 forced widespread business closures. Over 40 states have used this authority, recognizing that their outdated systems and their limited resources are not sufficient to handle the demand. This authority expires on March 14, while over 10 million Americans remain unemployed.

Congress has recognized the need to extend relief provisions, but in an effort to quickly pass a broad package through expedited budget procedures, Congress could unintentionally hurt the millions of Americans who are unemployed. The Senate’s Byrd Rule prohibits certain provisions from being included in budget reconciliation legislation, and as a result, extending this essential authority for states could be an unintended casualty during the budget reconciliation debate. Will Congress let this authority lapse, and put millions of unemployed Americans at risk.

States are clearly still struggling, a year into the pandemic, to handle the influx of unemployment claims. A few recent examples:

In Kentucky, the state had to sacrifice program integrity to get benefits out quickly – but at the same time, archived 400,000 emails that went unopened and unanswered from claimants.

“Kentucky Auditor Mike Harmon provided more details…about the state’s beleaguered unemployment insurance office and fund, saying his findings ‘should be deeply concerning to taxpayers and those who have filed for unemployment insurance benefits.’…Harmon’s latest audit elaborated on problems in the office. Many thousands of unemployment insurance claims have gone unresolved during the coronavirus pandemic that began last March.”

The Lexington Herald-Ledger

In Kansas, the state’s employment rebound ranks last in the country, and unemployment insurance fraud is running rampant.

“Even though the department beefed up its call center to 450 people, unknown thousands of out-of-work Kansans have been unable to get through to request desperately needed unemployment checks. Meanwhile, the system is paying out an undetermined amount of finite funds to fraudsters who have used the names of real Kansans — even those of state employees and the governor herself — to file fraudulent claims. One employee told The Star Editorial Board that his small company had fraudulent claims filed in the names of over half its employees.

The Kansas City Star

If Congress, even unintentionally, allows this authority for states to expire, it will have a devastating impact on unemployed Americans who are struggling to feed their families and get the assistance they are entitled to receive.

Congress must make sure they extend the authority for states to use qualified contractors to operate their unemployment insurance systems before it expires on March 14 – outside of the larger relief package if they have to.