US Tells States to Address Unemployment Fraud or Risk Penalties
Tyunews.com – The U.S. Department of Labor issued a warning to all state governments on Wednesday, urging them to take swift action against fraud, waste, and mismanagement in their unemployment insurance systems. Failure to comply could result in the federal government withholding administrative funds, the department stated. This directive is part of a broader campaign by the Trump administration to tackle misuse in programs that rely on federal support.
Acting Labor Secretary Keith Sonderling emphasized in a statement that governors are now being formally alerted to the issue. “The American people will no longer accept the unchecked squandering of their tax dollars,” he said, adding that states “should not allow such waste either.” If they do, the consequences will follow.
“We are officially putting governors on notice,” Sonderling stated. “The American people will no longer tolerate the blatant waste, fraud, and abuse of their hard-earned tax dollars — no state should allow it either. If states allow it, they will suffer the consequences.”
The Labor Department highlighted systemic issues such as insufficient oversight, obsolete technology, inadequate verification processes, and loose administrative controls as factors that allowed fraud to thrive. Specific examples were drawn from California, Illinois, and New York — states led by Democratic governors — though the department did not immediately clarify the nature of the alleged misdeeds.
California’s Governor Gavin Newsom’s office dismissed the move as an overreach, pointing to the state’s efforts to curb unemployment fraud during the pandemic. “Meanwhile, California outperforms other states in addressing fraud,” said spokesperson Marissa Saldivar, criticizing earlier policies that prioritized rapid benefit distribution over strict regulations.
Pandemic-Era Fraud Impact
The nonpartisan Government Accountability Office (GAO) estimated that between 11% and 15% of unemployment insurance payouts from April 2020 to May 2023 were attributed to fraud. This period spanned the final months of President Trump’s first term and much of former President Joe Biden’s administration, during which expanded access to funds was paired with rising concerns over oversight.
While the Labor Department’s new directive focuses on consequences from pandemic-era abuses, other federal agencies have also taken action. The Department of Health and Human Services attempted to withhold money from five Democratic-led states over child care subsidies, but a court blocked the measure. Similarly, the Department of Agriculture has threatened to withhold funds from states that fail to report data on Supplemental Nutrition Assistance Program participants, including their immigration status.
Anti-Fraud Measures
As part of its strategy, the Labor Department is deploying artificial intelligence tools to monitor how states audit their programs. Vice President JD Vance leads a task force aimed at identifying potential misuse across social services. Further instructions for states are expected in the coming weeks.
Associated Press reporter Sophie Austin in Sacramento, California, contributed to this article.
