Labor Department Threatens 53 States With Funding Cuts Over Unemployment Fraud Claims
Updated
Updated · The Guardian · Jun 17
Labor Department Threatens 53 States With Funding Cuts Over Unemployment Fraud Claims
3 articles · Updated · The Guardian · Jun 17
Summary
Keith Sonderling sent letters to 53 states and territories warning the Labor Department could withhold unemployment-insurance administrative funds if they fail to curb fraud and improper payments.
No new department-wide fraud data accompanied the threat, though officials singled out California’s $20 billion federal loan balance, New York’s claimed $2 million-a-day losses and Illinois’s $320 million in improper payments.
Improper payments are not the same as fraud and often stem from outdated systems; the national improper-payment rate is estimated at 14.9%, while Florida’s 36.43% rate exceeds California’s 16.85%.
The warning escalates a tougher federal approach after the department in May 2025 ordered states to return unspent ARPA modernization funds, a move critics said undercut anti-fraud upgrades.
Pandemic-era unemployment fraud nationwide was estimated at $100 billion to $135 billion from April 2020 to May 2023, underscoring a broad problem that experts say requires federal-state cooperation.